The Numbers

Investing in dividend stocks is the best way to make money in the stock market over the long term.

But don’t just take my word for it. Harvey Rubin and Carlos Spaht, II, both of Louisiana State University in Shreveport, wrote, “For those investors who adopt ten- and fifteen-year time horizons, the dividend investment strategy will lead to financial independence for life. Regardless of the direction of the market, a constant and growing dividend is a never ending income stream.”2

Just a few pages ago, I told you that dogma doesn’t work, yet here I am sounding fairly dogmatic. The proof that dividend investing creates wealth is in the numbers.

First of all, investing in the stock market works. Since 1937, if you invested in the broad market index, you made money in 67 out of 74 rolling ten-year periods, for a 91% win rate. That includes reinvesting dividends.

The seven ten-year periods that were losers ended in 1937, 1938, 1939, 1940, 1946, 2008, and 2009. The periods 1937 to 1940 and 1946 were tied to the Great Depression. The ten-year periods ending 1936 to 1940 were brutal with an average decline of 40%. The decade ending in 1946 was much tamer with a loss of 11%. The 2008 and 2009 ten-year periods each lost 9%.

So the only ten-year periods that didn’t make money were associated with near financial Armageddon. And even in some decades tied to those financial collapses, such as 2000–2010, investors still came out ahead.

Paul Asquith and David W. Mullins Jr. of Harvard ...

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