As I’ve written previously, the S&P 500’s long-term returns run about 10% annualized.
What I don’t write about very often is that only 7% of that is from market returns.
The other 3% comes from dividends.
And guess what?
When you own ETF’s, the dividends don’t stop coming when the market stinks.
(However, individual stocks (aka companies) DO stop their dividends during bad times. Just another reason not to buy individual stocks with serious money.)
So even while we’re waiting patiently for the market to bottom and finally rebound, you’re still getting paid ~3% in dividends.
As I wrote about a couple weeks ago, if you make sure those dividends are paid in cash (not automatically reinvested in the funds that paid them) then we can reinvest them in the portions of your portfolio that are the laggards.
That means you’re systematically buying low.
In a down market, every dollar of those dividends buys more and more shares than it would have before the downturn.
So even if you’re not dollar cost averaging through your 401k or monthly faucet savings (which you probably are), you’re still/also systematically buying low through the dividends you’re paid every quarter.
