Personal Economics 101

On May 21, I posted some important information about stock dividends (which includes dividends paid by ETFs). But there is an important point to be made for investing in dividend paying stocks. It's the same as compound interest on savings. Phil Town calls it Payback Time . The basic premise is to re-invest dividend payments from stocks to reduce the overall cost of ownership. If you hold the stock long enough (not always possible), eventually your cost is zero. Let's look at a real example using AT&T (T). The information here is based on actual data from Yahoo's finance website. We purchase 500 shares on June 5, 2014 for $35.02 a share. This is an investment of $17,510, which is also called our basis. We also make sure to instruct our broker to reinvest all dividends by buying extra shares, which will be purchased at the market rate, usually the day after the dividend is paid. We are actually going to buy extra shares without using our own money. We will use t

Actually, not just a teachable moment: Let's call it a moment of decades. Australia, where its "dysfunctional" conservative government (according to left-leaning Slate magazine) just won elections, has not had a recession in 28 years.   I put that in boldface because it's a remarkable fact. I've been reading more and more about Australia lately. Thanks to Netflix, I've been able to watch some Australian TV.  I read and heard that Australia is a lot like Texas, where I currently live. This alone makes it more interesting. I've never been there, but I've put it on my bucket list.  Sometimes we don't think about Australia at all, since it is literally on the other side of the world. When it's winter in Chicago, it's summer in Sydney. The quickest trip from Chicago to Sydney I could find with a basic Google search was 20 hours, 15 minutes via San Francisco. It's actually 19 hours in the air.  Australia -- like Europe -- recently had n