Author Topic: Dividend Mantra Sells Out (Literally)  (Read 41551 times)

Indexmantra

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Re: Dividend Mantra Sells Out (Literally)
« Reply #100 on: November 25, 2015, 02:06:45 PM »
Hi Nords,

I respect you, because your blog/writing profits have supported charitable endeavors. This is why I would never compare you personally to Jason. Jason wrote about financial independence in order to become financially independent. The army of zealots he created helped him get a small lump-sum payout - which is the reason he abandoned them never to be seen again.

I will repeat the same things I said in the beginning. I am repeating them, because noone has refuted the evidence yet.

The problem is that Mr Mantra has not beaten a simple S&P 500 index fund. He has spent at least 5000 hours over the past 5 years studying investments... with no results.  His earlier picks were much better than his latest selections. So it looks as if he has regressed, rather than progressed.

Not only that, he advises against measuring performance against a benchmark.

He also advises against using IRA/Roth IRA accounts..

His alpha was generated from writing about dividend investing and selling a site about dividend investing.

His actual investing record is not something to write about.

So to summarize, someone who blogs about investing should be a good investor. Otherwise, why are they blogging?

For the money of course

Aphalite

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Re: Dividend Mantra Sells Out (Literally)
« Reply #101 on: November 25, 2015, 05:32:53 PM »
I will repeat the same things I said in the beginning. I am repeating them, because noone has refuted the evidence yet.

The problem is that Mr Mantra has not beaten a simple S&P 500 index fund. He has spent at least 5000 hours over the past 5 years studying investments... with no results.  His earlier picks were much better than his latest selections. So it looks as if he has regressed, rather than progressed.

The logic is astounding. "His earlier picks were much better than his latest selections" - is that perhaps because his earlier picks have finally had time to compound and return to fair value? Is it because he attempts to buy stocks that are out of favor but drowning its shareholders in cash and thus such companies will eventually rebound - something you wouldn't see until five years down the line?

If you're going to choose to ignore the entire page 2 of this thread, you shouldn't claim that noone has refuted that an index fund will ALWAYS beat a DGI strategy - reproduced below is just ONE of the many posts refuting your religious obsession with proving "indexing > all other investing"

NOW, if you want to argue that indexing is the best time adjusted method of generating investment returns, well Nords has already covered that in his prior post and no one is disagreeing with you

Jag (snip) we're also in turn challenging your thinking as the studies you are citing feature a broad spectrum of investors and not specifically value investing, which is more or less what DGI ends up being. Beltim has provided several different studies in these forums on how the top two quintiles of individual investors actually outperform the market by a significant amount and over long periods of time. But you don't hear about the results because of stealth wealth. It's information asymmetry. Because you hear all the time about people who go after high flying stocks and then crash and burn. But you can easily check results - take something that's hardly optimal, like the DGI listing at http://www.suredividend.com/25-year-review-of-dividend-aristocrats-why-companies-fell-off-the-list/ - this is a listing of "dividend aristocrats" in 1989, and the article talks about how each of them either stayed on or why it fell off the list, so we're avoiding survivorship bias. If you did a calculation of $1000 investment for each stock with dividends reinvested from Jan 1989 to Dec 2014, and assumed that for firms that were acquired or no longer exist, total loss of principal even though this isn't what actually happened, you get the following:

Symbol   Return    Ending Value
K   8.41%    $7,543
PH   13.99%    $26,465
BAX   11.12%    $13,986
FPL/NEE   12.04%    $17,179
IFF   8.95%    $8,536
DOV   11.36%    $14,746
EMR   10.41%    $11,914
JNJ   13.58%    $24,179
KO   11.26%    $14,407
LOW   20.06%    $96,736
MMM   11.83%    $16,404
PG   12.34%    $18,376
CL   14.46%    $29,310
GPC   10.82%    $13,052
MAS   5.46%    $3,782
TMK   10.03%    $10,929
CSR   0.00%    $-   
HI   0.00%    $-   
RBD   0.00%    $-   
WLA   0.00%    $-   
AMP   0.00%    $-   
AHP   0.00%    $-   
LDG   0.00%    $-   
WIN   0.00%    $-   
TXU   0.00%    $-   
NSI   0.00%    $-   
Total    $26,000     $327,543
   11.13%   

