Don’t Let These 2 Mistakes Devastate Your Portfolio: Merck & Co., Inc. (MRK), Hovnanian Enterprises, Inc. (HOV)

Moreover, it’s all too easy to neglect the impact of dividends in stock markets that appear to be flat or down. For instance, ignoring dividends, Microsoft Corporation (NASDAQ:MSFT) has seen its stock price fall almost 15% in the past five years, as slowing PC demand and some vulnerability in its core operating system and office software spaces has emerged. Yet when you consider the impact of dividends, the stock has managed to eke out a modest positive total return over that time frame. Similarly, Merck & Co., Inc. (NYSE:MRK)‘s share price is down by a quarter over the past decade, as the company has seen many drugs recently fall off the patent cliff. Yet the stock has produced a 20% total return over that period thanks to high dividend yields.

What to do
History is useful in analyzing stocks and considering strategy. But if you rely too much on history, you’ll make the huge mistake of assuming that history always repeats itself. By looking at history as a rough outline of possible outcomes rather than as a timeline that will inevitably play out again, you’ll be best able to adapt to the new conditions that investors will face in the future.

Tune in every Monday and Wednesday for Dan’s columns on retirement, investing, and personal finance.You can follow him on Twitter @DanCaplinger.

The article Don’t Let These 2 Mistakes Devastate Your Portfolio originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.

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