The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: h2ogal on April 24, 2015, 10:33:52 AM
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I've done index investing for the past 10+ years, and never figured I would change, but after reading Spoonman's Journal, my interest is getting drawn to Dividend investing.
There are some interesting aspects to it; the potential for higher yields, the purity of not touching the principle investment, the potential to realize gains even during long flat periods in the equities market....
From what I've read using a dividend index fund is not a good option - lower yields, higher fees, etc. Consensus seems to be its "the worst of both worlds"....
From a portfolio allocation perspective, is anyone blending a self-made dividend portfolio with index funds? The folks who blog about dividend strategy seem to be "all in", with maybe some cash reserves (like a year of expenses) to fall back on.
Does having half your US equity allocation in a self made portfolio of dividend-paying stocks and the other half in a low cost index fund water down both strategies, or does it add balance and lower risk?
I would be interested in hearing from those who have looked into this.
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There's a tread on this about once a month. It has been debunked as a bad idea here and elsewhere umteen times. All the aspects you find interesting are false or irrelevant. Stick to index fund (assuming you agree that more money is better than less money)
Of course the people who are "all in" on this can't admit that they have suboptimaly placed their money for so long, so they will be along shortly to tell you why..
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From what I've read using a dividend index fund is not a good option - lower yields, higher fees, etc. Consensus seems to be its "the worst of both worlds"....
It's impossible to prove, but I get the feeling that the main reason most dividend-growth investors avoid dividend-focused funds is really just because their historical performance is easily-viewable, and they don't paint as rosy of a picture as dividend-focused investors like to paint. It's much more difficult to ascertain the performance of a set of individual, independent investors, and that fog creates a refuge in which those investors can continue to paint their picture as rosily as they would like and not have that picture be subject to the harsh light of objectivity.
From a portfolio allocation perspective, is anyone blending a self-made dividend portfolio with index funds?
Anyone invested solely in index funds is already "blending" in a dividend portfolio, since most stocks in an index pay dividends.
Adding a low-cost broad-market index fund to a self made portfolio of dividend-paying stocks would add balance and lower risk, but not because any dividends-vs.-non-dividends story; measured on its own, there is no reason that a dividend stock is any riskier than a non-dividend stock (or vice-versa). The reduced risk would simply come via increased diversification.
See here (http://forum.mrmoneymustache.com/investor-alley/dividend-portfolio-vs-index-fund/) for more on the false-dichotomy of "dividend-growth" vs. "index".
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I'll be the sacrilegious one who says you can beat the index with dividends and other components. I defer arguments as to why this is possible to James O'Shaughnessy, author of What Works On Wall Street. But I'll give you the short version. A long time ago, the author found that companies that paid dividends outperformed. He also found that companies that bought back their own stock or paid down debt (the three components of "shareholder yield") outperformed as well. He further found that momentum investing outperforms simple buy and hold.
There is a fund that invests in the companies with the highest shareholder yield and adds an element of momentum investing to determine entry points. That is Cambria Shareholder Yield (NYSEMKT:SYLD). I bought shares of SYLD on 28MAY2013 and simultaneously recorded the event in my Motley Fool CAPS to track performance against the S&P index.
Result per http://caps.fool.com/player/FVelociraptor.aspx (http://caps.fool.com/player/FVelociraptor.aspx)?
S&P 26.71%
SYLD 32.97%
Advantage 6.26%
Expense ratio is 0.59% and I leave it to the reader to determine if that is more or less than 6.26% since June 2013.
Or you can listen to skyrefuge who insists the DGI folks have 'drank the Kool-Aid' and are blind to reputed under-performance.
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I'll be the sacrilegious one who says you can beat the index with dividends and other components. I defer arguments as to why this is possible to James O'Shaughnessy, author of What Works On Wall Street. But I'll give you the short version. A long time ago, the author found that companies that paid dividends outperformed. He also found that companies that bought back their own stock or paid down debt (the three components of "shareholder yield") outperformed as well. He further found that momentum investing outperforms simple buy and hold.
There is a fund that invests in the companies with the highest shareholder yield and adds an element of momentum investing to determine entry points. That is Cambria Shareholder Yield (NYSEMKT:SYLD). I bought shares of SYLD on 28MAY2013 and simultaneously recorded the event in my Motley Fool CAPS to track performance against the S&P index.
Result per http://caps.fool.com/player/FVelociraptor.aspx (http://caps.fool.com/player/FVelociraptor.aspx)?
S&P 26.71%
SYLD 32.97%
Advantage 6.26%
Expense ratio is 0.59% and I leave it to the reader to determine if that is more or less than 6.26% since June 2013.
Or you can listen to skyrefuge who insists the DGI folks have 'drank the Kool-Aid' and are blind to reputed under-performance.
Morningstar says this is a Mid-cap fund:
(http://i.imgur.com/wbJGNcA.png)
Comparing SYLD (orange), to the Vanguard Mid-cap index (blue), and the Vanguard total market index (green), during the time period you specified:
(http://i.imgur.com/CMrOsY5.png)
Mid-cap index: 38%
SYLD: 35%
Total market index: 33%
We see SYLD underperformed the Mid-cap index, and just barely nudged out the total market index. So, your information is wrong. In fact, it looks like your data is comparing an S&P500 price chart, to an SYLD total return (price + dividends) chart. Sure enough, when I pulled up Vanguard's S&P500 price chart, I got a 27% increase:
(http://i.imgur.com/D5lhutC.png)
So, not only are you using the wrong benchmark, it isn't even an apples-to-apples comparison, as your data is explicitly removing dividends from only the benchmark side. Now, forgetting about SYLD for a moment, let's look at the general statement you're making:
"Companies that paid dividends in the past, ended up outperforming the market as a whole."
Since dividends are just another way to express returns, this statement is the equivalent of:
"Companies that had consistent returns in the past, ended up with more returns than the market as a whole."
That sounds like a reasonable statement to make. How is that information actionable? Shall I then invest money in the stocks which have performed well in the past, hoping they will continue to perform well in the future? Alarm bells should start ringing on that one. When you think about it, the whole concept sounds downright silly. If you look at stocks which continually paid dividends over a long period of time, of course they will have beaten the market. Because when companies are doing well...they continue to pay their dividends. But it's the fact that the companies did well which caused them to outperform, not the dividends.
Taking that information, and extrapolating it into, "Therefore I should only buy dividend stocks!" is not just silly, it’s illogical. You can't look at a list of stocks which outperformed, note that almost all of them paid dividends over that period, then expect current dividend stocks to outperform as well. Correlation does not imply causation (http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation). Example:
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Paying dividends are strongly correlated with stocks that outperformed.
Therefore, buying dividend stocks will result in me outperforming.
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The above example commits the correlation-implies-causation fallacy, as it prematurely concludes that the same factor which leads to paying dividends, also causes outperformance. A more plausible explanation is that companies which outperform, continue to pay their dividends, which thereby gives rise to a correlation. So the conclusion is false.
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Thanks for the thoughts and the links. I'm getting close to my goal and anxious to get to RE. I'm becoming susceptible to promises of faster growth. When you get close to your goal, even saving 50% doesn't make as much of an impact as a few good days in the market . it can become a little addicting.
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Thanks for the thoughts and the links. I'm getting close to my goal and anxious to get to RE. I'm becoming susceptible to promises of faster growth. When you get close to your goal, even saving 50% doesn't make as much of an impact as a few good days in the market . it can become a little addicting.
Then you're seeking emotional impact of an increase in your portfolio, that's a dangerous viewpoint for something that needs to last the rest of your life.
Stop and take some time to realize that as you get closer the small swings matter less. Start working on the step(s) after (aka life) if you're that close to your goal and all you're trying to do is eck out a 3% increase over the market.
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Do not under value the power of dividends. Especially in bad times.
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-25%20at%207.43.27%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-25%20at%207.43.27%20AM.jpg.html)
IN FACT BLEND IT WITH THIS ONE INDEXERS.... thanks for making me look. I will be switching ANEFX back to AGTHX
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-25%20at%208.24.33%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-25%20at%208.24.33%20AM.jpg.html)
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Then you're seeking emotional impact of an increase in your portfolio, that's a dangerous viewpoint for something that needs to last the rest of your life.
Stop and take some time to realize that as you get closer the small swings matter less. Start working on the step(s) after (aka life) if you're that close to your goal and all you're trying to do is eck out a 3% increase over the market.
Yup, you Nutshelled it....Im addicted to the emotional boost from seeing the growth of the past few years.
The other thing is I have some extra cash I've been trying to decide what to do with..... Since finding this site and bogleheads Im learning so much so fast. Its hard to make up my mind what to buy because Im literally learning new things daily.
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Do not under value the power of dividends. Especially in bad times.
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-25%20at%207.43.27%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-25%20at%207.43.27%20AM.jpg.html)
IN FACT BLEND IT WITH THIS ONE INDEXERS.... thanks for making me look. I will be switching ANEFX back to AGTHX
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-25%20at%208.24.33%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-25%20at%208.24.33%20AM.jpg.html)
You're comparing a 70/30 LargeValueStock/bond fund, to the 100% stock S&P500, and concluding that AMECX is safer (despite it's 5.75% load) because of dividends? That argument is all over the place. Then you cherry pick a seemingly random fund (again with a 5.75% load), show that it beat the S&P500 in the past, then declare you're moving money into it? Mrpercentage, seriously, you have a lot to learn in this space, and I'd recommend doing some additional reading before putting your money anywhere. You are exhiibiting so many negative investor traits, it's genuinely quite worrying.
Let's look at AMECX, and compare it to a portfolio with 70/30 LargeValueStocks/Bonds:
(http://1.ii.gl/5F07c_Z7Q.png) (http://1.ii.gl/5F07c_Z7Q.png)
(http://2.ii.gl/CioSCzndg.png) (http://2.ii.gl/CioSCzndg.png)
Seems just as safe to me, and it outperformed too. Let's not forget that these charts don't take into account AMECX's 5.75% load. That would've brought down the returns of AMECX to 56,113. Compared to $64,647 with the index. A 15% increase by going with the index.
Now let's look at the cherry picked AGTHX vs some other index funds with comparable risk:
(http://4.ii.gl/OMs-P8eEn.png) (http://4.ii.gl/OMs-P8eEn.png)
AGTHX: $43,454 ($40,951 after considering the 5.75% load)
Mid-Cap Growth Index VMGRX: $51,302
Mid-cap Index: $53,343
Small-cap Growth Index: $43,002
Mrpercentage, I implore you. Sit back, and don't touch anything in your portfolio, until you've done some reading. I'd start with A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393340740/ref=dp_ob_title_bk), and The Bogleheads Guide To Investing (http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/1118921283/ref=sr_1_1?s=books&ie=UTF8&qid=1429980482&sr=1-1&keywords=the+bogleheads+guide+to+investing).
Good luck!
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Then you're seeking emotional impact of an increase in your portfolio, that's a dangerous viewpoint for something that needs to last the rest of your life.
Stop and take some time to realize that as you get closer the small swings matter less. Start working on the step(s) after (aka life) if you're that close to your goal and all you're trying to do is eck out a 3% increase over the market.
Yup, you Nutshelled it....Im addicted to the emotional boost from seeing the growth of the past few years.
The other thing is I have some extra cash I've been trying to decide what to do with..... Since finding this site and bogleheads Im learning so much so fast. Its hard to make up my mind what to buy because Im literally learning new things daily.
Then stop trying to apply each new thing you learn daily to your life. Come up with an Investment Policy Statement. (http://www.bogleheads.org/wiki/Investment_policy_statement) Follow that IPS. Then learn. Incorporate within your IPS a periodic review in which you may choose to apply your new found knowledge. I wouldn't put this review on anything shorter than six months. Otherwise you may just end up like a dog chasing a new ball that has been thrown to it. Slow down and choose something solid on which to rest your foundation. Take time to learn and then you can apply. Don't try to do all at once.
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The IPS is a really good idea. After decades of investing it's really easy to lose your way and make sub-optimal decisions unless you have some kind of review mechanism. I wish I'd done this.
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I have been going heavy on the vanguard S&P 500 index fund (VFIAX).
It is hard to argue against a .05% expense ratio...
Not paying those crazy fees is like an extra dividend in my eyes.
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Mrpercentage, I implore you. Sit back, and don't touch anything in your portfolio, until you've done some reading. I'd start with A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393340740/ref=dp_ob_title_bk), and The Bogleheads Guide To Investing (http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/1118921283/ref=sr_1_1?s=books&ie=UTF8&qid=1429980482&sr=1-1&keywords=the+bogleheads+guide+to+investing).
Good luck!
I think it illustrates perfectly well the power of dividends. Sales load isn't applied to NAV by the way.
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Mrpercentage, I implore you. Sit back, and don't touch anything in your portfolio, until you've done some reading. I'd start with A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393340740/ref=dp_ob_title_bk), and The Bogleheads Guide To Investing (http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/1118921283/ref=sr_1_1?s=books&ie=UTF8&qid=1429980482&sr=1-1&keywords=the+bogleheads+guide+to+investing).
Good luck!
I think it illustrates perfectly well the power of dividends.
