Theory of Diversify IRREELEVEVEWER | A white channel

Many novice investors are familiar with Divalind Artlans Theory. This idea is from the work done in the 1960’s by Franco Modigrilian and Mertrton Miller. There were even the Nobel prize you have overcome in this work and the related work. I think you should not believe in this idea (or I think it is worth it), but it seems that it is true of it if you have a financial interest in reading this blog to read this blog.

What is Irrevance’s opinion?

Theory that the separation of a specific organization should be small, if any, do it with its stock price. Compatible Performance’s ability and developing those benefits is what determines its value, not its division payments. Investors do not have better companyback companies than one does not. In terms of tax laws, it may be best for available companies that do not pay for assignments.

What competitive ideas are?

Perhaps the most important idea of ​​competing is one called a bird called a bird in the idea. The idea here, nominated by investors called “investors,” that investors prefer to earn money, division, rather than the number of their shares. The arguments of this idea vary, but often express something like, “Treatment can be wrong with, but it will not lie about taxes.”

Sometimes the conflicts are made that stocks pay for rhymes have a higher refund than non-dividentable charges, and there is fact. But not for reasons most people think. For some dumb reason, some people wrongly think that they can use revenue when they retire, so they offer non-natural selection to invest.

Taxes can also enter into play. If the tax rates are more low than capital tax revenues or the state, benefits will make sense than they do under our current tax scheme.

Better argument is that when the judgment is paying, the authorities say, “We think that you will make the money better than we do.” I really like this dispute because it’s the way I use my business. When I want to invest in my business, I finally earn money from business. I can honestly, I can find the best reward for the renewal, or I couldn’t do it. When the business produces more money than I know what I do, I take it out and plant elsewhere. However, I doubt that CEOs sold in the community are sold in the community doing this way by small business people.

Maybe, anyway. Perhaps therefore the companies often change over time from deceptive organizations, which are not in the structures that pays them, companies paying companies. However, there is none of this changing the fact that the amount of money has received is a receivable fee, whether it is paid by the owner or return to the company.

More information here:

Why do so many prices don’t have the layers? Let’s see my tax information to get it

Why do you get division should not be interesting

Division is not dessert

Some novice investors think of an error that isolated by a free dessert money. You have dinner with increases in stock, and now you have Dessert by separation. Sorry, I’m now working on accounting activities. Just boil the company at the bottom of the important things, and you’ll see why.

Suppose you own the entire company. At the end of the year, the company has made $ 500,000 profit. As a business owner, you can leave that $ 500,000 in the business, or you can remove it from business and call it in classification, or anything in between. You can have a business now expensive for more $ 500,000 more, or you can have a business and $ 500,000 in cash. The same, the same.

Why are the divers the divisive shares.

While this was not true for a while, the duration of time indicates that stocks pay the payable stock and long-term returns. However, this is not because they pay the assignments. It is because they are attributable. That means you spend less money to buy a dollar earned than what it would be. The growth stock is like an apple. Everyone knows that it is a large company, and it often grows fast. The company is willing to pay over the dollar earned because it thinks money will grow rapidly. It is a sexy to have your own and sexy work.

The stock stock is like a consumer & gambling. It is not sexy. The company makes diapers and cleaning clothes. No one growing, “I want to work for the buyer and miss.” And consumer & gambling is actually good weeds compared to many cells. Its PE measure is 22.4. (Apple is 34). The VANGUARD VALLE INDEX Fund Parte Average 10 About now. British Petroleum has about 12 PE population. So you can pay $ 12 with a dollar earned with BP or $ 34 with the earned amount of money with Apple.

Not more than 10-20 years ago, but over a long time, the number of stocks have outgoing growing stocks. It may be because they are dangerous. More likely to get out of business. They are also sexy. No one can be bragged about in a cocktail party, and it is actually an important factor for other deceived investors. Value shares are more likely to pay separation at all and have a higher speed of divorce. Therefore, many shares of the dividend “has the value of the value. But the division yield is not the best way to select Value Stocks. Price-to-Book ratio and other monetary valuation numbers are best.

More information here:

Nuts and bolts investing

Investing is not required to be difficult

Tax results

Shares are actually dumb – clever. In the US, we pay the same tax prices on the divids that pays great profit. However, we find control when we see great profits. The company receives determining when dealing with the division. If you want to keep your taxes low, you would like to have an investment income only when you want to use it, as in the age of retirement, rather than your years of retirement. Everything else is equal, better “to announce your breaking” by selling certain stocks than if the company sent you your separation when they want.

Another benefit of the announcement tax deduction is that all tax deduction, but not when you sell stocks. One of the price sharing is “basic”, ie, the money you pay for stock. The foundation is taxed. If you sell stocks that cost $ 100,000 and the foundation is $ 40,000, you pay only a tax pay for $ 60,000 of major benefits. This reduces your tax bill for 40% compared to the separation model. But wait, there is more. You can choose which shares you sell. Maybe you choose to sell stocks that you already bought in the past 18 months. The basis of the shares is $ 90,000. Now, you get to spend $ 100,000 but you have to pay tax at $ 10,000. It’s good!

But wait, there is more. When you die, your heirs receive step on the basis. If they sell stocks worth $ 100,000 per week and the base is $ 100,000, we do not have a tax. That’s better than receiving division. Same thing if you give stocks to supply. Suppose you invest of $ 100,000 because of giving. It pays you a big separation every year. You pay taxes to these diagram and again update what is left of many stocks. Finally, you give shares of giving. But if the company had never paid assignments, you would have saved a number of money for taxes, and the support had received additional profits.

A lower row

Division is not a good thing. They don’t work. Before tax and taxed, they are often a bad thing. You need to understand this as an investor so that you can make appropriate financial decisions.

Do you believe in the imagination of the Irrelevance? Do you like to get assignments? Why or why not?