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Get Started in Shares by Glen Arnold

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Capital gains (and losses)

While dividends are of great importance to most investors, we also need to take into account the bonus that comes from a rapidly appreciating share price. We saw in Chapter 1 how Rolls-Royce’s shares had jumped from £1 to £8 in a decade. If your investment horizon (length of time you expect to hold) is this decade then you would have benefited more from the capital gain than from the dividends – although the dividends were pretty impressive too.

There are many companies that have such a wealth of projects expected to generate high returns (e.g. Google in its early days) that they sensibly save cash by not paying dividends for a decade or more so that they can finance investments. These should produce great profits in ...

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