Income Portfolio

[Exchme]

Take that same link and change the start year to 2009. You can create what ever answer you want.

I personally don't think Bonds or the NASDAQ are going to perform nearly as well over then next 10 years as they have over the last 10 years.

But I don't think I'm taking a big risk either way.

Uh, 2009 would miss the first half of the Great Financial Crisis, so is a peculiar choice. My numbers used the full range of the VYM data and it happily caught both a bad fall in 08-09 and a large bull market since. However, I love to learn and thought maybe you'd done an analysis, so I went and looked.

From the start of 2009, the same 93% VTI/7% bond has smaller drawdown to the bottom of the GFC (-20% vs -25% for VYM) and 93% VTI also much better performance since, with higher ending balances and higher Sharpe and Sortino ratios than VYM. So for your hand picked start date, I found exactly the same thing as before - dividend stocks did not protect on the downside and did not keep up on the upswing.

I do not understand your portfolio recommendation. If you are advocating for reducing bond percentages because you get income from dividends, the data refutes that idea. Dividend stocks fall like other stocks in downturns so are way riskier than bonds. Look elsewhere for shelter in a storm.

If you are you advocating dividend stocks to replace the stock portion of your portfolio, that would be an odd expectation. I'm not real up on literature, but I don't think factor based research identified dividends as a factor that could be added to enhance total return.

In any case, I'll do me and you do you.

 

[OldShooter]

... I don't think factor based research identified dividends as a factor that could be added to enhance total return. ...

Markowitz's Capital Asset Pricing Model (CAPM) considered only beta as a factor. Fama and French's Three Factor Model added small stock and value stocks as enhancements to return. Interestingly, those two factors are ones that selecting based on dividends will de-emphasize. Their later five-factor model added profitability and investment. Again, dividend orientation misses the prize, as dollars disbursed as dividends are not available for investment. There is some question whether the five-factor model is an improvement, though. But regardless you are correct, "dividends" does not appear in any of the models. If anything, IMO, dividends will probably be negatively correlated with high potential future value of a company.

 

[ERD50]

Of course you chose the time frame. Absurd to suggest you didn't. How did the charts get on this forum if you didn't pick the input data?

It is not absurd at all. I did not choose the time frame. REPEAT: I did not choose the time frame.

I entered that list of div-paying sector funds/ETFs that I could find with the longest history. I entered them in that web page, and then... the web page chose the time frames based on the history of those funds.

Look at the web page yourself. The time-frame I chose is 1985 to current. The web page reports:

Note: The time period was constrained by the available data for iShares International Select Div ETF (IDV) [Jul 2007 - Apr 2021].

I'll ask again, can you give me some available div-focused funds/ETFs with a longer history? I'll gladly run the data on them.

-ERD50

 

[olyveoil]

It is not absurd at all. I did not choose the time frame. REPEAT: I did not choose the time frame.

I entered that list of div-paying sector funds/ETFs that I could find with the longest history. I entered them in that web page, and then... the web page chose the time frames based on the history of those funds.

Look at the web page yourself. The time-frame I chose is 1985 to current. The web page reports:



I'll ask again, can you give me some available div-focused funds/ETFs with a longer history? I'll gladly run the data on them.

-ERD50

Your chart / your time frame. Simple as that. Gotta love someone blaming chart output on the "website".

 

[OldShooter]

Your chart / your time frame. Simple as that. Gotta love someone blaming chart output on the "website".

If you understood how PV works, you would understand ERD50's answers, which are quite a bit more polite than yours. I fail to see how your post here moves the dialog along in any useful way.

 

[olyveoil]

If you understood how PV works, you would understand ERD50's answers, which are quite a bit more polite than yours. I fail to see how your post here moves the dialog along in any useful way.

Kind of like a "sigh"?

What I am saying is the website (any website) uses input from the user to produce output (charts). Blaming a website for output data is absurd.

 

[Golden sunsets]

Your chart / your time frame. Simple as that. Gotta love someone blaming chart output on the "website".

Come on you guys!!!!!!!!!!!!

 

[braumeister]

MOD NOTE:
As we have said many times here, it's perfectly possible to disagree without being disagreeable. Showing respect for others' opinions and countering facts with other facts instead of dismissing them out of hand is not only possible but appreciated.

 

[pb4uski]

Your chart / your time frame. Simple as that. Gotta love someone blaming chart output on the "website".

No, you're not understanding. ERD did not pick the timeframe. The website goes back as far as it has data for.... so the start is typically the beginning of the newest fund/ETF listed.

