Author Topic: Investing for Dividends  (Read 16781 times)

clifp

  • Pencil Stache
  • ****
  • Posts: 537
Re: Investing for Dividends
« Reply #50 on: February 10, 2015, 10:21:10 PM »

This post is a perfect example of the traps people fall into.  They see people achieving things that seem impossible (retiring early), then when they see the statistics of how few people are able to beat the market over the long term, they think it's possible for them to do that too!  Things like this don't phase them:


"Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 oupaced the market by more than 1% a year. These are terrible odds." Jack Bogle (2007)


Mutual funds aren't people either. They are made up of collection of people (and computer programs) the managers are constantly changing.  I guarantee that the 1% of the funds that beat the average of over 50 years has had multiple managers over decade (Vanguard Wellington almost certainly being one of the over achiever they probably have had 100 managers/assistant manager over the last 85 years.)  The relevance of active mutual funds beating passive funds, is like pointing out that on average professional sports teams only win 1/2 their games. Realizing that basically only the Yankees, Celtics,and Lakers have had statistically significant winning percentage, and concluding that general managers, and coaches don't matter.
« Last Edit: February 11, 2015, 12:46:57 AM by clifp »

vagon

  • Stubble
  • **
  • Posts: 238
  • Location: Sydney
Re: Investing for Dividends
« Reply #51 on: February 10, 2015, 11:05:59 PM »
I cant be bothered to write a long post and have it cherry-picked for arguments so I'll stick with:

+1 for pretty much everything Dodge is saying.


el_beardo

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Investing for Dividends
« Reply #52 on: February 11, 2015, 12:59:41 AM »
if doing active dividend stock picking you have to add the time / effort of researching the best long-term companies, understanding the business, reading the reports, etc.

that time could also be used to generate additional income into an index fund. So what kind of alpha are you generating above a set it and forget it index fund strategy ?

if you are just starting out generating extra income might give you better long term returns than research on stocks for a small portfolio.

clifp

  • Pencil Stache
  • ****
  • Posts: 537
Re: Investing for Dividends
« Reply #53 on: February 11, 2015, 01:36:27 AM »
if doing active dividend stock picking you have to add the time / effort of researching the best long-term companies, understanding the business, reading the reports, etc.

that time could also be used to generate additional income into an index fund. So what kind of alpha are you generating above a set it and forget it index fund strategy ?

if you are just starting out generating extra income might give you better long term returns than research on stocks for a small portfolio.

For many people not much.  I certainly don't suggest people pick individual stocks unless they want to and express an interest in it, like the OP.  When I hit the million mark, I realized that trying to get an extra 1% from reducing cost, improving return, was a far more valuable use of say 5 hours a week than putting in the extra hour a night at the office. In the hopes of getting a superior review and getting a 6% vs 4% raise.

This isn't the case if you have $50,000 in assets. However, evaluating individual companies, gives you a pretty good insight into how the market works in general.  I found that in 2008 that individual stock pickers were far less likely to want to sell at the bottom, because having been evaluating stocks for years they had an appreciation for the terrific values that were available in Q4/08 and Q1/09. 

Noahjoe

  • 5 O'Clock Shadow
  • *
  • Posts: 64
Re: Investing for Dividends
« Reply #54 on: April 13, 2015, 11:32:52 AM »
Based on the argument that it takes thousands of hours of research to beat the market reliably year after year, wouldn't one deduce that it would be more beneficial to invest in low cost index funds and spend those thousands of hours doing something productive that produced more investable income?

waltworks

  • Magnum Stache
  • ******
  • Posts: 3238
Re: Investing for Dividends
« Reply #55 on: April 13, 2015, 12:16:12 PM »
When I hit the million mark, I realized that trying to get an extra 1% from reducing cost, improving return, was a far more valuable use of say 5 hours a week than putting in the extra hour a night at the office.

I find it hilarious that when you hit the million mark, you didn't just decide that your time was too valuable to go to work OR pick stocks.

-W

clifp

  • Pencil Stache
  • ****
  • Posts: 537
Re: Investing for Dividends
« Reply #56 on: April 16, 2015, 01:30:48 AM »
When I hit the million mark, I realized that trying to get an extra 1% from reducing cost, improving return, was a far more valuable use of say 5 hours a week than putting in the extra hour a night at the office.

I find it hilarious that when you hit the million mark, you didn't just decide that your time was too valuable to go to work OR pick stocks.

-W

Well why not decide your time is too valuable to spend posting and reading forums like MM?

Also I hit the million dollar mark before the Trinity study was published so there wasn't exactly a lot of literature for how much a 36/37 year old need to retired. I figured I needed to $2 million because I could get 5% on California Muni bonds which left me with a 100K and even with high evaluation that should be enough for a comfortable retirement.  I won't bother listing how many assumptions were wrong.

I find evaluating stocks interesting,and it also has proved profitable.  I'll certainly switch to pure indexing when it stops being fun, and/or when  my 5 year returns lag my benchmark.