Dividends and immediate gratification

In thinking about the usual need of people for immediate gratification, I'm surprised that so many people are hypnotized by the prospect of future capital gains versus immediate dividend or income income.

Increasing stock prices is one reason why companies buy back their own stock is to increase share value.

However, you can't spend any of this money until you sell the stock.

But apparently people feel an immediate gratification just from seeing a rise in the price of their stocks, even though they can't spend that money until they sell, and when they do they'll have to pay a hefty percentage to the government for capital gains tax. People get immediate gratification just from seeing the market value of their portfolio increase.

Plus, it's also true that, depending on when you buy the stock, it may be months before you receive that first dividend check. The market price can go up right after you buy it. But you actually have to wait a while for the dividend checks.

And, admittedly, the dividend yield on most stocks is so low that you have to buy a large amount of stock to get any kind of substantial check. And if you can afford to buy $20,000+ worth of stock at one time, the small percentage of current dividends still must not seem like much money to you.

The numbers for bonds and some other investments are larger than for most common stocks, but admittedly still don't seem a large return relative to the value of the money used to buy the security.

So, the magnitude of the numbers involve twist reality to make people think that they have big capital gains even though can't spend them, but dividends aren't worth waiting for, even though that's the current and ongoing reward for owning stock, which you can spend.

If you're going for capital gains and mistake market value for money in the bank, you think you still have all your original money plus the capital gains which could be much larger than any dividends.

financial immediate gratification
financial immediate gratification