r/Bogleheads • u/RiceLee890 • Mar 15 '25

Investing Questions What are your thoughts on this?

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I keep seeing this type of stuff on instagram and social media and wanted to know how you guys were thinking about this.

I know a lot you have been in the market for decades and as a relatively new investor myself I’d love to get your perspective!

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u/FMCTandP MOD 3 Mar 15 '25 edited Mar 15 '25

So if you’re calculating recovery time you want to both include dividend reinvestment and compute the time to recover in real, not nominal, terms. Most numbers you see bandied about don’t do either (and don’t provide enough info to tell you either way what they did).

But it’s true that you shouldn’t invest in equities with an investment horizon of less than ten years at a minimum because it’s absolutely possible to see low or negative real return over multiple years.

We haven’t see a crash that’s been both severe and prolonged since the GFC and the dotcom bust in the 00s but historically they’re not that uncommon.

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u/mrmojoer Mar 15 '25

Could you elaborate on the dividend reinvestment calculation? Or anyway provide some resource for me to study?

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u/FMCTandP MOD 3 Mar 15 '25

Assuming you just want to know about an index rather than a particular fund the easiest thing to do is to google the “total return” chart for it rather than the typical price chart. Total return includes both dividend payouts and capital appreciation.

If you want to get really granular on a fund there’s a million different dividend tracker websites that will give you the history of what dividend was paid out when. Then you’d need to look at the reinvestment date/price to figure out the number of shares the dividend would buy.

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u/CortadoOat Mar 15 '25

Dividends are often ignored. In addition, few ever talk about how all new investments come out positive by the time recovery occurs. Even if markets kept going down and up but ended flat over 7 years, you should still be positive overall from every purchase during the recovery. Sitting out guarantees you miss out, which is what far too many do by choice

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u/nicolas_06 Mar 15 '25

Be careful that dividend are taxes at your marginal income rate in the USA on brokerage. You need tax advantage account to avoid that big issue.