The Financial Times used to have two banners on the top left and right of its front page. One read "Friend to the Investor", the other read, "Foe to the Speculator". Hard to believe these days.
Let me set my stall out: I am not against capitalism but I am allergic to untruths propogated by its anti-anythingelseaswell proponents. New companies with successful innovative products and services will always rocket in value, and long may that be the case. But with mature companies its a different story.
Taking figures since 1900 to the present day, hot off the press research by the London Business School for Credit Suisse has shown that, without dividends being reinvested, over long periods share prices do no better than Government gilts and sometimes worse. If, and only if, divis are re-invested in the same shares do shares do better as investments, but importantly this is not because of gains in the share price.
Moral of the story: in this period of share price "correction", expect to lose the share price gains that have been made in the last decade or so (Japan is now where it was 25 years ago, FTSE 100 down 28% on 10 years ago), and look at the dividend. Expect good solid companies which pay regular strong divis to do well.
An outbreak of common sense investment clarity in our speculative fog. Reckitt and Benckiser comes to mind.
Short video at:
http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html?_i_referralObject=1029042602&fromSearch=n
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