The Magic of Compounding Dividends
Probably not the dividends you're thinking of...
Good morning,
I’m not a fan of “dividend” or “income” investment strategies.
A better approach is “total return” investing. Vanguard agrees with me.
Total return investing is what I recommend to my clients and how I invest personally.
However, there is one dividend investment strategy that I support and recommend.
But these aren’t investment dividends in the traditional sense.
They’re “memory dividends.”
As I mentioned a couple of weeks ago, I recently read the book “Die With Zero.”
The author, Bill Perkins, makes a compelling case for spending your money now instead of taking a huge portfolio balance to the grave.
Among his arguments, he specifically names memory dividends as being more valuable than financial dividends.
This is consistent with multiple psychology studies which conclude that investing money in experiences rather than spending on more “stuff” leads to greater levels of happiness.
And these experiences create memories, both for yourself and for the people you enjoy the experiences with. This could include your children, your grandchildren, other family, or friends.
Just like compound interest, these memory dividends can grow and compound over time too!
And they don’t just grow and compound for you.
Everyone you share your experiences with - big or small - will also enjoy these same memory dividends for the rest of their lives.
If you’re curious about the Die With Zero framework, go read the book and let me know what you think. Or if you’d like a good summary of the book, this is a good one from Ali Abdaal.
I’m not suggesting you literally try to bounce your last check as you run out of blood pressure.
And I’m absolutely advising against leaving gobs of money behind as that can create all sorts of issues for your heirs.
But just like with your spending, your saving, your investment risk, and virtually any other financial goal or variable you can think of, there is “enough.”
The challenge is exploring and defining your unique, personal definition of enough despite the constant influence of the world around us on what we think we want.
This exploratory process is my favorite part of the work I do.
And it can change your life.
And maybe create some more memory dividends along the way.
For you and those you care most about…
Links & Things
My clients, and others of you with an account at Schwab should have received the following email recently. Another good reminder to be wary and keep your guard up against potential scams:
And speaking of privacy and keeping you and your information (and money) safe, check out these resources:
Here are a couple of YouTube videos, both suggested by a reader (Thanks, John!):
Passwords are Dead (a thorough explanation of what’s coming to replace passwords)
Thank You!
I’m grateful to have you as a reader.
If you have any questions or an idea for a future newsletter, blog post, or YouTube video, I'd love your input.
Just hit reply - I read (and truly appreciate) every email you send.
Until next Wednesday,
Russ