You're highlighting the problem. You posted a fund which has 30% bonds, compared it to a 100% stock fund, and claimed the reason it was safer is because of dividends. Dividends demonstrably, almost as a rule, fall harder during crashes. This is not opinion, it's an observational fact. That's simply the way it is. So not only did you ignore the effect of bonds, you attributed the safety to dividends when they in fact are less safe, then when shown evidence that dividends weren't a factor and you still underperformed the index, your response is...this?
You are horribly lost here. To any newbies in the thread, this is a textbook example of what not to do. Keep it simple, focus on your savings rate, and it's almost a statistical certainty that you'll end up better off than following mrpercentage.
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Mrpercentage, I implore you. Sit back, and don't touch anything in your portfolio, until you've done some reading. I'd start with A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393340740/ref=dp_ob_title_bk), and The Bogleheads Guide To Investing (http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/1118921283/ref=sr_1_1?s=books&ie=UTF8&qid=1429980482&sr=1-1&keywords=the+bogleheads+guide+to+investing).
Good luck!
I think it illustrates perfectly well the power of dividends.
You're highlighting the problem. You posted a fund which has 30% bonds, compared it to a 100% stock fund, and claimed the reason it was safer is because of dividends. Dividends demonstrably, almost as a rule, fall harder during crashes. This is not opinion, it's an observational fact. That's simply the way it is. So not only did you ignore the effect of bonds, you attributed the safety to dividends when they in fact are less safe, then when shown evidence that dividends weren't a factor and you still underperformed the index, your response is...this?
You are horribly lost here. To any newbies in the thread, this is a textbook example of what not to do. Keep it simple, focus on your savings rate, and it's almost a statistical certainty that you'll end up better off than following mrpercentage.
Im NAV dude. I am the blue line. I was showing that something that was "underperforming" your beloved 500 was in fact beating the shit out of it. I was showing how even an income fund can beat the shit out of it. I was showing that the market when managed properly can be beat. Did you look at AMECX's blue line? Because as an actual owner of an account I can say it fell less. It fell less. Income [dividend] is safer depending on the market. Now if your argument is that interest rate will highly damage it-- maybe.. but not in the last 20 years sir. Look at the blue line. That is in fact me.
But a new question.. what will be hurt worse if interest rates rise? The dividend fund or the the bonds you are holding. Its my understanding that bonds can lose 7% of trading principle for every 1 point the interest rate is raised above the current one. That is of course unless you use an adjustable interest rate bond.
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Dodge -
Side-topic - Is the portfolio modelling tool that you have shown an extract from above a freely available product or is it part of a fee-for-service product?
Thanks!
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Dodge -
Side-topic - Is the portfolio modelling tool that you have shown an extract from above a freely available product or is it part of a fee-for-service product?
Thanks!
Here you go!
https://www.portfoliovisualizer.com/
Specifically:
https://www.portfoliovisualizer.com/backtest-portfolio
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AGTHX: $43,454 ($40,951 after considering the 5.75% load)
Mid-Cap Growth Index VMGRX: $51,302
Mid-cap Index: $53,343
Small-cap Growth Index: $43,002
Uh, you removed all the dividend reinvestment dude. Mine [AMECX] pays 4.5% @NAV and when reinvested it beat the S&P 500 for over a decade. Nice try though
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Mrpercentage, I implore you. Sit back, and don't touch anything in your portfolio, until you've done some reading. I'd start with A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393340740/ref=dp_ob_title_bk), and The Bogleheads Guide To Investing (http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/1118921283/ref=sr_1_1?s=books&ie=UTF8&qid=1429980482&sr=1-1&keywords=the+bogleheads+guide+to+investing).
Good luck!
I think it illustrates perfectly well the power of dividends.
You're highlighting the problem. You posted a fund which has 30% bonds, compared it to a 100% stock fund, and claimed the reason it was safer is because of dividends. Dividends demonstrably, almost as a rule, fall harder during crashes. This is not opinion, it's an observational fact. That's simply the way it is. So not only did you ignore the effect of bonds, you attributed the safety to dividends when they in fact are less safe, then when shown evidence that dividends weren't a factor and you still underperformed the index, your response is...this?
You are horribly lost here. To any newbies in the thread, this is a textbook example of what not to do. Keep it simple, focus on your savings rate, and it's almost a statistical certainty that you'll end up better off than following mrpercentage.
Dodge,
Can you provide some data and evidence that backs up your assertion that dividend-paying stocks fall more during hard times in the market than non-dividend stocks? All of my research has shown the opposite but maybe I'm mistaken.
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Mrpercentage, I implore you. Sit back, and don't touch anything in your portfolio, until you've done some reading. I'd start with A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393340740/ref=dp_ob_title_bk), and The Bogleheads Guide To Investing (http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/1118921283/ref=sr_1_1?s=books&ie=UTF8&qid=1429980482&sr=1-1&keywords=the+bogleheads+guide+to+investing).
Good luck!
I think it illustrates perfectly well the power of dividends.
You're highlighting the problem. You posted a fund which has 30% bonds, compared it to a 100% stock fund, and claimed the reason it was safer is because of dividends. Dividends demonstrably, almost as a rule, fall harder during crashes. This is not opinion, it's an observational fact. That's simply the way it is. So not only did you ignore the effect of bonds, you attributed the safety to dividends when they in fact are less safe, then when shown evidence that dividends weren't a factor and you still underperformed the index, your response is...this?
You are horribly lost here. To any newbies in the thread, this is a textbook example of what not to do. Keep it simple, focus on your savings rate, and it's almost a statistical certainty that you'll end up better off than following mrpercentage.
Dodge,
Can you provide some data and evidence that backs up your assertion that dividend-paying stocks fall more during hard times in the market than non-dividend stocks? All of my research has shown the opposite but maybe I'm mistaken.
Regarding dividend funds/stocks crashing harder. I first noticed this in a thread about dividends, where a hot-shot dividend investor was being interviewed about how dividend stocks always outperform. I pulled up his biggest fund, the WisdomTree Total Dividend Fund (their total dividend index fund - DTD), a dividend fund with about 1000 stocks in the US, listed on the NYSE, AMEX or NASDAQ Global Market, which pay regular cash dividends, and plotted it against the market index (VTSAX - blue line):
(http://i.imgur.com/12qz3eB.png)
Then I plotted their Small Cap dividend fund (DES), one of their biggest funds in terms of dollars invested:
(http://i.imgur.com/3h580t6.png)
A $900,000 portfolio, would have dropped to $315,000 during the last crash. While not all dividend funds were this bad, they all had a commonality to them...they all dropped harder in 2008-2009 than the market. By going this route, you have the worst of both worlds during a bear market. Lower gains than 100% bonds, and higher risk than 100% stocks.
I noticed this time and time again, every dividend fund I looked at, no matter who was behind it, crashed harder, but I didn't have a good reason why it happens so uniformly across dividend stocks, until I saw Skyrefuge's recent post:
http://forum.mrmoneymustache.com/investor-alley/ive-decided-on-vanguard-but-need-some-help-please/msg584803/#msg584803 (http://forum.mrmoneymustache.com/investor-alley/ive-decided-on-vanguard-but-need-some-help-please/msg584803/#msg584803)
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Mrpercentage, it's clear you aren't following my argument, or the data I've posted. This is showing more and more with each subsequent post. Literally nothing you've said actually counters my assertion. Again, I implore you, do some reading, and don't make any follow-up arguments until you understand my posts. I'm not saying you have to agree with them, but you should be able to follow along, and understand my reasoning. Then if you still disagree, you can make counter points which actually address what I'm saying.
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Mrpercentage, it's clear you aren't following my argument, or the data I've posted. This is showing more and more with each subsequent post. Literally nothing you've said actually counters my assertion. Again, I implore you, do some reading, and don't make any follow-up arguments until you understand my posts. I'm not saying you have to agree with them, but you should be able to follow along, and understand my reasoning. Then if you still disagree, you can make counter points which actually address what I'm saying.
Did I cherry pick those funds? You bet. Nothing but the best for my kids. Don't pretend an index always wins. They don't.
Since you are in the industry I suggest working for Capitol Group. They take care of their employees, their kids, and their grand kids. They ensure they can always beat the market without trying.
Cherry picking wisdom tree is crap. Im not talking about crap, Im talking about American Funds. They can beat the market for you too- even with a 5.75% load. As long as you are smart and don't think throwing around your funds a lot are going to beat the best minds in the industry. It won't unless you have NAV.
You come across as condescending. My actually money was in the account at bad times. Chew on those charts I posted and look at the numbers. They are real
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Top of the world Mom! Thank you for the NAV for me and my kids
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Dodge -
Side-topic - Is the portfolio modelling tool that you have shown an extract from above a freely available product or is it part of a fee-for-service product?
Thanks!
Here you go!
https://www.portfoliovisualizer.com/
Specifically:
https://www.portfoliovisualizer.com/backtest-portfolio
Thanks Dodge - will see if i can find something similar for the australian market
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I will read that book since it has come up a lot. Perhaps a better argument would have been posting the payout vs dividend reinvestment. Correct me if I'm wrong here but isn't Amecx a large cap dividend fund? Perhaps less vulnerable to a market crash
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I will read that book since it has come up a lot. Perhaps a better argument would have been posting the payout vs dividend reinvestment. Correct me if I'm wrong here but isn't Amecx a large cap dividend fund? Perhaps less vulnerable to a market crash
AMECX is 70/30 stocks bonds:
(http://4.ii.gl/NfPRJHQGw.png) (http://4.ii.gl/NfPRJHQGw.png)
Let's see how AMECX (Portfolio 2 below) did during the last crash, vs the comparable 70/30 index (Portfolio 1 below), and the 100% stock market index (Portfolio 3 below):
(http://4.ii.gl/frLpUe6Vb.png) (http://4.ii.gl/frLpUe6Vb.png)
(http://1.ii.gl/05NbMxnd7.png) (http://1.ii.gl/05NbMxnd7.png)
We can see that it's safety compared to the 100% market index, is attributed to it's allocation to bonds, as it performed similarly to the 70/30 index during the crash. AMECX in fact holds almost 10x more unique bonds than unique stocks:
(http://1.ii.gl/9Q97f-phf.png) (http://1.ii.gl/9Q97f-phf.png)
Wow, a 47% turnover is huge! I guess when you're only holding 150 stocks you feel the need to swap almost half of them out every year? Unfortunately, this causes a huge tax drag:
(http://2.ii.gl/OdpPKzp2d.png) (http://2.ii.gl/OdpPKzp2d.png)
Compare the Pretax return, with the Tax-adjusted return, and you'll see this penalty in effect. The tax penalty on a 1 year holding of AMECX was 7.5%! Turning a 6.6% gain into a -1.09% loss. On the comparable indexes, the penalty was only 2% and 1%. I hope you aren't holding this in a taxable account...
Anyway, yes, you can see in the chart above (which has all dividends reinvested) that AMECX indeed crashed a bit harder than it's index, showing that the dividend component to AMECX provided no additional safety. On the contrary, it likely contributed to its further decline.
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I've done index investing for the past 10+ years, and never figured I would change, but after reading Spoonman's Journal, my interest is getting drawn to Dividend investing.
There are some interesting aspects to it; the potential for higher yields, the purity of not touching the principle investment, the potential to realize gains even during long flat periods in the equities market....
I would be interested in hearing from those who have looked into this.
I do some active investing, dividends are a factor but I look at a variety of other things as well. I don't like the term "dividend investing" in this context. Index investing has a much more narrow and concrete meaning then the term "dividend investing". This makes it almost impossible to make a coherent argument for either side because I am sure people have wildly different ideas of what "dividend investing" means.
Dividend investing could mean a variety of things like:
1. Investing only in stocks that pay a cash dividend
2. Investing only in stocks that have a notion of shareholder yield (buybacks, dividends, lowering debt etc.)
3. Investing only in stocks that regularly increase their cash dividend
4. Investing only in stocks that have a relatively high yield vs other stocks (dogs of the dow type of strategy)
etc.
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You won't convince me to leave American Funds at NAV. You also won't convince me that small and mid cap higher volatility index will respond the same as a large cap low volatility high yeild fund. The idea was to show the positive gains of dividends.
You wont convince me I am a bad example either. Or that mutual funds are always a bad idea. I would go even further and say that in some cases that sales load will save somebody money who might think they can out smart the market by shuffling their index around.
hold on I will show you the power of dividends in a minute
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...Sales load isn't applied to NAV by the way.
...Im NAV dude. I am the blue line....
...Uh, you removed all the dividend reinvestment dude. Mine [AMECX] pays 4.5% @NAV and when reinvested it beat the S&P 500 for over a decade. Nice try though
...Im not talking about crap, Im talking about American Funds. They can beat the market for you too- even with a 5.75% load. As long as you are smart and don't think throwing around your funds a lot are going to beat the best minds in the industry. It won't unless you have NAV.
Top of the world Mom! Thank you for the NAV for me and my kids
You won't convince me to leave American Funds at NAV.
Have you explained what you mean by "NAV" in each of the quotes bolded above? "Net asset value" doesn't make sense for most of those quotes. "Navistar International Corp" (ticker symbol NAV) might make sense for some of the quotes, but not for all of them. Are you saying that your big market-beating technique is owning the company NAV (https://www.google.com/finance?cid=25393)?
