Or so it seems…
When we buy stock in the hopes of later selling it for a profit, we need to wait until we sell to have the proceeds in hand. During the time we own it, it is like a nice shiny bauble we can brag about to other people and have them go “ooo” and “ahhh”, but that’s about it.
Comparisons are fraught. Is it like a shiny new car? Not exactly. A vehicle of any kind will get you from A to B, regardless of how shiny or new it is. Is it like a shiny diamond? Maybe, people can ooh and ahhh, and you need to protect it from thieves, but it the diamond can be made visible by your actions (like wearing it), but no one goes to a party with their broker’s monthly statement to show off how many shares they own of a stock.
Until you sell your shares, you don’t get the profit you want. Yes, you could mortgage your shares (use it to buy other share on margin), but that is dangerous. Danger never stopped many people anyway.
So you hold your stock until you don’t. Once you sell, you get the cash. And the second point is that you no longer own it.
Elsewhere
But here is another way. What to do if you want to profit from your stock but still continue to own it?
This is the way I own stock, get cash, but still own it. I buy for the sake of getting dividends. Dividends, over time, can provide income regardless (we hope) of economic conditions. And so the price of the stock is of secondary importance.
Yes, at the beginning we feel the amount of dividends is absurd. Such small amounts of dividend income won’t get me anywhere, I thought. But over time, using dividend reinvestment and adding to my shares when prices fell, I have increased my dividend income to where it is covering about 50% of my monthly expenses. Not too bad. (You may be able to cover a larger or smaller amount of your expenses. YMMV.)
As previously mentioned, since I use dividend reinvestment, I am not receiving most dividends in the form of cash. But if I needed or wanted cash, I could easily turn the dividends from reinvestment to “send me the money.” No drama required.
Time
The term over time is important to highlight. The consideration of time has several important factors. First, the earlier one starts (namely, the younger one is when they start), the easier and faster one can accumulate later income, and the greater that income can be. The corollary of this statement is the later one starts (as in the older one is when they start), the less opportunity for income growth there can be. This is also a reflection of the well-known statement, ‘time in the market beats timing the market.’
The second factor regarding time is that since time for each human is limited, one needs to think about the need for money when one can use it (say, in retirement), versus the impact one desires for one’s heirs. There is no use use in pretending we will live forever. It just does not happen that way. So our goal is to accumulate assets for the purpose of enjoying life itself.
What do you think? Let me know here.
The illustration Ensign Semicolon is from “Punctuation Personified: or, Pointing Made Easy” (1824), by Mr. Stops. In the public domain, courtesy Bryn Mawr College.
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