Author Topic: Dividend Portfolio vs. Index Fund  (Read 30953 times)

Dodge

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Re: Dividend Portfolio vs. Index Fund
« Reply #50 on: March 23, 2015, 03:59:07 PM »

Can you link me to a fund or ETF that has been successful at beating the market?  Every time I research this, I come up short.  When people talk about this, the Dividend Aristocrats commonly come up.  A list of companies which have increased their dividend every year, for the pat 25 years.  How could we go wrong?  They throw up a chart showing the Dividend Aristocrats handily beating the market, and proclaim victory for their strategy.  It's all Survivorship Bias.

http://www.bogleheads.org/wiki/Survivorship_bias

The charts simply show, "This group of stocks which have exhibited increasing returns every year for the past 25 years, have higher 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 over the past 25 years, hoping they will continue to perform well in the next 25 years?  Alarm bells should start ringing on that one.

While these charts on past performance always look great, I have yet to see an actual real-time dividend-focused fund beat the market.  This seemed strange to me, if the charts look so great, why weren't any funds/ETFs able to capitalize on this?

I don't know what the OP is trying to accomplish, but I do hate to see a good dividend strategy maligned.
Since inception, SDY has beaten the S&P 500 with a lower standard deviation to boot.  Sounds pretty decent to me.

If you'll see the chart I posted a few posts up, you'll see a $10,000 investment made in SDY at inception would have grown to $21,253 as of today, while that same investment in Vanguard's S&P500 fund would have grown to $21,021.  They've gone back and forth a few times, and have always been very close.  If you consider that a decent strategy, then I'd recommend just buying the total stock market index VTSAX, which beat them both.

RapmasterD

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Re: Dividend Portfolio vs. Index Fund
« Reply #51 on: March 23, 2015, 04:14:14 PM »

Can you link me to a fund or ETF that has been successful at beating the market?  Every time I research this, I come up short.  When people talk about this, the Dividend Aristocrats commonly come up.  A list of companies which have increased their dividend every year, for the pat 25 years.  How could we go wrong?  They throw up a chart showing the Dividend Aristocrats handily beating the market, and proclaim victory for their strategy.  It's all Survivorship Bias.

http://www.bogleheads.org/wiki/Survivorship_bias

The charts simply show, "This group of stocks which have exhibited increasing returns every year for the past 25 years, have higher 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 over the past 25 years, hoping they will continue to perform well in the next 25 years?  Alarm bells should start ringing on that one.

While these charts on past performance always look great, I have yet to see an actual real-time dividend-focused fund beat the market.  This seemed strange to me, if the charts look so great, why weren't any funds/ETFs able to capitalize on this?

I don't know what the OP is trying to accomplish, but I do hate to see a good dividend strategy maligned.
Since inception, SDY has beaten the S&P 500 with a lower standard deviation to boot.  Sounds pretty decent to me.

If you'll see the chart I posted a few posts up, you'll see a $10,000 investment made in SDY at inception would have grown to $21,253 as of today, while that same investment in Vanguard's S&P500 fund would have grown to $21,021.  They've gone back and forth a few times, and have always been very close.  If you consider that a decent strategy, then I'd recommend just buying the total stock market index VTSAX, which beat them both.

Agreed that they both go back and forth. I'm 'in' SDY pretty big and would get out but for the tax consequences of doing so. It's measurably more expensive than SPY.

sirdoug007

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Re: Dividend Portfolio vs. Index Fund
« Reply #52 on: April 01, 2015, 12:39:03 PM »
Why not just look at ETF returns to replicate a dividend focused vs. non-dividend focused approach.

Playing around with SDY, SPY, and VTI I am failing to see any advantage of SDY.

Here are returns since 1/1/2009 with SDY in green, SPY in blue, and VTI in orange:  http://www.etfreplay.com/charts.aspx


SaintM

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Re: Dividend Portfolio vs. Index Fund
« Reply #53 on: April 02, 2015, 10:20:30 PM »
Playing around with SDY, SPY, and VTI I am failing to see any advantage of SDY.

You'll see it during the next downturn.

Dodge

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Re: Dividend Portfolio vs. Index Fund
« Reply #54 on: April 02, 2015, 10:39:26 PM »
Playing around with SDY, SPY, and VTI I am failing to see any advantage of SDY.

You'll see it during the next downturn.

SDY's 2009 bottom was lower than both the S&P500, and the total stock index.

sirdoug007

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Re: Dividend Portfolio vs. Index Fund
« Reply #55 on: April 03, 2015, 10:21:14 AM »
Playing around with SDY, SPY, and VTI I am failing to see any advantage of SDY.

You'll see it during the next downturn.

So why didn't I see it during the last downturn?  In all cases, these funds got cut in half in 1/2007-3/2009.

tj

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Re: Dividend Portfolio vs. Index Fund
« Reply #56 on: April 03, 2015, 05:32:43 PM »
Playing around with SDY, SPY, and VTI I am failing to see any advantage of SDY.

You'll see it during the next downturn.

So why didn't I see it during the last downturn?  In all cases, these funds got cut in half in 1/2007-3/2009.


Financials got creamed in the financial crisis. I suspect SDY fared better than the broad market during the tech bubble crash.

Dodge

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Re: Dividend Portfolio vs. Index Fund
« Reply #57 on: April 03, 2015, 05:42:25 PM »
Playing around with SDY, SPY, and VTI I am failing to see any advantage of SDY.

You'll see it during the next downturn.

So why didn't I see it during the last downturn?  In all cases, these funds got cut in half in 1/2007-3/2009.


Financials got creamed in the financial crisis. I suspect SDY fared better than the broad market during the tech bubble crash.

SDY was created in 2005, so we will never know...

SaintM

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Re: Dividend Portfolio vs. Index Fund
« Reply #58 on: April 03, 2015, 07:05:35 PM »
Playing around with SDY, SPY, and VTI I am failing to see any advantage of SDY.

You'll see it during the next downturn.

So why didn't I see it during the last downturn?  In all cases, these funds got cut in half in 1/2007-3/2009.

That wasn't a downturn, that was a full fledged panic.  No one trusted the system to survive to the next day.

waltworks

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Re: Dividend Portfolio vs. Index Fund
« Reply #59 on: April 03, 2015, 08:13:48 PM »
Ok, you're really stretching now. I don't care about dividend strategies either way but at what point does it stop working? When does the "downturn" become a "panic" and suddenly dividend investing is no better than anything else?

-W

That wasn't a downturn, that was a full fledged panic.  No one trusted the system to survive to the next day.