“Buy! Buy! Buy!” shout the city folk in blue braces from one side of the trading pit. “Sell! Sell! Sell!” retort those with red neckties.

Whatever happened to “Wait! Wait! Wait!” wonders your writer?

These days sharetrading is conducted via computer – the trading is often done automatically according to decisions made by the computers themselves – and the drama of the buyers and the sellers at loggerheads is consigned like steam engines and home brewing to our rosy-tinted memories of yesteryear. Institutions and individuals alike now haggle over shares in front of screens that blink red and blue, with more arrows, buttons and switches than a computer game.

When trading platforms look like fruit machines, it’s no wonder investors behave like short-term gamblers. But there’s a way of profiting from holding shares that requires no selling at all, by receiving the (generally) twice-a-year dividend.

The dividend is the money a company pays every shareholder out of its retained profits, as a reward for holding its shares. It’s too often forgotten that as a shareholder in a company, you’re a part-owner in its business. The dividend you receive is your share of the annual earnings.

Annually, the amount paid out by companies in the London stock market as dividends is about 2-3% of the entire market capitalisation. Some shares pay more: several UK banks, for instance, are currently paying the equivalent of over 6% of their market capitalisation in annual dividends. Others, typically high tech or loss-making companies, don’t pay any dividend.

The amount paid out as a percentage of your shareholding (such as the 6% just cited) is called the yield of the share. There’s more detail elsewhere on Monevator.com regarding calculating the dividend yield; for now it’s enough to know that shares paying relatively high dividends are known as high yield shares.

Do the small percentage returns from dividends sound dull to you? Sure, you won’t hear much about dividends from excited market pundits on CNBC and Bloomberg, who prefer to scream that the price of Wibbly Wobbly PLC has fallen by 0.2% in early morning trading.

What if I was to tell you that over the long-term, the bulk of profits made from investing in the stock market have historically come from receiving and reinvesting dividends?

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“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.”
Robert Frost

Whether to buy your own home or not is a tricky question for anyone wanting financial freedom.

Now that might seem to some a mad statement; in most English speaking countries, buying a house to live in is a rite-of-passage, and while these days renting doesn’t quite conjure up visions of a harried mother washing tired clothes in a tin bath while four kids sleep head-to-toe in a single bed behind her, it’s still frowned upon.

Indeed – and ironically – the British love affair with property has blossomed into Buy-To-Let (BTL), where renting is perfectly acceptable as long as it’s not you doing the renting. These nouveau landlords had better hope the rental sector doesn’t return to its bad old image of multi-occupancy squalor and sordid bedsits. (When most people want to buy their own home, just like you, it’s a daydream to believe that sufficient millions of your peers will put this aspiration aside just to rent from hundreds of thousands of similar new BTL investors and make you all rich.)

But leaving aside for now being a landlord – which can certainly make great money if you buy at the right price – what are the pros and cons of owning your own home to live in?

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The inspiration behind Monevator.com is a family member close to my heart. He retired a few years ago at 64 years of age.

He’d managed to retire a year early. He’d wanted out for a decade beforehand, but he couldn’t afford to leave.

If money was tight, why did he cut and run at 64, instead of sticking it out until 65? I’d love to say that at 64 he suddenly discovered his inner hippy, or better yet a winning lottery ticket down the back of the sofa.

Alas, he had been diagnosed with cancer. He realised that he didn’t want to spend another day working in a job he was sick of, to contribute to a pension he might never see.

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