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Here you go.. dividends taken in cash vs reinvesting. Chew on that
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-26%20at%205.50.57%20PM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-26%20at%205.50.57%20PM.jpg.html)
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-25%20at%207.43.27%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-25%20at%207.43.27%20AM.jpg.html)
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...Sales load isn't applied to NAV by the way.
...Im NAV dude. I am the blue line....
...Uh, you removed all the dividend reinvestment dude. Mine [AMECX] pays 4.5% @NAV and when reinvested it beat the S&P 500 for over a decade. Nice try though
...Im not talking about crap, Im talking about American Funds. They can beat the market for you too- even with a 5.75% load. As long as you are smart and don't think throwing around your funds a lot are going to beat the best minds in the industry. It won't unless you have NAV.
Top of the world Mom! Thank you for the NAV for me and my kids
You won't convince me to leave American Funds at NAV.
Have you explained what you mean by "NAV" in each of the quotes bolded above? "Net asset value" doesn't make sense for most of those quotes. "Navistar International Corp" (ticker symbol NAV) might make sense for some of the quotes, but not for all of them. Are you saying that your big market-beating technique is owning the company NAV (https://www.google.com/finance?cid=25393)?
Im listening Cathy. When you are all done attacking my fund spreading the love of index. Please explain how a dividend reinvestment strategy doesn't work. From my view you guys look totally retarded. Im not trying to insult anyone. Im saying I must view you in the same way you apparently see me. When somebody slaps up figures that don't match the performance I see, I rightfully question it. Dividends are powerful.. Specifically large cap- low volatility- high yield-- when you are all done attacking me because I have the audacity to:
Invest for my kids
Use mutual funds
Invest in very success large companies with a promising future who are beating your indexs-- I am beating your indexs over all thank you
Invest my saving-- okay that might be stupid.. I should pull out of Betterment and index all together and keep more cash
Not to mention Im backed by a pension, have no debt, my cars paid off..
Im a bad example huh.. well you are all very poor judges. Im okay with be a bad example then.
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Have you explained what you mean by "NAV" in each of the quotes bolded above? "Net asset value" doesn't make sense for most of those quotes. "Navistar International Corp" (ticker symbol NAV) might make sense for some of the quotes, but not for all of them. Are you saying that your big market-beating technique is owning the company NAV (https://www.google.com/finance?cid=25393)?
Im a bad example huh.. well you are all very poor judges. Im okay with be a bad example then.
How do we put this politely? She's asking you, very literally, what your acronym "NAV" means. That's all.
You may be a paragon of well managed personal finance. Nobody's asking about that here. They're commenting on your investment posts, which, to be as charitable as possible, read like garbled stream of consciousness rants.
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Here you go.. dividends taken in cash vs reinvesting. Chew on that
...extremely large image...
...extremely large image 2...
So all I gathered from that was that the net asset value of a portfolio that reinvests dividends is much higher than the same portfolio that doesn't reinvest dividends. Well...I mean...that's pretty obvious, even if it's not understood that a company giving a dividend and the investor reinvesting in said company is no different than that company not giving a dividend and instead reinvesting that money themselves.
Is the point you're trying to make that by reinvesting dividends, you get a higher net asset value in the end? If so, then I think it's safe to say that everyone will agree with you on that point.
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Jeebus. Yes, reinvesting your dividends makes you more money than buying yourself hookers and blow and fast food with them.
It also has no bearing on the question of what produces the best total returns, or what's the least volatile, etc. Please, please listen to Dodge.
-W
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Okay Im being unclear.
NAV [net asset value]: 1. hey Im happy with the deal I have please don't try to sell me an index 2. can we get back to how dividend focused investing can stabilize your portfolio 3. Im really not interested in discussing fees Im trying to show you how a focus of dividends can reduce the downside on your portfolio 4. I do realize it would be unfair to compare a fund without discussing fees but I don't want to compare funds I want to talk about how dividend focused investing can produce results
Dividends keep popping out even when the principle is lowering due to the market. Even if a stock you hold is losing value you might be out performing the S&P 500 if you are reinvesting your dividends. Your upside is from increased shares not capitol gains--its from the shares you have increasing and increasing the dividends returned now that you have more shares.
Taxes matter more for non retirement accounts. Lack of sleep plays with clarity, sorry about that
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Well, just like how anyone can start a business or a dividend portfolio, so too can anyone start a fund and get customers to invest into their picks with customer money and fee them.
Taking control of your money may pay out more, just like when you take control of your finances and life's limited time.
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Dividends often get cut in bad times, and if you'd read the link to the earlier thread about this, or listened to anything Dodge had to say, high dividend paying stocks *crash harder* in a downturn.
If you are concerned with overall returns, focusing on dividends is a bad idea. It's not horrible, it's just not optimal. You will end up with more money by just buying everything, dividend paying or not. If you are combining that with picking individual dividend stocks... well, then you're picking stocks, and that's almost universally considered a terrible idea, but it's a different discussion.
The fee and tax drags are significant too, of course.
-W
Dividends keep popping out even when the principle is lowering due to the market. Even if a stock you hold is losing value you might be out performing the S&P 500 if you are reinvesting your dividends. Your upside is from increased shares not capitol gains--its from the shares you have increasing and increasing the dividends returned now that you have more shares.
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mrpercentage invest in individual stocks and front-load, managed mutual funds. I think I also saw him say he was going to spend thousands on the latest iPhone an/or apple watch. What exactly is he doing on this forum? Don't know if there is anywhere on the internet less aligned with his interests.
Is he really MMM trolling in his off-hours?
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Dividends often get cut in bad times, and if you'd read the link to the earlier thread about this, or listened to anything Dodge had to say, high dividend paying stocks *crash harder* in a downturn.
If you are concerned with overall returns, focusing on dividends is a bad idea. It's not horrible, it's just not optimal. You will end up with more money by just buying everything, dividend paying or not. If you are combining that with picking individual dividend stocks... well, then you're picking stocks, and that's almost universally considered a terrible idea, but it's a different discussion.
The fee and tax drags are significant too, of course.
-W
Dividends keep popping out even when the principle is lowering due to the market. Even if a stock you hold is losing value you might be out performing the S&P 500 if you are reinvesting your dividends. Your upside is from increased shares not capitol gains--its from the shares you have increasing and increasing the dividends returned now that you have more shares.
If you are talking about REIT's with 8+ % yes they will crash. If you are talking about a well established large cap that does not have explosive growth-- well the market tends to rally around those.
Look an index can be a good deal, but be careful playing with index strategy. I can save a lot of money being my own security guard but I might just get the crap knocked out of me... it is hubris to think that the sales load of a fund is for nothing-- or to think that by picking up a few index's you can better secure your money then having someone who has done this for 30 years handle it.
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I'm not sure, might be too incoherent to be a troll. Then again, maybe that's part of the fun?
Anyway, yeah, no reason to keep trying - I'm not sure anyone is home.
-W
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Help us out here. If you can answer this question, it would go a long way to helping us understand how to respond to your posts.
If you are talking about a well established large cap that does not have explosive growth-- well the market tends to rally around those.
I posted indisputable evidence that in fact, this does not happen. How do you respond to that?
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I'm not sure, might be too incoherent to be a troll. Then again, maybe that's part of the fun?
Anyway, yeah, no reason to keep trying - I'm not sure anyone is home.
-W
(http://4.ii.gl/oJ3qEZxuQ.png)
https://www.youtube.com/watch?v=GipZ0cC7IE8
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Baba Booey! Baba Booey! Howard Stern's penis!
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and the bumble bee can't fly and Warren Buffets method doesn't work. Indisputable nothing. SOME strategies can not be reproduced indexing indexers. Because some strategies require you work with the strong. Read Neitzche.. and numbers.. okay look at the price of Disney and Apple and go back to the post "Can't beat an index" and look up what the price was when I told you to buy. Indisputable what? Results.. thats what I thought. You can't blanket buy everything and expect to beat the market without wrecking the whole damn thing for everyone. You want to index fine-- stick with the 500-- but if you have 10 million dollars and want to gain money without losing it to a dumbass-- you might want to consider Class A share's.
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(http://reactiongif.org/wp-content/uploads/GIF/2014/08/GIF-disbelief-furrowed-brow-incredulous-Louie-CK-WTF-GIF.gif)
(http://www.reactiongifs.com/r/nwy.gif)
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(http://i45.photobucket.com/albums/f78/lapsedlawyer/popcorn.gif)
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and the bumble bee can't fly and Warren Buffets method doesn't work. Indisputable nothing. SOME strategies can not be reproduced indexing indexers. Because some strategies require you work with the strong. Read Neitzche.. and numbers.. okay look at the price of Disney and Apple and go back to the post "Can't beat an index" and look up what the price was when I told you to buy. Indisputable what? Results.. thats what I thought. You can't blanket buy everything and expect to beat the market without wrecking the whole damn thing for everyone. You want to index fine-- stick with the 500-- but if you have 10 million dollars and want to gain money without losing it to a dumbass-- you might want to consider Class A share's.
Mrpercentage, I understand your stance on this. Let's do this. I'm going to ask a Yes or No question. Please, please, please, simply answer with "Yes" or "No". Seriously. Nothing else. Simply "Yes", or "No".
Question 1: "Dividends crash less during a downturn, as evidenced by this AMECX chart." Does this accurately portray your stance?
Yes or No?
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You want to index fine-- stick with the 500-- but if you have 10 million dollars and want to gain money without losing it to a dumbass-- you might want to consider Class A share's.
For buying individual stocks:
According to Investopedia, "Although Class A shares are often thought to carry more voting rights than Class B shares, this is not always the case. Companies will often try to disguise the disadvantages associated with owning shares with fewer voting rights by naming those shares 'Class A,' and those with more voting rights 'Class B.' "
http://www.investopedia.com/terms/c/classashares.asp#ixzz3YZIL38K3
For buying mutual funds:
"Whenever you see alphabet soup, i.e., Class A, Class B and Class C shares, when shopping for mutual funds, it means you're paying a load. A load is a sales commission; the letter just tells you when you'll get nicked for it. "
http://www.bankrate.com/brm/news/dollardiva/20020110a.asp
Therefore, I don't see class A shares as an advantage.
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Love this thread - it's providing great entertainment!
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Okay, so what is Mr. Percentage doing? Im leaving my good deal alone that's what. Yes, over all I like that fund or I wouldn't have such a high percentage of my portfolio in it. Im a loyal person. American Funds have been good to me and have made me money. I will not undercut a perfectly good company for a possible point or two somewhere else.
Dividend purchasing well, Im buying Ford.. its got a 3.7% yield. It just did a recall. It's price isn't over inflated because Warren Buffet is sitting in it (GM). It has been around for over a hundred years. Im sure it will do just fine. Shit Im driving one. They must be doing something right.
But I must be fucking retarded cause Im not even going to look at the fundamentals.
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which is drawing down the least?......... BOOM!
(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1313.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1313.jpg.html)
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(http://i.imgur.com/CIWGzWh.gif)
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Love this thread - it's providing great entertainment!
This is quite fantastic. I propose the tread is moved to wall of shame & comedy. And I beg mrpercentage to share more of his investing insight
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I'm just going to say, it's amazing to read coherent, research backed posts "refuted" by rambling stream of consciousness reactionary word salads.
Amazing but it can also be depressing.
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I'm just going to say, it's amazing to read coherent, research backed posts "refuted" by rambling stream of consciousness reactionary word salads.
Amazing but it can also be depressing.
What are you talking about? These are all great! After a quick look back, my favorite might be: "Read Neitzche.. and numbers"
And many other classics quotes I would expect to find scribbled in feces on the wall of a mental institution.
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I'm done giving away million dollar ideas. I'm beating the street. Go ahead and copy fund managers with indexes. Me I'm fucking winning
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Where's FreeYourChains when you need him/her...
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I'm done giving away million dollar ideas. I'm beating the street. Go ahead and copy fund managers with indexes. Me I'm fucking winning
Question 1: "Dividends crash less during a downturn, as evidenced by this AMECX chart." Does this accurately portray your stance?
Yes or No?
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I'm done giving away million dollar ideas. I'm beating the street. Go ahead and copy fund managers with indexes. Me I'm fucking winning
You're a total fucking rock star from mars. Come on bro, you got tiger blood.
https://www.youtube.com/watch?v=9QS0q3mGPGg
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My free million dollar idea: get a good night's sleep and post sober. I may or may not follow my own advice.
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WOW this thread delivered.
(https://1.bp.blogspot.com/-lvfXPxH9jOg/TcNszM__aTI/AAAAAAAAAUg/BsEmb1THDRs/s1600/excited+2.gif)
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The one post I want to highlight in this thread is here:
I'll be the sacrilegious one who says you can beat the index with dividends and other components. I defer arguments as to why this is possible to James O'Shaughnessy, author of What Works On Wall Street. But I'll give you the short version. A long time ago, the author found that companies that paid dividends outperformed. He also found that companies that bought back their own stock or paid down debt (the three components of "shareholder yield") outperformed as well. He further found that momentum investing outperforms simple buy and hold.
There is a fund that invests in the companies with the highest shareholder yield and adds an element of momentum investing to determine entry points. That is Cambria Shareholder Yield (NYSEMKT:SYLD). I bought shares of SYLD on 28MAY2013 and simultaneously recorded the event in my Motley Fool CAPS to track performance against the S&P index.