That's 11.13% while assuming total principal loss on 10 of the 26 stocks, which again didn't actually occur, while the SP500 from 1989 to 2014 returned about 10% with dividends reinvested. If you look at the actual data, you might start to realize just how much junk is actually in the indices you're touting so highly - things like airlines, ship builders, car manufacturers, paper, textiles, steel - anything that has high capital requirements and are commodity like items. Whereas when you stick with the consumer staple, tobacco, energy, and healthcare industries, you will have realized an extremely good result over the long haul even if you overpay for companies here and there

Indexmantra

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Re: Dividend Mantra Sells Out (Literally)
« Reply #102 on: November 25, 2015, 07:12:54 PM »
AlphaLite,

You are either twisting my words or you simply did not understand what I said. If you lack in reading comprehension, how do you expect to beat the market?

1) Did you or anyone else present evidence that Jason Fieber has beaten the S&P 500?
No they didn't.
The fact is that Jason Fieber has not beaten the market. This is the point I am making.

2) I never claimed that a very tiny minority cannot manage to beat the market using  a dividend strategy ( whether by skill or through luck). The odds are so low, and the amount of work needed is so large, that it might not really be worth trying.
Perhaps you disagree with me and make up stuff because you lack basic reading comprehension. You should go back and read my comments, rather than stating things I have never said.

3) The other point I am making is that the quality of the companies Jason Fieber is selecting for the past three years has been lower relative to companies he was selecting earlier.

He used to pick aristocrats right? His most recent picks are just companies where he is just trying to pick at a bottom. He also seems to be picking the companies with the highest yields as of recently. This works until you average down on a company that really goes downhill

The other problem is that his early picks did well, but the amount of money he had invested with them was much lower than the amount of money invested with the newest picks. He simply had more money to invest in 2013, 2014 and 2015 than in 2011 and 2012.

After the blog became successful, he quality of picks and their performance seems to have decreased substantially.
Incidentally, a the largest portion of his funds have been invested in companies of poorer quality. When you pride yourself for responding to every comment on your site, you end up spending less time on the stock research.

4) The list of 26 companies is incomplete.  This list was selected in 2005, and was most probably curve-fitted and optimized to show good backtested performance. I know for a fact that there were more than 26 companies that raised dividends by a quarter century in 1989.  You can see by looking at the companies with longest streaks today like Cincinati Financial (55 years), or Genuine Parts (59 years) and ask yourself why these companies were not part of the list from 1989? What about Heinz or General Mills? Perhaps you suffer from survivorship bias? Or perhaps you are not as good in researching as you thought you were? Or perhaps basic math is tough for you. This is in addition to your lack of reading comprehension.  Perhaps you should be indexing.

So the next time you respond, you have to refute all the 4 points above point by point.  Otherwise you are not worthy of my time. (Funny how I spend less time on my investments than you and do better than 90% of investors out there and still know more about your own world of dividend investing than you)

After you have done that please provide evidence to me that shows that ( this is what I have been claiming all along.):

A) Jason Fieber has beaten the S&P 500 since 2011
B) That the time he spent picking stocks ( at least 5000 hours for 5 years) was worth it as a result.
C) If A is wrong and B is wrong, then the only reason he kept to his inferior ways of investing ( he probably did worse than your dividend aristocrats too) is because he earned money from the site

I have crunched the numbers myself and already have the answers ( which most dividend zealots refuce to acknowledge). Based on my observations, the only way that picking individual stocks worked for him is because he was paid in advertising income. Otherwise, he would have wasted his time.

Sharpy

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Re: Dividend Mantra Sells Out (Literally)
« Reply #103 on: November 26, 2015, 08:21:20 AM »
Most fund mangers can not beat the SP500 index consistently, let alone Jason.  Let's admit that he is good in terms of writing and inspiring others to be frugal.   But stock picking is not his forte. Most people just can't beat the index. Most of my money is in this total market index fund. I do not bother to pick stocks at all. 