 

[AtlasShrugged]

Here are some Morgan Housel thoughts that are germane to this debate.

https://www.collaborativefund.com/blog/play-your-own-game/

 

[MRG]

Here are some Morgan Housel thoughts that are germane to this debate.

https://www.collaborativefund.com/blog/play-your-own-game/

Thanks for posting this. Interesting and kinda my view. I have feet in both camps, and to add confusion, I write cash covered puts on certain dividend payers as the dividend provides a floor under "normal" conditions. When I'm put into something I sit back enjoy the dividend and write calls on the equity to juice the return. Benchmark that!

 

[ERD50]

Here are some Morgan Housel thoughts that are germane to this debate.

https://www.collaborativefund.com/blog/play-your-own-game/

Interesting, thanks for posting. But I'm not sure it is relevant to the debate.

But first, I see that Daniel Kahneman was mentioned. I'm a big fan of his writings on behavioral economics (the inspiration for the Freakonomics series). But that section seems a bit odd.

Daniel Kahneman once told his financial advisor that he had no desire to become richer; he just wanted maintain a lifestyle he was satisfied with. She told him, “I can’t work with you.”

? All he wanted was capital preservation as a goal. What's so hard about understanding that? There are certainly ways to build a portfolio that would be geared towards preservation rather than growth. Why turn down his business? Heck, I'd do it for free, just to get a chance to chat with him!

But to the meat of that article (I assume this is what you are referring to, you didn't post your thoughts on it),

A big problem in investing is that we treat it like it’s math, where 2+2=4 for me and you and everyone – there’s one right answer. But I think it’s actually something closer to sports, where equally smart and talented people do things completely differently depending on what game they’re playing.

What you want might not be what I want.
....

So here’s my advice.

1. Judge less. ...

Keeping with the sports analogy, I think that misses the target.

Certainly, different people can have different goals. That's fine and to be expected. But that's not the same as 2+2=4, one answer.

Whether or not people have different goals, 2+2 still equals 4. Maybe they don't want to add 2 and 2, but that doesn't change the answer. There is still only one right answer.

So if someone want to focus on one sector of the market, that's their choice. But if they are going to post here, and say that that sector does things that the data has shown it has not done, then we are back to 2+2=4. It does not equal 5, or 3, regardless of your investing goals/style/risk-tolerance.

Here's another parallel to the thread about cars with incredible 0-60 acceleration (and let's stick to ICE cars to keep this comparison simple). Some of us don't care about owning a car that can do 0-60 in 3 seconds, and some do. That's personal preference, and it's all good.

But if the 3 second guy claims he gets 40 mpg while doing these runs, he better have some data to back it up. Or of the 40 mpg guy claims his car does 0-60 in 3 seconds, he better have some data to back it up.

It's not about choices, it's about presenting accurate, meaningful information.

-ERD50

 

[ERD50]

Your chart / your time frame. Simple as that. Gotta love someone blaming chart output on the "website".

No, you're not understanding. ERD did not pick the timeframe. The website goes back as far as it has data for.... so the start is typically the beginning of the newest fund/ETF listed.

olyveoil, I'm trying to present some meaningful data and information here. There is no way to present meaningful data for a fund/ETF before it existed.

And no one has offered up tickers for funds/ETFs that go back further than my list, despite my multiple requests.

I can only hope, as pb4uski offers, that you misunderstand what this chart represents. A misunderstanding can be corrected (if the individual is open minded). The only other explanations I can think of are not as charitable.

-ERD50

 

[olyveoil]

No, you're not understanding. ERD did not pick the timeframe. The website goes back as far as it has data for.... so the start is typically the beginning of the newest fund/ETF listed.

This is really simple.
Pick different inputs. IE an older fund.
Or not.

Good luck to the OP.

 

[pb4uski]

This is really simple.
Pick different inputs. IE an older fund.
Or not.

Good luck to the OP.

....I'll ask again, can you give me some available div-focused funds/ETFs with a longer history? I'll gladly run the data on them.

-ERD50

Yes, and ERD invited olyveoil to provide older dividend focused funds or ETFs and olyveoil failed to rise to the opportunity.

olyveoil reminds me of that scene in "A Few Good Men"...

The truth is that the data suggests that a focus on dividend payers rather than broad based portfolios slightly underperforms looking at 3 and 5 year rolling average returns. What is interesting is that the difference is negligible from 2012 to 2014... widened slightly from 2014 to early 2020... and then widened more significantly since the covid crash in 2020.

