08-17-2014, 11:27 PM
Slowlife, welcome to the forum, and great first post. It sounds like you've accomplished quite a bit by age 29. I'm 32, and the idea of buying a house has barely crossed my mind.
On a side note about cars, have you done track days? I've done a bit of racetrack driving (both cars and motorcycles) and let's just say it's the opposite of investing, i.e. the process of turning money into CO2.
If you've read a bit about dividend growth investing you're probably aware that chasing yield is considered a common mistake. I admit it's tempting and I agree with your logic, somewhat. However for long term buy-and-hold, the growth of the dividend is of central importance, rather than the starting yield. A high yield usually means either a) high risk, or b) low growth. I was first drawn in to DGI thinking that dividend growth only referred to reinvestment and compounding. If this was the whole strategy, we'd be buying high yield utilities, telecoms, and REITs, and hoping for low price appreciation so the dividends can compound faster. In fact, price appreciation is a central part of DGI. So, with regard to wanting capital appreciation... this is not greed! Over the long term, if the dividend grows consistently (and is supported by fundamentals), the price will have to catch up, otherwise you'd eventually have a blue chip yielding 20%. So, DGI is a total return strategy, and capital appreciation is part of it. When you're retired and living on investment income, it might make sense to rotate into higher yielding stocks. In the meantime, lower yield/higher growth stocks will give you less of a tax burden while you're saving and accumulating.
Everyone has their own goals and take on DGI, so I'm sure they will chime in.
On a side note about cars, have you done track days? I've done a bit of racetrack driving (both cars and motorcycles) and let's just say it's the opposite of investing, i.e. the process of turning money into CO2.
If you've read a bit about dividend growth investing you're probably aware that chasing yield is considered a common mistake. I admit it's tempting and I agree with your logic, somewhat. However for long term buy-and-hold, the growth of the dividend is of central importance, rather than the starting yield. A high yield usually means either a) high risk, or b) low growth. I was first drawn in to DGI thinking that dividend growth only referred to reinvestment and compounding. If this was the whole strategy, we'd be buying high yield utilities, telecoms, and REITs, and hoping for low price appreciation so the dividends can compound faster. In fact, price appreciation is a central part of DGI. So, with regard to wanting capital appreciation... this is not greed! Over the long term, if the dividend grows consistently (and is supported by fundamentals), the price will have to catch up, otherwise you'd eventually have a blue chip yielding 20%. So, DGI is a total return strategy, and capital appreciation is part of it. When you're retired and living on investment income, it might make sense to rotate into higher yielding stocks. In the meantime, lower yield/higher growth stocks will give you less of a tax burden while you're saving and accumulating.
Everyone has their own goals and take on DGI, so I'm sure they will chime in.