Dividend Bias / Rational Thinking

[Scooterd]

A good Read - Be Aware Of Your Dividend Bias

https://rationalthinking.net/beware-your-dividend-bias/

Excerpt -
"In the stock market, it’s easy to fool yourself. Decision-making is all about making good or bad outcomes. We all fall prone to what Annie Duke calls resulting: we judge the quality of our decisions on the outcome, not the other way around. But you can have a good outcome despite a bad decision, and you can have a bad outcome even though the quality of your decision was good.

The same goes for Dividend Investing. We get lured by receiving tangible payments and we forget the opportunity cost of the capital distribution. Warren Buffett has never walked into his office just to focus his investments on one asset class or one style of investments. Why should he limit himself? It doesn’t make much sense to potentially exclude many good investments. Dividend investors get obsessed with “income” and ignore the many other very viable options". - Oddmund Groette

Sound reliable Portfolio construction takes years, and should encompass many forms of investment securities, correlated and uncorrelated. Opinions vary, This one is mine.  -  Scoot

"I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail." - Abraham Maslow 1966

[crimsonghost747]

This is an age old discussion, and I believe the only true answer here is that it depends on you. Many view the market as some sort of a race or a competition, where they need to be better than the guy next to them. This might be true for the big boys on wall street because they are essentially fighting against each other for the chance to play with our money. But when it comes to individual investors, I find this to be an absolutely flawed concept.

Everyone has their own lifestyle, their own goals, their own risk tolerance. These are what need to guide our decision making, and these are what we need to be comparing our results to. This is why I shy away from comparing my portfolio to an index as much as possible. I have different goals and a different risk tolerance than the SP500. I only take a peek when we have these days/weeks/months when the markets tank properly. And the reason I look? It's that risk tolerance thing. I know I want to have less risk than the SP500. So when the risk materializes, I check to see if I reached my goal.

Not surprisingly, I am focusing the large majority of my portfolio towards producing income. Sure, I could be flipping cryptocoins with 300% leverage instead. But I chose DGI and it's not because I'm obsessed, it's not because I ignore other options. It's simply because DGI gives me the things I want, which are regular cash flows which is growing faster than inflation and relative safety compared to the rest of the markets.

[fenders53]

You looking for trouble Scoot?

I prefer businesses that can grow the dividend and business consistently. It tends to be a sign of a lasting company. I do monitor total return. I certainly do not want my capital to decrease over the long haul. Of course it is a normal occurrence in the short term. I don't want to trail the S&P by a wide margin year after year, but I don't need to beat the index either. So "yield traps" are out. Dividend cuts are generally a strong warning of trouble ahead. A true DGI stock is a good long term investment.

For most of my years I have mixed growth and value. Decade long market rotations between growth and value are my incentive to balance to some degree. I never know when I may be "right or wrong" for long periods of time if I pick a side.

[Scooterd]

(02-05-2022, 04:15 AM)fenders53 Wrote: You looking for trouble Scoot?

I prefer businesses that can grow the dividend and business consistently.  It tends to be a sign of a lasting company.  I do monitor total return.  I certainly do not want my capital to decrease over the long haul.  Of course it is a normal occurrence in the short term.  I don't want to trail the S&P by a wide margin year after year, but I don't need to beat the index either.  So "yield traps" are out.  Dividend cuts are generally a strong warning of trouble ahead.  A true DGI stock is a good long term investment.  

For most of my years I have mixed growth and value.  Decade long market rotations between growth and value are my incentive to balance to some degree.  I never know when I may be "right or wrong" for long periods of time if I pick a side.

You looking for trouble Scoot?

Yep!
Just a little Salvo regarding "Facebook, Salmon, and paradigms". 

>

For most of my years I have mixed growth and value.  Decade long market rotations between growth and value are my incentive to balance to some degree. - Fender53

Ditto, though My portfolio tends to lean Value. I overweight specific investments and sectors periodically (dividend and non-dividend payers alike) as the business economic cycle transitions from phase to phase. Though I am never rewarded with the highs of bull market highs , conversely the portfolio has never experienced the lows of bear market lows..... Just slow and steady moderate growth over the past number of decades. That said, what may be in the comfort zone for me, may not be in the comfort zone (circle of competence) for others, and in my opinion that's Ok!!!. What may be good for Moi, May not be good for Vous...Many paths through the woods , we're all on different paths trying to reach our specific destinations.

I like mine with lettuce and tomato,
Heinz 57 and french fried potatoes,
Big kosher pickle and a cold draft beer
Well, good God almighty which way do I steer.....
....."Facebook, Salmon, and paradigms" 

"I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail." - Abraham Maslow 1966