Samuel Hartzmark

We did a survey on how dividends work and received thousands of responses... Q: "Which of the following best describes how dividends work for a stock investor?" A1: "A stock yields 5%. The stock is trading at $100 and pays a $5 cash dividend. After distribution, the investor now has a stock worth $95 and a $5 cash dividend." A2: "A stock yields 5%. The stock is trading at $100 and pays a $5 cash dividend. After distribution, the investor now has a stock worth $100 and a $5 cash dividend." The good news? Meb's audience (mostly) gets its. 90% of pros understand how dividends work, and 80% of individuals. 👏 HOWEVER, for the broad-based audience, the results are DISMAL. 60% of pros understand how dividends work (despite 90% rating their knowledge at "average to very good")... Only 25% of individuals understand how dividends work. You read that right, 75% of individuals think that dividends are free money paid out like an allowance or bonus... This agrees with my experience over the last 20 years. Most individuals, and a non-trivial number of professionals, do not understand the most basic input in all of investing! This explains everything from the irrational preference for dividends to predatory offerings focused on paying out magically high dividends to hope and dreams of passive income. We will publish a longer paper on this soon, but in the meantime, stay tuned for a great podcast on the topic dropping shortly!

Avoid the Black Hat firms at all costs . Fun podcast....wonder what % of investments are made based upon misunderstanding this one chart? Over half? podcasts.apple.com/us/podcas…