Result per http://caps.fool.com/player/FVelociraptor.aspx (http://caps.fool.com/player/FVelociraptor.aspx)?
S&P 26.71%
SYLD 32.97%
Advantage 6.26%
Expense ratio is 0.59% and I leave it to the reader to determine if that is more or less than 6.26% since June 2013.
Or you can listen to skyrefuge who insists the DGI folks have 'drank the Kool-Aid' and are blind to reputed under-performance.
Morningstar says this is a Mid-cap fund:
[ img ]
Comparing SYLD (orange), to the Vanguard Mid-cap index (blue), and the Vanguard total market index (green), during the time period you specified:
[ img ]
Mid-cap index: 38%
SYLD: 35%
Total market index: 33%
We see SYLD underperformed the Mid-cap index, and just barely nudged out the total market index. So, your information is wrong. In fact, it looks like your data is comparing an S&P500 price chart, to an SYLD total return (price + dividends) chart. Sure enough, when I pulled up Vanguard's S&P500 price chart, I got a 27% increase:
[ img ]
So, not only are you using the wrong benchmark, it isn't even an apples-to-apples comparison, as your data is explicitly removing dividends from only the benchmark side. Now, forgetting about SYLD for a moment, let's look at the general statement you're making:
"Companies that paid dividends in the past, ended up outperforming the market as a whole."
Since dividends are just another way to express returns, this statement is the equivalent of:
"Companies that had consistent returns in the past, ended up with more returns than the market as a whole."
That sounds like a reasonable statement to make. How is that information actionable? Shall I then invest money in the stocks which have performed well in the past, hoping they will continue to perform well in the future? Alarm bells should start ringing on that one. When you think about it, the whole concept sounds downright silly. If you look at stocks which continually paid dividends over a long period of time, of course they will have beaten the market. Because when companies are doing well...they continue to pay their dividends. But it's the fact that the companies did well which caused them to outperform, not the dividends.
Taking that information, and extrapolating it into, "Therefore I should only buy dividend stocks!" is not just silly, it’s illogical. You can't look at a list of stocks which outperformed, note that almost all of them paid dividends over that period, then expect current dividend stocks to outperform as well. Correlation does not imply causation (http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation). Example:
------------------------------
Paying dividends are strongly correlated with stocks that outperformed.
Therefore, buying dividend stocks will result in me outperforming.
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The above example commits the correlation-implies-causation fallacy, as it prematurely concludes that the same factor which leads to paying dividends, also causes outperformance. A more plausible explanation is that companies which outperform, continue to pay their dividends, which thereby gives rise to a correlation. So the conclusion is false.
Not just because it was an epic blowout, but because it was addressing a more frequent poster than mrpercentage.
One who has a whole blog around these topics. One who "ER'd" with a 10% WR or something like that.
So I'm hoping we'll get more serious answers/a real discussion.
So what I'm curious about, Mr. Raptor, is: did this post change your mind? If not, why not?
I know we all have a tendency to dig in and stick with our previous beliefs, even when confronted with evidence to the contrary, via the Backfire Effect (http://youarenotsosmart.com/2011/06/10/the-backfire-effect/), but your fund underperformed via a comparable measurement, and you paid them extra in fees to do so. So if you're sticking with that fund... why?
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You guys did sell me on something though.. YOU should stick with an index-- since my rambles present key details you always miss. You can't catch tuna with the same fishing pole without taking into consideration-- the tides- the season- the lure- the depth- the type of tuna you are going for. It's an art.
I have had too much kool aid here though. I think Im going to stick to the blog for a while. Deuces
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(http://i.imgur.com/6zIDQLd.gif)
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The one post I want to highlight in this thread is here:
I'll be the sacrilegious one who says you can beat the index with dividends and other components.[snip]
Not just because it was an epic blowout, but because it was addressing a more frequent poster than mrpercentage.
One who has a whole blog around these topics. One who "ER'd" with a 10% WR or something like that.
So I'm hoping we'll get more serious answers/a real discussion.
So what I'm curious about, Mr. Raptor, is: did this post change your mind? If not, why not?
I know we all have a tendency to dig in and stick with our previous beliefs, even when confronted with evidence to the contrary, via the Backfire Effect (http://youarenotsosmart.com/2011/06/10/the-backfire-effect/), but your fund underperformed via a comparable measurement, and you paid them extra in fees to do so. So if you're sticking with that fund... why?
I think I'm responding to rebel spy here. Hard to tell with so many inline quotes and working from the little box on forum.
First: I didn't sell SVXY. I did a quick calculation and at today's spot and current portfolio liquidation, SVXY makes up a 1.38% allocation for me. I haven't even bothered to check the performance until just now. So, no sell. It just isn't material to me the way municipal bonds and a basket of written puts on various blue chips are. It's just one of the places I park cash for the very long term when I have more than enough to fund my current lifestyle plus an (best guess) inflation buffer. The better question might be might I add to SVXY if my cash situation allows in the future? The answer is yes but a pair of CEF in muncipal bonds that trade below NAV (NIO/NEA) are *currently* more attractive to me and my needs.
The real question seems to be WHY (not?) I simply am not impressed that the other researcher felt Yahoo! Finance had SVXY better characterized as I think a mid-cap and that it should be compared to a mid-cap index (the OP I think was asking about mixing yield and indexing and if that beat the broad market e.g. SP500?). My reading of the prospectus indicates they invest in anything over 200M (so no micro-caps) with no upper limit. Does that mean it is mid cap? All the time? Or just when the selection criteria favor mid-cap over small/large? Allocations are driven by a combination of shareholder yield and momentum. I'm not impressed by the momentum part even though O'Shaunessy found momentum also "Works on Wall Street." The simple justification, is I expect companies that reward shareholders via the components of shareholder yield to outperform those that don't over a sufficiently long period of time (much longer than my current holding period.) This is because I consider returning cash to shareholders a proxy for management's ethics. E.g. they are giving the booty to owners instead of building private empires at their expense.
My blog (is that a topic now?) doesn't yet cover SVXY (not my highest conviction holding as evidenced by low allocation.) I promote dividend growth (a subset of shareholder yield), insurance companies with a strong history of good underwriting, CEFs selling below NAV, and selling options for income. These are the things that have worked for me and outpaced the S&P. The options take is the most important part and was the driver of being able to ER and do so with a higher than normal WR. That is, in upwards or sideways markets, I expect selling options for income on large stable companies to outperform the underlying equities.
My approach has been designed to beat the S&P which I considered my primary opportunity cost (what I what likely index to as an alternative.) I have no doubts I could find an index that has beaten my approach since roughly 2009 (how about a biotech index for example?) when I began building my approach. Same as one can find a lot of indexes that have beaten SVXY over the given time period. My speculation (and it is based on a belief companies that put owners first are "better") is that SVXY (and my overall approach) will beat any sufficiently broad index of the US or World, while under-performing niche areas full of people who are smarter (or luckier) than I am.
Is not the original point of the thread to explore whether you could combine indexing and dividend investing? I contributed the only morsel I had on that particular and narrow topic. YMMV.
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Thanks for the thorough response, Raptor. I appreciate it.
Your argument seems to boil down to me to:
1) It's such a small amount you don't care about, and
2) You don't think the comparison used to a mid-cap index is fair, because you don't think SVXY is mostly mid-caps.
(Correct me if I'm wrong, I don't mean to misstate you, just summarizing.)
The first I think is ridiculous. If something is suboptimal, it shouldn't be part of your AA. If it's not suboptimal, that's fine, but to dismiss it as "it's only X% of my portfolio" is poor reasoning, IMO.
The second I don't know enough about SVXY, or care to look into, but I'd accept it as a reasonable argument, if true.
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Thanks for the thorough response, Raptor. I appreciate it.
Your argument seems to boil down to me to:
1) It's such a small amount you don't care about, and
2) You don't think the comparison used to a mid-cap index is fair, because you don't think SVXY is mostly mid-caps.
(Correct me if I'm wrong, I don't mean to misstate you, just summarizing.)
The first I think is ridiculous. If something is suboptimal, it shouldn't be part of your AA. If it's not suboptimal, that's fine, but to dismiss it as "it's only X% of my portfolio" is poor reasoning, IMO.
The second I don't know enough about SVXY, or care to look into, but I'd accept it as a reasonable argument, if true.
I think you're missing the main argument, which was that Raptor thinks this strategy will work over the very long term. Putting words into his mouth, it seems like a marginal underperformance to an index (if true) over a short time period isn't meaningful evidence that it doesn't work.
An analogy is suggesting that stocks return more than bonds over the long term, and sticking to that philosophy when in the first year of owning stocks bonds perform better.
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Fair enough. I disagree that it will, but if you hold that it will, by all means, stick to it. But make sure you're calculating the right things when you compare it, so you don't think you're 6% ahead of where you actually are.
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Thanks for the thorough response, Raptor. I appreciate it.
Your argument seems to boil down to me to:
1) It's such a small amount you don't care about, and
2) You don't think the comparison used to a mid-cap index is fair, because you don't think SVXY is mostly mid-caps.
(Correct me if I'm wrong, I don't mean to misstate you, just summarizing.)
The first I think is ridiculous. If something is suboptimal, it shouldn't be part of your AA. If it's not suboptimal, that's fine, but to dismiss it as "it's only X% of my portfolio" is poor reasoning, IMO.
The second I don't know enough about SVXY, or care to look into, but I'd accept it as a reasonable argument, if true.
Arebelspy, you have me on point one. Being irrational with 1% is still 'stupid is as stupid does'. My point was more, I haven't been crying myself to sleep at night because my most beloved investing idea was savaged by a meanie on the internet using graphs. I have a finite number of hours in a day, I just haven't gotten around to even re-evaluating SVXY because I'm frying bigger (mostly options) fish at the moment. I'll re-assess eventually, it just isn't a high priority item at 1.4% or so.
2. I think comparison to a mid-cap (or better a basket of mid-caps so we know the mid-cap presented wasn't cherry picked...) *might* be fair some of the time. The prospectus gives the fund leeway to be anything from small cap to mega cap or anything in between so long as the selections 'win the shareholder yield race' and pass some sort of momentum criteria I never fully understood. It was 3 and 6 month momentum so I didn't pay much mind. Over the time period I'm thinking of, its irrelevant.
Beltim is closer on point number two. This is kind of like the Dual Momentum thread (which is more interesting to me right now) where one poster is focused on whether there is a logical reason for DM to work. I think shareholder yield is a strong indicator of very long term performance (as found in What Works On Wall Street) and that the (year?) or so I've held doesn't mean much and b) comparing to a mid-cap over a very long period makes less sense than comparing to a broader index over a decades long period because that is what I perceive to be my opportunity cost for my active management approach.
The point of my original post was to convey what I knew to the original poster about mixing dividends and indexing (admittedly, very little) Hindsight being 20/20 (and my memory better at the moment), I should have also noted there is an index of Dividend Achievers run by Vanguard with very low fees, VIG. I have interest in that as well but haven't taken the time to read the prospectus like I did with SVXY and don't expect to have extra cash above and beyond what I want to direct to municipal bonds for at least a year or so. So another non-priority item for my reading list.
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I thought this was about SYLD, where did SVXY come from?
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I thought this was about SYLD, where did SVXY come from?
Good question. (https://dl.dropboxusercontent.com/u/9743562/icon_lol.gif)
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SYLD vs SVXY - Sleight of hand?
Dodge wasn't a meanie, it's amazing how many people respond to data and graphs and actual hard numbers with emotion. An investment performs or it doesn't. FinancialVelociraptor claimed it outperformed by 6% but it either underperformed or was closer to 2% in it's advantage. That's a part of a conversation.
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Is this thread a real thing or am I dreaming? Surely at least one of the posters in here is a troll...
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Okay I will let facts speak
take your time and actually look at the methods. The companies.. the Charts [earlier displayed] were to show the power of dividends.. thats all nothing more. I think they illustrated that well. Methods matter. End result is not always what counts. Im not a detail weenie. Im a big picture guy. Take that into consideration
I will let the truth speak for itself.
Exhibit A:
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-29%20at%205.05.33%20PM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-29%20at%205.05.33%20PM.jpg.html)
Exhibit B:
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-29%20at%205.26.14%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-29%20at%205.26.14%20AM.jpg.html)
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But I have to ask, how can you get a meaningful performance comparison over only two years? (I'm talking about the SYLD discussion)
Mr Percentage, what is your screenshot trying to tell us?
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Mr Percentage, what is your screenshot trying to tell us?
1. That large cap value is the focus. Also shows companies to start with for strait stock.
2. That if you have a lot of money Class A are a pretty good deal. Lower over all fees and if you have a million no sales load.
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Mr Percentage, what is your screenshot trying to tell us?
1. That large cap value is the focus. Also shows companies to start with for strait stock.
2. That if you have a lot of money Class A are a pretty good deal. Lower over all fees and if you have a million no sales load.
Question 1: You said earlier that AMECX is safer than the index during a crash. Do you still believe this is true?
Yes or No?
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Mr Percentage, what is your screenshot trying to tell us?
1. That large cap value is the focus. Also shows companies to start with for strait stock.
2. That if you have a lot of money Class A are a pretty good deal. Lower over all fees and if you have a million no sales load.
Question 1: You said earlier that AMECX is safer than the index during a crash. Do you still believe this is true?
Yes or No?
