The Magic Stocks In A Dividend Portfolio

The more I study investing, the more I realize that one initial impression that I had about the stock market in general, and index funds in particular, turns out to be wrong: When I would look at index funds that returned 10% over a particular period, I initially assumed that most of the stocks delivered returns similar to that 10% mark—I figured most would clump together in the 8% to 12% range, and sure, you’d have a few outliers.

 The more I dive into understanding stock market returns, the more I realize that there are often very focused “magic stocks” that are responsible for most of the results. For instance, when you look at Jeremy Siegel’s study of the top quintile of dividend stocks delivering the best total returns over the super long term, it is important to understand that one particular company—the old Philip Morris—played a key role in carrying the top quintile of highest-yielding dividend stocks to deliver the superior long-term returns that get written about.

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