Writing about his stock picks is actually a big part of his blog.  Without that, it would be hard to find something to write about after you are done with almost all topics.


YoungInvestor

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Re: Dividend Mantra Sells Out (Literally)
« Reply #104 on: November 26, 2015, 04:21:06 PM »
I'd like some backup on the 2/5 investors beat the market claim ( top 2 quintiles). Would be interesting to see the data.

Financial.Velociraptor

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Re: Dividend Mantra Sells Out (Literally)
« Reply #105 on: November 26, 2015, 04:38:19 PM »
I'd like some backup on the 2/5 investors beat the market claim ( top 2 quintiles). Would be interesting to see the data.

I didn't see this claim upthread but it seems to make sense.  If the distribution of returns was purely random, we'd expect 2.5/5 to beat the average.  Anything less than half beating the index suggests worse than random results.

YoungInvestor

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Re: Dividend Mantra Sells Out (Literally)
« Reply #106 on: November 26, 2015, 05:00:45 PM »
I'd like some backup on the 2/5 investors beat the market claim ( top 2 quintiles). Would be interesting to see the data.

I didn't see this claim upthread but it seems to make sense.  If the distribution of returns was purely random, we'd expect 2.5/5 to beat the average.  Anything less than half beating the index suggests worse than random results.

Randomness does not imply uniform distribution. For a lognormal distribution, which tends to be used to represent investment results, the median would be below the mean quite significantly for long-term result. That is, after a year, your odds of beating the market would be roughly 50/50, but after 10 years, it would be much lower.

An extreme illustration of the same principle : Say you have 1/100 chance of making 500% return on your investment, and 99/100 chances of making 0%. The mean result would be 5%, yet 99% of investors would make less than that. This is of course very extreme, but it just shows the concept.

In a truly random situation, I'd expect less than 2/5 investors beating the market long-term, which is why I'd like to see the data.

Nords

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Re: Dividend Mantra Sells Out (Literally)
« Reply #107 on: November 26, 2015, 05:20:34 PM »
Randomness does not imply uniform distribution. For a lognormal distribution, which tends to be used to represent investment results...
I think both Long Term Capital Gains and Fannie Mae have independently verified that the lognormal distribution is an approximation, and that a lot of bad things can happen in the 0.06% by which the randomness tends to differ from the lognormal.

Sorry to interrupt the statistics discussion, but I just wanted to make sure we all understood that the analysis is based upon a flawed assumption.  Sure, it's just an itty-bitty flaw, but...

Sharpy

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Re: Dividend Mantra Sells Out (Literally)
« Reply #108 on: November 26, 2015, 05:22:04 PM »
I'd like some backup on the 2/5 investors beat the market claim ( top 2 quintiles). Would be interesting to see the data.

I didn't see this claim upthread but it seems to make sense.  If the distribution of returns was purely random, we'd expect 2.5/5 to beat the average.  Anything less than half beating the index suggests worse than random results.

Beating the average does not mean beating the market/index.  I read somewhere that 80% of actively managed funds can not beat the index consistently year over year, let alone retail Joes.



YoungInvestor

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Re: Dividend Mantra Sells Out (Literally)
« Reply #109 on: November 26, 2015, 05:40:51 PM »
Randomness does not imply uniform distribution. For a lognormal distribution, which tends to be used to represent investment results...
I think both Long Term Capital Gains and Fannie Mae have independently verified that the lognormal distribution is an approximation, and that a lot of bad things can happen in the 0.06% by which the randomness tends to differ from the lognormal.

Sorry to interrupt the statistics discussion, but I just wanted to make sure we all understood that the analysis is based upon a flawed assumption.  Sure, it's just an itty-bitty flaw, but...

While not perfect, using a lognormal distribution is closer to the actual state of things than a uniform distribution. The overarching statement remains, and I would very much like to see this piece of data.