Unless you want to argue about interest rates it is the green line Dodge so you tell me. Its all relative really
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-29%20at%207.38.55%20PM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-29%20at%207.38.55%20PM.jpg.html)
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Hmmmm...
(http://cdn2.hubspot.net/hub/131307/file-17523408-png/images/confusion-resized-600.png)
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Mr. Percentage the non-load adjusted returns for that mutual fund are worse than the Large Cap Value Index Fund that Vanguard provides, there are two of them VUVLX and VVIAX. Moreover based on this time frame as shown on your graph there's no advantage to a Value strategy, the S&P 500 Index outperforms the Value Indexes.
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when the market dips it dips less.. I wouldn't say safe per say.. but I think it buys time and at least it gives you dividends
perfect no.. but managed. I still prefer the idea of large cap value stock that pays high dividends. Companies I expect to survive a crash that pay a big dividend. I think that is essential for waiting for it all to come back. If the market crashes and interest rates rise no one is completely safe-- except maybe variable interest rate bonds because the protect the investment trade value-- and gold-- neither are doing good right now but if it crashes they will.
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-04-29%20at%207.53.23%20PM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-04-29%20at%207.53.23%20PM.jpg.html)
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Question 1: "Dividends crash less during a downturn, as evidenced by this AMECX chart." Does this accurately portray your stance?
Yes or No?
when the market dips it dips less.
Question 2: Do you acknowledge that AMECX is 70% stocks and 30% bonds?
Yes or No?
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Im a big picture guy.
No, you're really not. That's ok, but you are definitely not a big picture guy. I have yet to see you articulate a 30,000 foot view of investing theories or principles. You've sat around and talked about why you're really smart for picking AAPL or a fund with a huge load. Those are details, not the big picture.
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AMECX is my defensive line-- I don't pay a load.
Apple and Disney are my wide receivers.
On a shit day like today Im glad I have AMECX.
But Im still optimistic. Im going to let everything ride and take advantage of of lower prices for long term investments.
Im not surprised either. Textbook season. Sell in May and go away. Glad I cashed out betterment 2 days ago. I will have cash to purchase.
What works for me may not work for everyone.
The danger in bonds are more for individual purchases I think Dodge. If you are willing to ride out the full term there isn't much risk.
I wish everyone the best of luck. Dividends have worked well for me.
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AMECX is my defensive line-- I don't pay a load.
Apple and Disney are my wide receivers.
On a shit day like today Im glad I have AMECX.
But Im still optimistic. Im going to let everything ride and take advantage of of lower prices for long term investments.
Im not surprised either. Textbook season. Sell in May and go away. Glad I cashed out betterment 2 days ago. I will have cash to purchase.
What works for me may not work for everyone.
The danger in bonds are more for individual purchases I think Dodge. If you are willing to ride out the full term there isn't much risk.
I wish everyone the best of luck. Dividends have worked well for me.
Question 2: Do you acknowledge that AMECX is 70% stocks and 30% bonds?
Yes or No?
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Jesus.. your plan is perfect Dodge. Implement it. You mother fucking genius!! Feel better?
Nice! If Apple is good enough for Cramer its good enough for me. I have other reasons in cash for the crash but Cramer is good enough for me.
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Jesus.. your plan is perfect Dodge. Implement it. You mother fucking genius!! Feel better?
Nice! If Apple is good enough for Cramer its good enough for me. I have other reasons in cash for the crash but Cramer is good enough for me.
Question withdrawn (agreed, rule #1).
I was really trying to bring you down the path of understanding your mistakes, as I believe anyone can learn this stuff, even when they are as hard-set against it as you are :) Too bad you didn't play along.
In case any newbies in here are still following, and are interested in seeing how:
AMECX - American Funds Income Fund of America (http://www.morningstar.com/funds/XNAS/AMECX/quote.html) - 70% in 150 individual stocks, and 30% in 1320 individual bonds - 5.75% load fee + 0.57% fee
fared during the 2008-2009 crash against a 70/30 stock/bond index, with the standard funds recommended here:
VTSAX - Vanguard Total Stock Market Index (https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT) - 3796 individual stocks - 0.05% fee
VBTLX - Vanguard Total Bond Market Index (https://personal.vanguard.com/us/funds/snapshot?FundId=0584&FundIntExt=INT) - 7477 individual bonds - 0.07% fee
(http://3.ii.gl/NrRmwbIIU.png)
(http://3.ii.gl/Euzm2W7t.png)
(http://3.ii.gl/t4uCvDj_Q.png)
Be careful not to spread misinformation mrpercentage. There are lots of newbies here who might be tempted to drop their life-savings into a fund based on something you post (I've received many PMs, it happens). It's ok to like AMECX, but we are doing a major disservice to the readers of this forum if we show them a 70/30 stock/bond fund, then compare it to a 100% stock index fund during a crash, and say they should "value the power of dividends. Especially in bad times." ... all the while pointing them towards a fund with a 5.75% load fee and 0.57% yearly fee.
AMECX is not special. To the newbies, if you want stability, buy a Vanguard Lifestrategy (https://investor.vanguard.com/mutual-funds/lifestrategy/#/) fund with lots of bonds. If you're really adventurous, make yourself a Three Fund Portfolio (https://www.bogleheads.org/forum/viewtopic.php?f=10&t=88005) with the two funds I mentioned above, and:
VTIAX - Vanguard Total International Stock Index (https://personal.vanguard.com/us/funds/snapshot?FundId=0569&FundIntExt=INT) - 5905 individual stocks - 0.14% fee
It's easier than you think...
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My take on the merit of buying dividend paying stocks verses non dividend paying stocks is that doing this has historically exposed you to the value factor, which has been shown to increase investment returns over the broad market.
So if you want to increase your returns based on the validated presence of a value anomaly, then you should simply invest in a true value fund, i.e. seek out the property that has given your chosen strategy a performance boost in the past (The value factor) instead of seeking out a weak proxy for it (dividend stocks.)
Of particular concern now is that in the past purchasing dividend stocks has on average meant purchasing value stocks (i.e. dividend paying stocks have historically been sold at a discount to the whole market.)
At the current point in history however dividend stocks are trading at a premium to the broad market (a.k.a. they are not even a proxy for the value anomaly at this point.)
Buyer beware!
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Jesus.. your plan is perfect Dodge. Implement it. You mother fucking genius!! Feel better?
Nice! If Apple is good enough for Cramer its good enough for me. I have other reasons in cash for the crash but Cramer is good enough for me.
The fact that you ignored the main crux of my post proves my point.
PS Cramer, really? That's not strategy, that's listening to a TV personality.
PPS Dodge was asking you a question, not giving you a strategy. You ignored his question just like you ignored the "big picture" of my post.
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Be careful not to spread misinformation mrpercentage. There are lots of newbies here who might be tempted to drop their life-savings into a fund based on something you post
This is pretty funny. Any newbies out there who are extremely influenced by stream of consciousness ramblings, I just have one thing to say: Don't do it. don't invest in individual stocks just because you saw them on talked about on TV or read about them in the WSJ. Even if you "do your research", the fact is, you know very little compared to the people who work on this stuff for a living and can use supercomputers to access information before you can. Did you read about the Twitter earnings leak last week? So think about it realistically. Can you really dedicate more time, effort, intelligence and energy than an Ivy League MBA that works full time for a hedge fund? I knew this guy once his name was Phillip McCutchen and he graduated from Yale undergrad. We used to play lacrosse together in the fall. He was a helluva player, almost fearless out there, and man did he have a shot. The guy was all out from minute one until minute 60. Afterwards we'd go out to this bar on Lake Champlain called The Dock. He'd always drink boilermakers. The guy was totally hardcore. I remember this one time, he got so drunk that he stripped off all his clothes on a bet and dove from the patio straight into the lake. Everyone got a pretty good laugh about that. He even had random patrons buying him drinks after that. Of course he puked in the bushes, but Phil could always boot and rally. Good ol' Phil. He went on to Brown where he got his MBA and he now works at, I shit you not, Champlain Wealth Management. Whenever I talk to him, he we always laugh about the old times of playing lacrosse and drinking boilermakers. Diversification is the key. If you concentrate on individual companies, you're taking on a lot of risk that you have absolutely no control over. You know how they always have a disclaimer that investments are risky and can include loss of principal? Well, that's literally true if you invest in individual stocks, but only theoretically true if you invest in the total market. If the the market goes to zero, well, your money is going to be worthless anyway. If your individual stocks go to zero, well, the rest of us will take a slight hit but keep coming back for another round. Kind of like Phil when he played lacrosse and drank boilermakers.
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Hat is off to you Dodge. You are persistent. I don't believe that shows reinvested dividends though. Im only showing you what I do. I have to show you tools that I know. Your way may be better. Your way may be wiser. Look, I know you can lose money on individual stocks. That just happens to be where the biggest gains are. You can fish with a net. I prefer a harpoon-- its more sporty. I prefer to hunt with a bow-- more sporty.
In truth-- I expect to see some loss in Disney because I don't plan to sell it-- EVER. I expect many peaks and valleys that will end at 25,000% when Im too old to use it. I do see some big peaks in the not too distant future though. You can't factor in the Hysteria that comes when people get a taste of the success that will be. They need to see smash the box office-- they will go nuts.
May the force be with you.
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Hat is off to you Dodge. You are persistent. I don't believe that shows reinvested dividends though. Im only showing you what I do. I have to show you tools that I know. Your way may be better. Your way may be wiser. Look, I know you can lose money on individual stocks. That just happens to be where the biggest gains are. You can fish with a net. I prefer a harpoon-- its more sporty. I prefer to hunt with a bow-- more sporty.
In truth-- I expect to see some loss in Disney because I don't plan to sell it-- EVER. I expect many peaks and valleys that will end at 25,000% when Im too old to use it. I do see some big peaks in the not too distant future though. You can't factor in the Hysteria that comes when people get a taste of the success that will be. They need to see smash the box office-- they will go nuts.
May the force be with you.
You use a lot of words but you have yet to articulate a philosophy or strategy. Platitudes and appeals to celebrity do not constitute a philosophy.
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Hat is off to you Dodge. You are persistent. I don't believe that shows reinvested dividends though. Im only showing you what I do. I have to show you tools that I know.
Great! It's good to question what you see! Never blindly believe what you see on the internet, especially if it seems contrary to the data you know. Portfoliovisualizer.com says:
(http://2.ii.gl/kN83LHgiN.png)
So let's test it! Lets compare the data I presented, to the data and tools you know:
(http://4.ii.gl/fc0iP_2GL.png)
(http://4.ii.gl/c4ZsEmbTN.png)
Compared to my data:
(http://4.ii.gl/Hss1U28h.png)
It seems clear to me that Portfoliovisualizer.com is indeed reinvesting dividends as they claim. What do you think?
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Dodge is right. Portfolio visualizer measures total returns including dividends. Not worth debating really
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Be careful not to spread misinformation mrpercentage. There are lots of newbies here who might be tempted to drop their life-savings into a fund based on something you post
This is pretty funny. Any newbies out there who are extremely influenced by stream of consciousness ramblings, I just have one thing to say: Don't do it. don't invest in individual stocks just because you saw them on talked about on TV or read about them in the WSJ. Even if you "do your research", the fact is, you know very little compared to the people who work on this stuff for a living and can use supercomputers to access information before you can. Did you read about the Twitter earnings leak last week? So think about it realistically. Can you really dedicate more time, effort, intelligence and energy than an Ivy League MBA that works full time for a hedge fund? I knew this guy once his name was Phillip McCutchen and he graduated from Yale undergrad. We used to play lacrosse together in the fall. He was a helluva player, almost fearless out there, and man did he have a shot. The guy was all out from minute one until minute 60. Afterwards we'd go out to this bar on Lake Champlain called The Dock. He'd always drink boilermakers. The guy was totally hardcore. I remember this one time, he got so drunk that he stripped off all his clothes on a bet and dove from the patio straight into the lake. Everyone got a pretty good laugh about that. He even had random patrons buying him drinks after that. Of course he puked in the bushes, but Phil could always boot and rally. Good ol' Phil. He went on to Brown where he got his MBA and he now works at, I shit you not, Champlain Wealth Management. Whenever I talk to him, he we always laugh about the old times of playing lacrosse and drinking boilermakers. Diversification is the key. If you concentrate on individual companies, you're taking on a lot of risk that you have absolutely no control over. You know how they always have a disclaimer that investments are risky and can include loss of principal? Well, that's literally true if you invest in individual stocks, but only theoretically true if you invest in the total market. If the the market goes to zero, well, your money is going to be worthless anyway. If your individual stocks go to zero, well, the rest of us will take a slight hit but keep coming back for another round. Kind of like Phil when he played lacrosse and drank boilermakers.
+1
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As an outsider to this thread, who's pretty amused by everything so far, I want to applaud you Dodge for your patience here.
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As an outsider to this thread, who's pretty amused by everything so far, I want to applaud you Dodge for your patience here.
I'm still floored that the dude refuses to articulate anything resembling a philosophy or strategy.
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Oh for God sakes. I'm going to go against the grain here and recommend ishares. I suppose you keep bringing up vanguard because it's what you know. I will never switch my bulk to index personally. Cash mutual funds and stock for me. End of story.
Call it an experiment. I will post my total return % next April.
