The effect of dividends on portfolio growth.The S&P500 buy-and-hold with initial investment of $10,000, adding $100/mo, increasing the addition by 4% each year. The last month's amount is $288 (1975 start) or $427 (1965 start).On Jan-2003, cease additions and begin withdrawing $1,500/mo, increasing the withdrawal by 2.5% each year. The last month's amount is $1873.Final value on Jan-1-2013Begin date Jan-1975:Including re-invested dividends: $982,055Without dividends: $261,729Begin date Jan-1965:Including re-invested dividends: $1,224,229Without dividends: $512,099Any investment strategy or method that delivers the returns of the index only, excluding dividends, is going to suffer a large burden. Over the long haul, dividends produce a very large amount of the total return.------------------At Dec-2012 the S&P500 yield was 2.2%.A portfolio of $1,021,600 yielding 2.2% pays a dividend of $1873/mo. At that point the dividends are more than the withdrawals, so the principal is not touched -- the withdraws are completely out of income.
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