Good thoughts. Though, I personally never loved the idea of Dividend investing. Most dividend companies tend to move sideways over long periods of time. That 8% dividend they give out ends up being no different than just investing in a market index over time.
Appreciate your thoughts! Like any strategy, dividend investing has pros and cons. Investing is all about finding a strategy that you believe in and works for your financial goals.
I guess from performance-based approach we all should invest only on passive index or ETF and never invest on anything else.
However, it gets pretty boring to only passive investing for 30-40 years. Therefore some sauce is needed, to learn more personally and of course people are different.
Although dividends might be double-taxed, non-dividend companies investing solely on company itself does not guarantee future results either. Perhaps a bag of mixed assets is always the best, as they say...
Good thoughts and good point about how it can get boring so most like to venture off a bit. It’s just important to make sure it doesn’t get too costly!
I am familiar with the "Dogs of the Dow" but find two potential faults with it.
First, the investable universe is rather small. There are many high quality small and mid cap companies with spectacular finances that are not in the Dow. I always mention REITs and BDCs and none of these are present in the index.
Second, rebalancing will most likely create a taxable event. The article mentions that even taking taxes into account the DOD approach will still do well. Everyone's taxes are very unique though. I would be careful here. Maybe an ETF or some other kind of fun would be better to own.
On the positive side, the approach is super simple, isn't it? And if something is simple then it becomes doable and repeatable. That can enable a lot of people who would otherwise be turned off from investing.
The smaller investable universe is one constraint the strategy puts into place to achieve the simplicity you mentioned. That simplicity is one of the bigger advantages to following the "Dogs of the Dow". There is some more detail on the strategy in Saturday's article.
You're also correct on taxes - they're unique to each individual, and investors should consider their effects as they choose a strategy.
I am still not clear if a priority to high dividend investing is the appropriate strategy for me right now, or rather something to shift into (or convert) as I get closer to ending the build phase (aka. Retirement). Dividends are taxable and hence, even with a DRIP, reduce compounding. Are there any best practices related to life cycle adjusted allocation evolution?
Tend to agree. Every investor is unique and has its own needs. The main reason for Compounding Dividends is the fact that some people prefer to invest in dividend companies and get the monthly cash payments in. This might be irrational from a compounding perspective. :)
Good thoughts. Though, I personally never loved the idea of Dividend investing. Most dividend companies tend to move sideways over long periods of time. That 8% dividend they give out ends up being no different than just investing in a market index over time.
Appreciate your thoughts! Like any strategy, dividend investing has pros and cons. Investing is all about finding a strategy that you believe in and works for your financial goals.
Yep!
Yeah I agree with the Author and with you aswell.
I guess from performance-based approach we all should invest only on passive index or ETF and never invest on anything else.
However, it gets pretty boring to only passive investing for 30-40 years. Therefore some sauce is needed, to learn more personally and of course people are different.
Although dividends might be double-taxed, non-dividend companies investing solely on company itself does not guarantee future results either. Perhaps a bag of mixed assets is always the best, as they say...
Good thoughts and good point about how it can get boring so most like to venture off a bit. It’s just important to make sure it doesn’t get too costly!
Great point!
I am familiar with the "Dogs of the Dow" but find two potential faults with it.
First, the investable universe is rather small. There are many high quality small and mid cap companies with spectacular finances that are not in the Dow. I always mention REITs and BDCs and none of these are present in the index.
Second, rebalancing will most likely create a taxable event. The article mentions that even taking taxes into account the DOD approach will still do well. Everyone's taxes are very unique though. I would be careful here. Maybe an ETF or some other kind of fun would be better to own.
On the positive side, the approach is super simple, isn't it? And if something is simple then it becomes doable and repeatable. That can enable a lot of people who would otherwise be turned off from investing.
Always appreciate the insightful comments Boris!
The smaller investable universe is one constraint the strategy puts into place to achieve the simplicity you mentioned. That simplicity is one of the bigger advantages to following the "Dogs of the Dow". There is some more detail on the strategy in Saturday's article.
You're also correct on taxes - they're unique to each individual, and investors should consider their effects as they choose a strategy.
500 dollars milega
Aj
I am still not clear if a priority to high dividend investing is the appropriate strategy for me right now, or rather something to shift into (or convert) as I get closer to ending the build phase (aka. Retirement). Dividends are taxable and hence, even with a DRIP, reduce compounding. Are there any best practices related to life cycle adjusted allocation evolution?
Hi Nico,
Tend to agree. Every investor is unique and has its own needs. The main reason for Compounding Dividends is the fact that some people prefer to invest in dividend companies and get the monthly cash payments in. This might be irrational from a compounding perspective. :)