I'm an individual stock investor over an important portion of my portfolio, but part of my methodology is to question everything, which is why I question statements from both indexers and individual stock investors.

Intellectual laziness is a major flaw in this business, so I still appreciate your comment.

Financial.Velociraptor

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Re: Dividend Mantra Sells Out (Literally)
« Reply #110 on: November 26, 2015, 07:07:58 PM »
You guys are smarter than I!

I'm a picker (not nose!) but my sandbox is in a different asset class than most indexers as I like to work with options and discounted bonds.  I expect alpha, but not based on being smarter than the herd but by virtue of using more lucrative asset classes.

Nords

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Re: Dividend Mantra Sells Out (Literally)
« Reply #111 on: November 27, 2015, 08:10:06 AM »
Randomness does not imply uniform distribution. For a lognormal distribution, which tends to be used to represent investment results...
I think both Long Term Capital Gains and Fannie Mae have independently verified that the lognormal distribution is an approximation, and that a lot of bad things can happen in the 0.06% by which the randomness tends to differ from the lognormal.

Sorry to interrupt the statistics discussion, but I just wanted to make sure we all understood that the analysis is based upon a flawed assumption.  Sure, it's just an itty-bitty flaw, but...

While not perfect, using a lognormal distribution is closer to the actual state of things than a uniform distribution. The overarching statement remains, and I would very much like to see this piece of data.
The issue is mentioned in a research paper titled "Deja Vu All Over Again".
http://morningstardirect.morningstar.com/clientcomm/iss/Kaplan_Deja_Vu_All_Over_Again.pdf

Stock market "unusual events" happen far more often than a lognormal distribution would predict, but the math is considered fairly straightforward.

A different type of distribution curve predicts the unusual events a little better, but it it has fat tails and apparently the analysis math is much more difficult.

So in other words much of the probability & statistics analysis is done with the "wrong" distribution curve because we have better math tools.  But as long as the future sticks to within three standard deviations of the median, everything should be fine.

It's like the old joke about the guy who lost his car keys on the sidewalk and was looking for them under a street light because the light was better there.

I can't remember whether it was Markowitz or Sharpe who commented "Thank goodness the Nobel Committee can't take the prizes back."

For most investors investing in mainstream index funds, this analysis issue is a distinction without a difference until yet another recession occurs.  However if investors are buying an asset that has a poorly-understood risk (like thinly-traded options or peer-to-peer lending) then they should be aware that nobody really has the math to analyze whether investors are being adequately compensated for the risk they're taking. 
« Last Edit: November 27, 2015, 08:13:06 AM by Nords »

Sharpy

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Re: Dividend Mantra Sells Out (Literally)
« Reply #112 on: November 27, 2015, 10:22:53 AM »
You guys are smarter than I!

I'm a picker (not nose!) but my sandbox is in a different asset class than most indexers as I like to work with options and discounted bonds.  I expect alpha, but not based on being smarter than the herd but by virtue of using more lucrative asset classes.

I actively trade ES_F and CL_F.  As a matter of fact, I use algorithmic trading for ES, which has been running in a real account for a year and half now. This is the side gig I will run once I FIRE in 2017.  It runs best when my position size is small. So my majority money will still sit in a total market index fund.

These 2 strategies seem to contradict either other.  One is extremely active, the other extremely passive.

Nords

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Re: Dividend Mantra Sells Out (Literally)
« Reply #113 on: November 27, 2015, 12:03:08 PM »
These 2 strategies seem to contradict either other.  One is extremely active, the other extremely passive.
Every investor (largely males of a certain age) needs to set aside 10-15% of their portfolio for a testosterone-poisoned brilliant-investor shoot-the-moon investment. 

Whether that's spent on trading options, or penny stocks, or starting a business, or angel investing (guilty), it satisfies a desire to take an active role in your investing and to exert control over the result. 

It also immunizes you against further temptation.  If you make a gazillion dollars off this part of your portfolio then you'll cash out and stop doing it because it's a lot of risk (or a lot of work).  If you lose every penny then you'll say "Well, I've learned my lesson and I'm never doing that again.  And this time I really mean it!"  If it returns 0% per year for a few years then you'll move on to something else.