Now that said, I'm not a dividend naysayer... if someone wants to focus on dividend payers then that's fine... its their money to invest as they wish... but the data suggests that the strategy is slightly suboptimal compared to a total return strategy.

https://www.portfoliovisualizer.com...location9_2=15&symbol10=DVY&allocation10_2=15

 

[Montecfo]

Drawing broad conclusions about relative investment performance over time while considering only what I call the "Fed Era" i.e. 2008 forward, seems a bit, well, short sighted does it not?

 

[Dash man]

I don’t doubt that broad based dividend paying funds may underperform a total return fund. But I do believe selective dividend growing stocks will outperform a total return fund over the long haul. Companies that raise their dividend every year show they are healthy companies, especially those that have raised dividends for 15+ consecutive years.

 

[olyveoil]

Yes, and ERD invited olyveoil to provide older dividend focused funds or ETFs and olyveoil failed to rise to the opportunity.

olyveoil reminds me of that scene in "A Few Good Men"...

The truth is that the data suggests that a focus on dividend payers rather than broad based portfolios slightly underperforms looking at 3 and 5 year rolling average returns. What is interesting is that the difference is negligible from 2012 to 2014... widened slightly from 2014 to early 2020... and then widened more significantly since the covid crash in 2020.

Now that said, I'm not a dividend naysayer... if someone wants to focus on dividend payers then that's fine... its their money to invest as they wish... but the data suggests that the strategy is slightly suboptimal compared to a total return strategy.

https://www.portfoliovisualizer.com...location9_2=15&symbol10=DVY&allocation10_2=15

What I refuse to accept are 3 things
1.) a website is responsible for human inputs
2.) The truth is not as presented comparing investments over an extended bull market
3.) I am not advocating focusing solely on dividend payers. Again....for the umpteenth time...I believe dividend payers are part of a portfolio. I also explained the exact percentage. IE the "Truth" being presented is based on a strawman / false premise. But you are welcome to keep repeating it.

 

[olyveoil]

Drawing broad conclusions about relative investment performance over time while considering only what I call the "Fed Era" i.e. 2008 forward, seems a bit, well, short sighted does it not?

Of course it does. But it seems like repeating it over and over makes some people believe everyone else should take as gospel.

 

[olyveoil]

I don’t doubt that broad based dividend paying funds may underperform a total return fund. But I do believe selective dividend growing stocks will outperform a total return fund over the long haul. Companies that raise their dividend every year show they are healthy companies, especially those that have raised dividends for 15+ consecutive years.

I concur. Yield on cost being a metric. Not for everyone, though to keep up with it all.

 

[pb4uski]

Drawing broad conclusions about relative investment performance over time while considering only what I call the "Fed Era" i.e. 2008 forward, seems a bit, well, short sighted does it not?

Of course it does. But it seems like repeating it over and over makes some people believe everyone else should take as gospel.

I think it depends on whether you think the "Fed Era" will ever end and if so, when.

 

[pb4uski]

I don’t doubt that broad based dividend paying funds may underperform a total return fund. But I do believe selective dividend growing stocks will outperform a total return fund over the long haul. Companies that raise their dividend every year show they are healthy companies, especially those that have raised dividends for 15+ consecutive years.

I tend to agree, just like good stock pickers can outperform an index... but we know how that works out.

Care to share 5-10 tickers?

 

[OldShooter]

... Yield on cost being a metric. ...

Sunk cost fallacy: https://en.wikipedia.org/wiki/Sunk_cost Neither the market nor your portfolio knows or cares what you paid for things. Absent tax considerations, every day is tabula rasa for an intelligent investor.

(Note, this comment is for others. Miss Oill will blow it off.)

 

[olyveoil]

Sunk cost fallacy: https://en.wikipedia.org/wiki/Sunk_cost Neither the market nor your portfolio knows or cares what you paid for things. Absent tax considerations, every day is tabula rasa for an intelligent investor.

(Note, this comment is for others. Miss Oill will blow it off.)

How does the sunk cost fallacy apply to yield on cost for dividend payers but not on total return stocks/MF's?

Again, yield on cost is a METRIC. Just as unrealized gains are a METRIC.

 

[olyveoil]

I tend to agree, just like good stock pickers can outperform an index... but we know how that works out.

Care to share 5-10 tickers?

Tickers I own.

NEWT
GAIN
ABBV
HRC
MRK
C
PSX
MPC
QYLD
BMY
DHT