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It sounds like Mr Percentage buys stocks and mutual funds that his favourite TV characters like. I may be making too much of the Cramer reference.
Mr Percentage, how do you identify the specific stocks and mutual funds that you invest in?
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Actually I had a 3.8 in college thanks. Look up Ad Hominem. Thanks. Strong interest in philosophy here. Thousands of hours of audiobooks consumed in a long commute because I bought my house at the wrong time and refused to sell.
I will post my gains next year. For the record:
DIS @ 92.54
AAPL @ 125
ESCA @ 15.55
PAH @ 26.63
F @ 15.80
For the last time. I have an employee discount through my mom. No sales load for me.
I will let the numbers speak next April. You have the floor. I'm done here
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I'm no proponent of this particular approach to investing. But this piling on on a particular poster who disagrees with the group's favored investment philosophy is cliquish, mean spirited and unhelpful.
Poke holes in his arguments, if you disagree with them, but don't speculate about his intelligence, his ethics or his college GPA. These are all things that you obviously have no knowledge about.
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What arguments? What philosophy? Did you read the thread? What small semblance of coherent thought *was* presented was completely and thoroughly annihilated a while ago. You are defending someone who is (maybe was?) unclear on the idea of dividend investing vs reinvesting dividends!
Best case scenario is OP is a troll. Worst case...
-W
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I'm actually not defending anyone. I'm attacking the ad hominum feeding frenzy sensibilities of the mob.
A careful reading of my brief post should tell you as much.
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Oh, I read it carefully. And it still makes no sense for you to jump in. The thread descended into farce long ago, you're wasting your time.
-W
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If you read it carefully then what "philosophy" were you referring to? Are you denying that you and your co-assailants have a philosophy?
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If you read it carefully then what "philosophy" were you referring to? Are you denying that you and your co-assailants have a philosophy?
Miles, he has yet to articulate any coherent logic to investing. He's just shouting out names of successful stock or mutual funds. How is that a philosophy?
I'm more than willing to listen to challenges to conventional wisdom, particularly of this forum. If you check my post history I do that pretty often.
All I want is a 30,000 foot view of the OP's philosophy. He responded to this by talking about his GPA or the actual discipline of philosophy. He also said "Cash mutual funds and stock for me." The first and last are asset classes. The middle one can mean a million things. That's not a strategy.
If the strategy is indeed listening to Cramer, picking whatever the hottest company is, or Morning-"star chasing," then so be it. He should own it and be ready to hear the multitude of reasons that is an extremely poor choice.
Right now it is like we're talking to Faulkner without the brilliant themes.
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I don't think anything I say will make a difference really. You don't have to agree with my way of making a lot of money. It's in other posts but since you asked (take it a face value I'm not debating it)
Intuition supported by rules that restrain impulsiveness and knee jerk fear selling. I don't like to invest in something I'm not willing to buy because if they can't sell it to me why would I assume success elsewhere. Perfect example is Bank of America. I fired them years ago for screwing me. Now they are screwing their share holders because they are hung up from screwing other people. You see it is a limiting factor. If you can, I recommend actually visiting a place you want to invest in. Then you might actually have a clue what it is about instead of looking at an abstract chart.
It doesn't take a genius to figure out Disney will be worth more to in 30 years. Everyone is just so fucking greedy they aren't willing to go through a few valleys. They would rather pay high taxes and throw money at a digit on the screen because a chart told them to do it.
I don't even think you deserve to know such a money making secret Mr my name is an oxymoron. Somebody else deserves to know it though. There just might be a janitor who has the balls to let money ride on a company he actually knows is good. He will have much more money than you some day. I'm sure of it.
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I don't think anything I say will make a difference really. You don't have to agree with my way of making a lot of money. It's in other posts but since you asked (take it a face value I'm not debating it)
Whether or not you've made a lot of money is actually not germane to the discussion. We're asking about your philosophy and strategy so we can see whether it is replicable.
Intuition supported by rules that restrain impulsiveness and knee jerk fear selling. I don't like to invest in something I'm not willing to buy because if they can't sell it to me why would I assume success elsewhere. Perfect example is Bank of America. I fired them years ago for screwing me. Now they are screwing their share holders because they are hung up from screwing other people. You see it is a limiting factor. If you can, I recommend actually visiting a place you want to invest in. Then you might actually have a clue what it is about instead of looking at an abstract chart.
Great, what your rules that constrain knee-jerk selling?
I fired them years ago for screwing me. Now they are screwing their share holders because they are hung up from screwing other people. You see it is a limiting factor. If you can, I recommend actually visiting a place you want to invest in.
How exactly did they screw you? This sounds like a political statement and not investing analysis. What about the fundamentals? Earnings, p/e ratio, dividend, management?
If you can, I recommend actually visiting a place you want to invest in. Then you might actually have a clue what it is about instead of looking at an abstract chart.
What abstract chart?
It doesn't take a genius to figure out Disney will be worth more to in 30 years. Everyone is just so fucking greedy they aren't willing to go through a few valleys. They would rather pay high taxes and throw money at a digit on the screen because a chart told them to do it.
You just said you did what Cramer said. And for the record, I don't think there are many people in this forum that advocate technical investing. People here are generally about fundamentals.
I don't even think you deserve to know such a money making secret Mr my name is an oxymoron. Somebody else deserves to know it though. There just might be a janitor who has the balls to let money ride on a company he actually knows is good. He will have much more money than you some day. I'm sure of it.
I feel like I'm talking to Charlie in Always Sunny.
And I'm also willing to be there will be one janitor with more money than me. I have no clue why this is relevant.
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I'm a hybrid investor....own 30-40 dividend stocks and the rest is in indexed products.
Working well so far, about $10,500 each year in passive income from stocks alone.
I hope to retire on $30,000 per year in dividends.
"I would be interested in hearing from those who have looked into this." Been doing this for 5-7 years with no intention of stopping since the dividend income keeps going up and up every year.
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I'm a hybrid investor....own 30-40 dividend stocks and the rest is in indexed products.
Working well so far, about $10,500 each year in passive income from stocks alone.
I hope to retire on $30,000 per year in dividends.
"I would be interested in hearing from those who have looked into this." Been doing this for 5-7 years with no intention of stopping since the dividend income keeps going up and up every year.
So you've been doing it during one of the biggest bull markets in history, where the market went from a 50% decline, to breaking new record highs, and you have no intention on stopping since the stocks keep going up.
Does this mean you intend on stopping during the next crash, when dividend income declines?
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Excellent point, Dodge, though not at all specific to this strategy.
IE Your question is equally germane to buy and holders over allocated to equities.
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He said the dividends keep going up, not the stocks. I can relate to that, increasing dividends make me feel good too. I've been doing this for 14 years, through 2 stock market slumps.
I didn't outperform the index though. And it was a heck of a lot of work to figure that out. So i'm slowly converting to an index strategy.
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Hat is off to you Dodge. You are persistent. I don't believe that shows reinvested dividends though. Im only showing you what I do. I have to show you tools that I know. Your way may be better. Your way may be wiser. Look, I know you can lose money on individual stocks. That just happens to be where the biggest gains are. You can fish with a net. I prefer a harpoon-- its more sporty. I prefer to hunt with a bow-- more sporty.
We're not talking sports here, we're talking wealth building and retirement. If your job was to feed yourself for the rest of your life on what you catch now, would you really choose a harpoon over a drift net? Because it's "sporty?" Regardless, analogy tends to be a refuge or dodge when someone doesn't want to debate or can't support their position at hand. Investing is not fishing. It's investing.
Milesdividendmd, I think some post must have been deleted because I've not seen anything about GPAs other than what looks like a non-sequitur from mrpercentage.
And it's frustrating to try to have a conversation with someone that can't actually articulate a position and when asked specific questions about it rambles on about TV personalities and audio books. Asking for them to actually support their claims is not an attack.
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analogy tends to be a refuge or dodge when someone doesn't want to debate or can't support their position at hand.
Given that this thread long ago descended into farce (as pointed out above), I won't hesitate to go off on a minor tangent in response to the quoted statement, which (to use an anology!) I think paints with too broad a brush. Analogies, when used properly, can be a fine argumentative and/or explanatory tool. Some of my favorite writers on this forum (and on investment topics generally, like Warren Buffet) make dexterous use of analogies, and I would hate to see anyone discouraged from using such a fine tool simply because it happens to sometimes also be employed by the evasive debater.
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analogy tends to be a refuge or dodge when someone doesn't want to debate or can't support their position at hand.
Given that this thread long ago descended into farce (as pointed out above), I won't hesitate to go off on a minor tangent in response to the quoted statement, which (to use an anology!) I think paints with too broad a brush. Analogies, when used properly, can be a fine argumentative and/or explanatory tool. Some of my favorite writers on this forum (and on investment topics generally, like Warren Buffet) make dexterous use of analogies, and I would hate to see anyone discouraged from using such a fine tool simply because it happens to sometimes also be employed by the evasive debater.
Fair enough, and point conceded. But I would still argue that in most hands it's a rather crude implement.
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We're not talking sports here, we're talking wealth building and retirement. If your job was to feed yourself for the rest of your life on what you catch now, would you really choose a harpoon over a drift net? Because it's "sporty?" Regardless, analogy tends to be a refuge or dodge when someone doesn't want to debate or can't support their position at hand. Investing is not fishing. It's investing.
Milesdividendmd, I think some post must have been deleted because I've not seen anything about GPAs other than what looks like a non-sequitur from mrpercentage.
And it's frustrating to try to have a conversation with someone that can't actually articulate a position and when asked specific questions about it rambles on about TV personalities and audio books. Asking for them to actually support their claims is not an attack.
Thank you for this, overlook. Non-sequitur is a perfect descriptor and your point re: "sporty" is spot on.
Like I said, I'm still awaiting a description of the OP's strategy or philosophy. Maybe we're all idiots and he's on to something, but I seriously doubt it and I definitely won't believe it until I've seen a big picture view.
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what your rules that constrain knee-jerk selling?
No major stake (maybe greater that 2%) in a company without staying for one year (both for taxes and knee jerking). If you aren't that certain of their success you shouldn't buy that much of it. Staying greater than a year is even better. A few years. If you need the money sooner than that-- don't put it in the market. You need the patience to watch an investment grow. If you are looking for a rocket, just know, it might blow up in your face.
This sounds like a political statement and not investing analysis. What about the fundamentals? Earnings, p/e ratio, dividend, management?
Nope, the customer is the foundation of any investment. If they have no customers or are losing customers they are no good in my book.
Model from space:
(1) cutomers/good business practices ----> (2) innovation/ moving with the future ----> (3)are profitable or are highly likely of being profitable--->(4)share holders
How Bank of America fucked up:
There once was a bright eyed lad who gladly gave a bank is money. He was not concerned with finances; he was concerned with living. He made several ATM withdrawals every month at various machines and gladly paid his bank to do it. He even had a thousand dollars sitting in a non-linked savings account collecting shitty interest and was happy to do it. Then one day, he did some online small purchases while drunk forgetting a bill that would be posting that day. Those online purchases came in as ten separate $1 charges each over drafting his account. The young man made a mistake and he knew it so he called the company and escalated his mistake through management hoping that surely someone would see the injustice of paying $350 for $10. Hey can I pay $35 instead and promise not to do it again. No they said. Actually it was closer to "Fuck you, take a hike". So the young man said "Fuck me? No fuck you asshole. Im never using you again. Ever. Not for credit cards. Not your ATM machines. Not your bank. Ever." The young man went and withdrew his now $650 from his savings account and hasn't used any Bank of America services for 15 years now. That same lad was $10,000 in credit card debt a few years ago before he dug himself out-- it wasn't a Bank of America credit card.
If the order is:
(4)--->(3)--->(2)--->(1)
it is a poor investment
You just said you did what Cramer said. And for the record, I don't think there are many people in this forum that advocate technical investing. People here are generally about fundamentals.
No. You wanted me to repost all my reasons for liking Apple. Cramer's reasoning is good enough for me. I frequently disagree with what he says, but get a lot out of watching his show. I posted my reason in "cash before the crash", but I think I told you that.
I have no clue why this is relevant.
It doesn't take a genius or a lot of analysis to be a good investor. It helps a lot, and can turn good profits obscene-- but it is not necessary. I truly believe that.
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popcorn's gone. reaching for the jujubees.
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popcorn's gone. reaching for the jujubees.
Can I join you? I feel like this is a lost in translation situation. I'll bring junior mints.
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Best case scenario is OP is a troll. Worst case...
Im not a Troll...just a "Seeker/Learner"
I started this thread because I'm trying to refine (or redefine) my personal investing strategy, and part of that process is investigating various philosophies and strategies and making a rational evaluation of fit for my specific situation.
Many of the folks on here are using a buy and hold index / lazy portfolio strategy, and for the past 10 years or so I've been doing mainly that. Because Im getting close to FIRE, Im re-evaluating this to see if it continues to make sense or if there is a better way or something new I should be doing as I transition from accumulation phase to 'drawdown' phase.
So, yes we all agree index investing is good. Also, can we agree that there are some very coherent investors that use alternative strategies. (Dividend investing, Real Estate, etc...)
I think we can all admit that although index investing works well for the majority, some people may have specific and individual situations that could tip the scales towards an alternative strategy....