In my case, working my way through all of the different investing techniques has brought me back around to passive index investing.  I can appreciate dividend investing but it's more work than I care to exert.  I feel the same way about angel investing, but I enjoy the camaraderie and the mentoring.  "Luckily" it'll be a few more years (decades?) before those investments have run their course.

Most of all, I want to finish working through this research while I'm young enough to be at (hypothetically) the peak of my cognition.  I don't want to be tempted to start investments like this when I'm 82 years old.

pbkmaine

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Re: Dividend Mantra Sells Out (Literally)
« Reply #114 on: November 27, 2015, 12:22:48 PM »
So funny you say that. When I was a financial planner, I used to give all my gunslinger clients "play money" to trade the markets with. The rest went into a diversified portfolio of Vanguard index funds. Every quarter, we'd compare their results to mine. Even if they won big in one quarter, in a year the index funds were usually ahead. After a few years the index portfolio always won.


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Sharpy

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Re: Dividend Mantra Sells Out (Literally)
« Reply #115 on: November 27, 2015, 01:15:22 PM »
These 2 strategies seem to contradict either other.  One is extremely active, the other extremely passive.
Every investor (largely males of a certain age) needs to set aside 10-15% of their portfolio for a testosterone-poisoned brilliant-investor shoot-the-moon investment. 

Whether that's spent on trading options, or penny stocks, or starting a business, or angel investing (guilty), it satisfies a desire to take an active role in your investing and to exert control over the result. 

It also immunizes you against further temptation.  If you make a gazillion dollars off this part of your portfolio then you'll cash out and stop doing it because it's a lot of risk (or a lot of work).  If you lose every penny then you'll say "Well, I've learned my lesson and I'm never doing that again.  And this time I really mean it!"  If it returns 0% per year for a few years then you'll move on to something else.

Very well put!   That is exactly what my plan is.   I have done everything I could to back test my trading, that includes a major bear market 2008-2009 and a major bull market.   But back testing is back testing.  I might have curve-fit all the test results without knowing it.   So keeping it small is key... 

Ramparts

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Re: Dividend Mantra Sells Out (Literally)
« Reply #116 on: November 27, 2015, 04:04:02 PM »
Quote
1) Did you or anyone else present evidence that Jason Fieber has beaten the S&P 500?
No they didn't.

Can you show the methodology & data you used to claim that he hasn't? I tried to reproduce your results by taking his net income from his Income & Expense pages from 02/2011 to 07/2015 and assumed he instead put all that money into VFIAX at the start of each month. I ended up with 983.148 shares, which at $193.80 is $190,534.08 on August 2nd, while his Freedom Fund update from that August says his portfolio is at $203,440.93. I had to make an assumption on his net income for the three months he didn't post income/expenses (05/2012 - 07/2012), which I set at a $3,250 each. I ended the study in August since that's when the Income/Expense reports stop.

I'd like to compare my data & methodology to yours to see where I might be getting mixed up.

hops

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Re: Dividend Mantra Sells Out (Literally)
« Reply #117 on: December 10, 2015, 02:20:36 PM »
It's hard to believe the new owners have essentially let the blog sit idle now for a month. Out of curiosity, I checked Jason's social media yesterday and he recently addressed the situation (to the extent that he could) and expressed interest in starting a new project next year where he'll continue tracking his progress:

https://www.facebook.com/DividendMantra/posts/1654080991525857?comment_id=1654154098185213&comment_tracking={%22tn%22%3A%22R%22}

My Own Advisor

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Re: Dividend Mantra Sells Out (Literally)
« Reply #118 on: December 10, 2015, 05:13:11 PM »
I've never met Jason, but I chatted with him quite a bit over email.

I have a hybrid investing approach - indexing and dividend investing.  He was very passionate about dividend investing only.  Dividends are not magic, just part of total return.

Anyhow, hard to believe he was getting that many followers on his site with the modest but decent portfolio but kudos to him.

He was always very genuine with me.  I only wish him success in the future.