If you put 300 Euro in stock, you can expect to get 1 Euro of dividents from it every month until the end of the economy. The same rule of thumb holds for any other currency. And of course the dividends will adjust for inflation.

This number comes from a simple estimate: A 4 per cent yearly dividend, divided by 12 months gives a monthly return on investment of 1/25 * 1/12 = 1/300.

As somebody who is thinking in monthly budgets, I find this a very helpful consideration. Would I rather spend these 300 Euro on something right now? Or would I rather put them in stocks and receive a Euro every month until the end of the world as we know it?

Interestingly, 300 Euro is right about the point where I would sometimes rather spend the money on something fun than save it. Would I perfer to have that 3000 Euro holiday or recieve 10 Euro in stock returns every month? That’s actually a hard decision. I guess that means that stocks are priced correctly.

That being said, with the current monetary policy of western central banks, maybe it will soon be the rule of 1000.

Subscribe via RSS