For example, we could all agree that if someone owns a construction business and his wife has a real estate license, Real Estate investing may be more advantageous for them as opposed to the average investor. For this fictitious couple Real Estate investing may provide a higher rate of return than index investing with a 3-fund lazy portfolio.
Some points I hoped to tease out with this thread from the rational, spreadsheet-loving engineer types on this forum, who happen to choose dividend investing (like Spoonman), what is the specific reason for that and why does it work for you and what advantages or opportunities specifically did you have that made this a reasonable choice?
After reading all these posts (some of which made lots of sense, and some of which were very amusing) it seems to me that Free trades, waived expenses, free access to analytical software and company data, lots of time, and a genuine interest in this kind of analysis may be what is needed to tip the scales and make dividend investing a good option.
Probably not a good option for me right now. Im not smart enough, and Im way too lazy.
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Best case scenario is OP is a troll. Worst case...
Im not a Troll...just a "Seeker/Learner"
I think in the diversion into silliness, waltworks simply forgot who the OP was; he was speculating that mrpercentage was a troll, not you.
Also, can we agree that there are some very coherent investors that use alternative strategies. (Dividend investing, Real Estate, etc...)
I certainly agree that there are coherent investing strategies beyond buy-and-hold indexing, but I disagree that "dividend investing" is one of them.
I think it's telling that you gave two examples of the cases when "alternative" strategies might be preferred over buy-and-hold indexing (and I agree with those cases), but neither of them was "dividend investing". First you described a case where real-estate investing might be preferred, and then you described someone with these advantages:
Free trades, waived expenses, free access to analytical software and company data, lots of time, and a genuine interest in this kind of analysis
What you described there is a strategy more commonly known as "value investing", or "fundamental analysis", not "dividend investing".
I maintain that "value investing" is a coherent strategy, while "dividend investing" is not. Most "dividend investors" are really just standard-issue value investors who then irrationally choose to exclude stocks that use methods besides dividends to return value to their shareholders. Selling shares is equivalent to receiving a dividend, so there is no coherent reason for a value investor to exclude a non-dividend-paying stock on that basis alone.
And thus, that focus on dividends is often a sign that a self-styled "dividend investor" has a fundamental misunderstanding of how dividends work, and such misunderstandings make me think that value investing, while more coherent, also may not be a strategy that is particularly suitable for them.
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What you described there is a strategy more commonly known as "value investing", or "fundamental analysis", not "dividend investing".
I maintain that "value investing" is a coherent strategy, while "dividend investing" is not. Most "dividend investors" are really just standard-issue value investors who then irrationally choose to exclude stocks that use methods besides dividends to return value to their shareholders. Selling shares is equivalent to receiving a dividend, so there is no coherent reason for a value investor to exclude a non-dividend-paying stock on that basis alone.
And thus, that focus on dividends is often a sign that a self-styled "dividend investor" has a fundamental misunderstanding of how dividends work, and such misunderstandings make me think that value investing, while more coherent, also may not be a strategy that is particularly suitable for them.
Very well put skyrefuge. I spend a lot of time reading various dividend centric, especially dividend growth, blogs. I believe in the concept but think you are hitting the nail on the head. Just because O'shaunessy found in What Works On Wall Street a long time ago that dividend paying companies beat those that didn't (on average) you can't zero in on just one metric. He also found that share repurchases and extinguishment of long term debt also "worked" to beat the index.
The rationale is some companies have management that is entirely self interested and is enriching themselves at shareholder expense. Companies with management that focus strongly on returning cash to owners (via debt reduction, divs, or buybacks) are arguably better aligned with the owners than the previously mentioned self serving ones. That doesn't mean a company that reinvests all capital back into the business can't be good too. That may be where the highest return is available!
I think it should also be noted that companies with strong insider ownership tend to outperform (ceteris paribus) their peers. It is a good thing when management has their interests aligned with ownership.
Personally, I find for my options income centric approach to the markets, it makes a lot of sense to narrow down my invest-able universe to the largest, most stable, cash gushing businesses around. I thus consider dividend growth over long periods of time a good indicator the company will fit my other criteria. It makes me oftentimes heavily tilted towards consumer staples but that isn't such a bad place to be if the options premiums are there for you.
Also good: Indexing. YMMV.
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Mr Velociraptor: That is an interesting book. "What works on Wall Street". I'm just reading through it.
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I certainly agree that there are coherent investing strategies beyond buy-and-hold indexing, but I disagree that "dividend investing" is one of them.
I'm going to expand on something I said in this thread (http://forum.mrmoneymustache.com/investor-alley/ive-decided-on-vanguard-but-need-some-help-please/msg584337/#msg584337) to challenge the notion that dividend-focused strategies necessarily make no sense:
If a company that doesn't pay dividends takes a 30% hit during a market crash, then a twin of that company, whose only difference is that they pay out dividends rather than retaining their earnings, would also take a 30% hit.
At the risk of providing fodder to proponents of dividend-focused strategies, I think this statement highlights what in my view is the only plausible potential flaw in the otherwise unassailable logic behind the argument that dividends do eat into principal to an equal extent: that argument presupposes the efficiency of the market, which is not a logically necessary truth.
In your twin company hypothetical, the reason for the identical performance of the dividend-paying company and the earnings-retaining company is that the market recognizes the fact that the payment of the dividend leaves the company poorer by an amount equal to the total dividend payout and therefore reduces the market value of the company by a corresponding amount. But what if the market were not efficient enough to absorb this information? What if it were so grossly inefficient that the market completely failed to price the occurrence of the dividend payment into the share price? In that case, the dividend would represent a free lunch, at least until the market price self-corrects to reflect the decrease in the company's intrinsic value.
The answer to this line of counter-argument, though, is that it is completely divorced from reality. The stock market is in fact highly efficient, and certainly efficient enough to correctly reflect so obvious a change in the intrinsic value of a company as a divestment of its cash in the form of a dividend payment to its public shareholders.
Moreover, even if the market were not so efficient, the market's misvaluation could cut in either direction: as long as we're accepting the existence of alternate reality where the market can fail to recognize the decrease in value caused by the parting of a company and a portion of its cash holdings, then that fantasyland market could just as easily undervalue the shares after the occurrence of a dividend as overvalue them, in which case the non-payment of a dividend would be providing a free lunch.
The stock market can be thought of as a Keynesian beauty contest (http://en.wikipedia.org/wiki/Keynesian_beauty_contest). If enough investors have a preference for dividends (or believe that other investors have a preference for dividends (or believe that other investors believe that other investors have a preference for dividends, and you can keep extending this idea up yet another level until this clause becomes an infinite regression of nested parentheticals)), then that becomes a self-fulfilling prophecy. These investors with a preference for dividends (or a belief that other investors have a preference for dividends) would bid up the price of shares of dividend-paying companies, making those investors' dividend-focused performance prediction come true.
Now, I'm going to repeat the disclaimer that this should not be relied upon by would-be proponents of a dividend-focused strategy, because (1) I don't believe there is a critical mass of dividend-focused investors (or investors who believe there is a critical mass of dividend-focused investors), and (2) even if there were, in the long-run, the market would run out of greater fools (and investors who believe in the existence of greater fools), so the "weighing machine" that is the stock market in the long-term would correct the overvaluation created by the "voting machine" that is the stock market in the short-term. But this does explain how the idea that "dividend-focused strategies make no sense," which appears to be an unassailable truth when viewed through the lens of logic and reason, is not tautologically true when you account for human irrationality (or "rational irrationality").
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These investors with a preference for dividends (or a belief that other investors have a preference for dividends) would bid up the price of shares of dividend-paying companies, making those investors' dividend-focused performance prediction come true.
Sure, that's a reason why a dividend-focused approach could outperform, but no one who calls themselves a "dividend investor" has ever used that "greater fool" theory to explain their preference for dividends (except perhaps as a face-saving post-hoc explanation as they begin to accept that dividends actually provide no free lunch). In fact, such a recursive jiujitsu scheme is likely to be psychologically antithetical to investors who are attracted to dividends for their (deceptively) straightforward money-making mechanism.
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Sure, that's a reason why a dividend-focused approach could outperform, but no one who calls themselves a "dividend investor" has ever used that "greater fool" theory to explain their preference for dividends (except perhaps as a face-saving post-hoc explanation as they begin to accept that dividends actually provide no free lunch). In fact, such a recursive jiujitsu scheme is likely to be psychologically antithetical to investors who are attracted to dividends for their (deceptively) straightforward money-making mechanism.
Ha! I completely agree, and perhaps should have festooned my disclaimers with flashing red lights. To borrow language from some of your posts, any newbies (or even not-so-newbies) reading along should make sure to acquire the first-order understanding of why dividends do not represent a free lunch before attempting to understand (or, worse yet, try to build a strategy based upon) the high-level shit now under discussion.
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Sure, that's a reason why a dividend-focused approach could outperform, but no one who calls themselves a "dividend investor" has ever used that "greater fool" theory to explain their preference for dividends (except perhaps as a face-saving post-hoc explanation as they begin to accept that dividends actually provide no free lunch). In fact, such a recursive jiujitsu scheme is likely to be psychologically antithetical to investors who are attracted to dividends for their (deceptively) straightforward money-making mechanism.
Ha! I completely agree, and perhaps should have festooned my disclaimers with flashing red lights. To borrow language from some of your posts, any newbies (or even not-so-newbies) reading along should make sure to acquire the first-order understanding of why dividends do not represent a free lunch before attempting to understand (or, worse yet, try to build a strategy based upon) the high-level shit now under discussion.
It would help if we could get MrMoneyMustache to stop saying things like:
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On top of this, international stocks currently pay a much higher dividend yield. For every $100,000 of VTI you own, you’ll get $1780 in annual dividends. For an equal amount of VXUS, you will get $3370, or almost twice as much. In other words, international stocks are priced at a much more attractive level than US stocks, which in my book is a time to buy.
http://www.mrmoneymustache.com/betterment-vs-vanguard/
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Sure, that's a reason why a dividend-focused approach could outperform, but no one who calls themselves a "dividend investor" has ever used that "greater fool" theory to explain their preference for dividends (except perhaps as a face-saving post-hoc explanation as they begin to accept that dividends actually provide no free lunch). In fact, such a recursive jiujitsu scheme is likely to be psychologically antithetical to investors who are attracted to dividends for their (deceptively) straightforward money-making mechanism.
Ha! I completely agree, and perhaps should have festooned my disclaimers with flashing red lights. To borrow language from some of your posts, any newbies (or even not-so-newbies) reading along should make sure to acquire the first-order understanding of why dividends do not represent a free lunch before attempting to understand (or, worse yet, try to build a strategy based upon) the high-level shit now under discussion.
It would help if we could get MrMoneyMustache to stop saying things like:
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On top of this, international stocks currently pay a much higher dividend yield. For every $100,000 of VTI you own, you’ll get $1780 in annual dividends. For an equal amount of VXUS, you will get $3370, or almost twice as much. In other words, international stocks are priced at a much more attractive level than US stocks, which in my book is a time to buy.
http://www.mrmoneymustache.com/betterment-vs-vanguard/
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Maybe Beltim should start a thread (http://forum.mrmoneymustache.com/ask-a-mustachian/avoidable-health-care-costs/) on that?
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Another difference between dividends and the proceeds of a stock sale is that dividends allow insiders to extract earnings and profit from the company without reducing their influence over the company. Consider a founder who controls, say, 35% of the voting power of the shareholders, and she makes use of that voting power to influence the affairs of the corporation. If she liquidates her shares for quarterly spending money, her power over the corporation will gradually decrease. On the other hand, if the corporation pays a dividend, she can maintain her same share of voting power while having money to spend. Insiders at companies that pay dividends might be more motivated to do a good job for the long-term because they can continue to extract earnings and profits without reducing their control. This in turn might increase the value of such dividend-paying companies.
I'm not saying this effect is real, just that it could be real, such that the irrelevancy of dividends is not a logical truth.
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Another difference between dividends and the proceeds of a stock stale is that dividends allow insiders to extract earnings and profit from the company without reducing their influence over the company.
This also explains another reason why an investor may (rationally) express a preference for receiving their returns in the form of dividends rather than share sale proceeds (because, of course, your statement applies equally to all investors whose shareholdings carry voting power, not just "insiders"), without even needing to reach the second step of your analysis explaining how the payment of dividends could (theoretically) increase the value of a company.
Of course, the overwhelming majority of investors (and, it's probably safe to say, every single investor who has ever come to a forum like this one to advocate the benefits of a dividend-focused investment strategy) doesn't give two shits about their voting power (which is so trivially low as to be meaningless to begin with) and instead views their investment as a strictly passive vehicle to wealth accumulation (in which case a preference for dividends makes no sense, as it leaves the timing of part of your return of capital (and any associated tax consequences) at the mercy of the company's management).
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Another difference between dividends and the proceeds of a stock sale is that dividends allow insiders to extract earnings and profit from the company without reducing their influence over the company. Consider a founder who controls, say, 35% of the voting power of the shareholders, and she makes use of that voting power to influence the affairs of the corporation. If she liquidates her shares for quarterly spending money, her power over the corporation will gradually decrease. On the other hand, if the corporation pays a dividend, she can maintain her same share of voting power while having money to spend. Insiders at companies that pay dividends might be more motivated to do a good job for the long-term because they can continue to extract earnings and profits without reducing their control. This in turn might increase the value of such dividend-paying companies.
I'm not saying this effect is real, just that it could be real, such that the irrelevancy of dividends is not a logical truth.
Agreed, while this might be a good story, we have no way of knowing how this will influence stock prices. If you give otherwise great management an easy path to extract earnings and profit, without reducing their influence over the company, over time their monetary incentive to grow the company would diminish, as they don't have as much money invested. In short, insiders at companies that pay dividends might be more less motivated to do a good job for the long-term because they can continue to extract earnings and profits without reducing their control.
I know you weren't advocating this line of thinking, I'm simply pointing out how the same reasoning can apply to the opposite direction, so that alone shouldn't be enough to justify a dividend strategy.
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Another difference between dividends and the proceeds of a stock sale is that dividends allow insiders to extract earnings and profit from the company without reducing their influence over the company. Consider a founder who controls, say, 35% of the voting power of the shareholders, and she makes use of that voting power to influence the affairs of the corporation. If she liquidates her shares for quarterly spending money, her power over the corporation will gradually decrease. On the other hand, if the corporation pays a dividend, she can maintain her same share of voting power while having money to spend. Insiders at companies that pay dividends might be more motivated to do a good job for the long-term because they can continue to extract earnings and profits without reducing their control. This in turn might increase the value of such dividend-paying companies.
I'm not saying this effect is real, just that it could be real, such that the irrelevancy of dividends is not a logical truth.
Could be. But you could make the opposite case and other cases. If insiders think the business is a great investment, they would want funds reinvested in the business because that maximizes their wealth (even if they have to borrow on margin against their shares or sell other holdings for spending money). If insiders think reinvesting in the business isn't valuable (because better returns are available elsewhere) they will want dividends. If insiders want to increase their position, they would want buybacks (of other's shares). If they needed some cash, they could sell a few shares and still have a larger percentage of ownership.
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Wait... are you guys saying that stocks that don't pay dividends are better than stocks that do pay dividends?
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Another difference between dividends and the proceeds of a stock sale is that dividends allow insiders to extract earnings and profit from the company without reducing their influence over the company.
As forummm alluded to, that difference only exists in the case where the number of outstanding shares remains constant, which is not true when the company is doing a share buyback. In that case, if our insider simply sells an amount of shares equal to 35% of the total amount the company is buying, she will get her cash and maintain her ownership level.
So dividends are not unique in their ability to achieve that goal.
The fact that most "dividend investors" love dividends but ignore/hate buybacks is one of the clearest indicators to me that most dividend-focused strategies are birthed from an incomplete understanding of stocks and corporate finance.
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Wait... are you guys saying that stocks that don't pay dividends are better than stocks that do pay dividends?
No. In general, we're saying that, all else being equal (earnings, market-share, etc.), a company that pays dividends is the same as a company that does not. And thus, it makes no sense to have a specific preference for dividend-paying companies.
Only in the case of taxation does a dividend-paying company become "worse" than a non-dividend-payer, because dividends can force you to incur taxes that you might have preferred to defer.
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Dividend stocks HAVE outperformed non nondividend paying stocks historically. That is an empiric fact. Not worth debating really.
But the reason for this historical outperformance is that dividend stocks have traditionally been cheap relative to non dividend stocks (ie they had more exposure to the value factor.)
The really concerning thing for dividend stocks (and their fans) going forward is that on average, they are now MORE expensive than non dividend paying stocks. ie they have a negative exposure to the value factor.
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Ok, good. We get very good tax treatment on dividends at low income levels, so they have a strong appeal once I stop working.
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Dividend stocks HAVE outperformed non nondividend paying stocks historically. That is an empiric fact. Not worth debating really.
But the reason for this historical outperformance is that dividend stocks have traditionally been cheap relative to non dividend stocks (ie they had more exposure to the value factor.)
The really concerning thing for dividend stocks (and their fans) going forward is that on average, they are now MORE expensive than non dividend paying stocks. ie they have a negative exposure to the value factor.
If you look at stocks which continually paid dividends over a long period of time, of course they will have beaten the market. Because when companies are doing well...they continue to pay their dividends. It's the fact that the companies did well which caused them to outperform. This is true even during decades where value underperformed.
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Dividend stocks HAVE outperformed non nondividend paying stocks historically. That is an empiric fact. Not worth debating really.
But the reason for this historical outperformance is that dividend stocks have traditionally been cheap relative to non dividend stocks (ie they had more exposure to the value factor.)
The really concerning thing for dividend stocks (and their fans) going forward is that on average, they are now MORE expensive than non dividend paying stocks. ie they have a negative exposure to the value factor.
If you look at stocks which continually paid dividends over a long period of time, of course they will have beaten the market. Because when companies are doing well...they continue to pay their dividends. It's the fact that the companies did well which caused them to outperform. This is true even during decades where value underperformed.
You can spin it that way Dodge. You seem to attribute everything to survivorship bias. That's your thing. I get it.
But the fact remains that dividend stocks' historical outperformance is largely explained by exposure to the value factor. An exposure that is currently negative. To me that constitutes actionable intelligence. (Of course admitting this requires one to come to terms with the three factor model, harder for some than for others.)
Playing the old saw of survivorship bias: not so much.
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But the fact remains that dividend stocks' historical outperformance is largely explained by exposure to the value factor.
Source? Looking at the last crash, it looks like Dividend's (Orange line) out-performance is more attributed to the Growth factor (Green line) than the Value factor (Blue line)
(http://4.ii.gl/SBrvKxe8.png)
¯\_(ツ)_/¯
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Ok, good. We get very good tax treatment on dividends at low income levels, so they have a strong appeal once I stop working.
Is the tax treatment on long term capital gains any different than dividends? If not, then you shouldn't care whether you're paying bills by using dividends or selling shares. It's the same thing.
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Ok, good. We get very good tax treatment on dividends at low income levels, so they have a strong appeal once I stop working.
Is the tax treatment on long term capital gains any different than dividends? If not, then you shouldn't care whether you're paying bills by using dividends or selling shares. It's the same thing.
Dividends can be converted directly to Molson and poutine without incurring a tax penalty. Or so I've heard.
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Ok, good. We get very good tax treatment on dividends at low income levels, so they have a strong appeal once I stop working.
Is the tax treatment on long term capital gains any different than dividends? If not, then you shouldn't care whether you're paying bills by using dividends or selling shares. It's the same thing.
Dividends can be converted directly to Molson and poutine without incurring a tax penalty. Or so I've heard.
First the free healthcare, then the medical cannabis, and now this! I have got to move to Canada.
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But the fact remains that dividend stocks' historical outperformance is largely explained by exposure to the value factor.
Source? Looking at the last crash, it looks like Dividend's (Orange line) out-performance is more attributed to the Growth factor (Green line) than the Value factor (Blue line)
(http://4.ii.gl/SBrvKxe8.png)
¯\_(ツ)_/¯
Great analysis! What's next Rorschach blots?
"Hmm it looks like a butterfly therefore the three factor model is utter crap because....Bogle!"
http://www.onefpa.org/journal/Pages/Dividend%20Investing%20A%20Value%20Tilt%20in%20Disguise.aspx
http://www.forbes.com/sites/greggfisher/2012/09/13/the-mystery-behind-dividend-yield-investing/
Plenty of research to back up my claim. Yours....????
[MOD NOTE: Forum rule #1. Don't be a jerk.]
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Either you believe there's one simple trick, or you believe TANSTAAFL. It seems like we have this conversation over and over. If you want to do a dividend strategy, fine. It's probably not optimal but you're not costing yourself much as long as you're not picking individual stocks, jumping in/out or market timing, or otherwise being dumb.
The number of people who don't "get" dividends vs. "eating into your principle" does make me wonder if dividend paying stocks in general are usually overvalued. I'm not convinced enough of that to actually act on it and go 100% BRK or whatever, though.
-W
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But the fact remains that dividend stocks' historical outperformance is largely explained by exposure to the value factor.
Source? Looking at the last crash, it looks like Dividend's (Orange line) out-performance is more attributed to the Growth factor (Green line) than the Value factor (Blue line)
(http://4.ii.gl/SBrvKxe8.png)
¯\_(ツ)_/¯
Great analysis! What's next Rorschach blots?
"Hmm it looks like a butterfly therefore the three factor model is utter crap because....Bogle!"
http://www.onefpa.org/journal/Pages/Dividend%20Investing%20A%20Value%20Tilt%20in%20Disguise.aspx
http://www.forbes.com/sites/greggfisher/2012/09/13/the-mystery-behind-dividend-yield-investing/
Plenty of research to back up my claim. Yours....????
[MOD NOTE: Forum rule #1. Don't be a jerk.]
What would I provide research for? What is it you think I'm claiming?
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Dividends can be converted directly to Molson and poutine without incurring a tax penalty. Or so I've heard.
Please. Muskoka and Salmon. Or Big Rock and strip loin. Allow me my indulgences.
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The number of people who don't "get" dividends vs. "eating into your principle"
Even people who write blogs about investing in dividends! And people listen to them. Interview them on podcasts, like they know what they're talking about. Drives me crazy.
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@Dodge,
"So you've been doing it during one of the biggest bull markets in history, where the market went from a 50% decline, to breaking new record highs, and you have no intention on stopping since the stocks keep going up."
I have no intention of changing my approach, to be more specific. Buy and hold some quality companies and index everything else.
"Does this mean you intend on stopping during the next crash, when dividend income declines?"
No, I won't be changing my approach when the next crash happens. In the recent oil market slide, I bought stocks, I didn't sell them.
Thanks for your questions.
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Mrpercentage, I implore you. Sit back, and don't touch anything in your portfolio, until you've done some reading. I'd start with A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393340740/ref=dp_ob_title_bk), and The Bogleheads Guide To Investing (http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/1118921283/ref=sr_1_1?s=books&ie=UTF8&qid=1429980482&sr=1-1&keywords=the+bogleheads+guide+to+investing).
Good luck!
Random Walk Down Wall Street is turning out to be a good book. Even makes me laugh. And I thought you were a chart monkey. Im not done with it yet.. but thank you.
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Nope Im not done yet. You don't see the value of mixing 50% dividend with 50% growth? Seriously?
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-05-15%20at%206.39.34%20PM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-05-15%20at%206.39.34%20PM.jpg.html)
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Nope Im not done yet. You don't see the value of mixing 50% dividend with 50% growth? Seriously?
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-05-15%20at%206.39.34%20PM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-05-15%20at%206.39.34%20PM.jpg.html)
That's not a valid comparison. If there's anything you should learn from my posts here, it's that invalid comparisons can be very misleading in the investing world. You are committing one of the 4 Advisor Moves That Shouldn't Be Legal (http://v), Skewed Benchmarks. Let's look at your fund choices:
AMECX = 70% stocks, 30% bonds
ANEFX = 90% stocks, 10% bonds
Put half in each and you have a total portfolio of 80% stocks, 20% bonds. So first I compared this to the standard 80/20 index fund:
(http://2.1m.yt/6oLgLVnt-.png)
(http://2.1m.yt/r64cIokEb.png)
Then of course I realized this still isn't a valid comparison, as the bonds in your fund choices are lower quality, there's an international component, and a bit of separation between growth and value that isn't cap-weighted. This is the best I could come up with to try and match your fund choices:
(http://2.1m.yt/C95rFNG0k.png)
(http://2.1m.yt/eQ0fW7EPf.png)
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Damn Dodge.. you have mastered fund comparison. Seriously dude A+
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...
Not only that, are the massively higher fees in the American funds accounted for in these charts?
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Not only that, are the massively higher fees in the American funds accounted for in these charts?
Yes they are.
Expenses are deducted from dividends and are reflected in total return data such as this.
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Not only that, are the massively higher fees in the American funds accounted for in these charts?
The higher ER is included, but not the 5.75% load.
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Yes they are.
Expenses are deducted from dividends and are reflected in total return data such as this.
As I suspected, they aren't. See dodge's post above. The 5.75% is huge and I'd classify it as highway robbery.
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Hey,
Sort of hate to resurrect an old thread but I've gotten offline messages about this particular thread. The particular sticking point is whether my comparision of SYLD to S*P at motley fool included dividends in the S*P part. I've messaged someone at the Fool to clarify the point. If I'm wrong, I'll eat crow.
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Hey,
Sort of hate to resurrect an old thread but I've gotten offline messages about this particular thread. The particular sticking point is whether my comparision of SYLD to S*P at motley fool included dividends in the S*P part. I've messaged someone at the Fool to clarify the point. If I'm wrong, I'll eat crow.
Does it really matter what they say?
Actual S&P500 returns during this time: 33%
Price-only S&P500 returns during this time: 27%
S&P500 return as reported by caps.fool.com when compared against your SYLD purchse: 27%
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Hey,
Sort of hate to resurrect an old thread but I've gotten offline messages about this particular thread. The particular sticking point is whether my comparision of SYLD to S*P at motley fool included dividends in the S*P part. I've messaged someone at the Fool to clarify the point. If I'm wrong, I'll eat crow.
Thank you for resurrecting this thread as it provided some entertainment!
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indeed, it was a nice education for those of us who missed it the first time around.
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Word from TMFTurtle is:
"Yep, we use the SPY as our benchmark, and it includes dividends.
Julie "