Income Portfolio

[braumeister]

Quote:

Originally Posted by olyveoil I was trying to reply to the OP, here.

FWIW, the OP made his decision, thanked everyone, and logged off a week ago. Hasn't been back since.

[Montecfo]

Quote:

Originally Posted by ERD50 You are reading too much into what I said. I can only go by the data I have. It may or may not be indicative of the past or the future, I have no idea. But if they under-performed in that environment, what makes me think they will out-perform in some other environment (they may or may not - I don't know)? Some people claim the div-payers hold up better in dips. Well, they didn't hold up better in those dips. So that's not something I can count on. No one seems to be able to present data for any other long term period. So I go with what I have, accepting that it is still limited. I never said otherwise, it represents the dates provided. Why would anyone think otherwise? Again, can someone provide data from other periods? I'm all eyes. -ERD50

Now we are getting somewhere. I think we are now both saying the same thing, that the Fed Era has little to say about prior or future periods, and that you are using a very limited data set.

There is little to conclude from this relatively short, homogenous window, and it may have little to no predictive value.

[ERD50]

Quote:

Originally Posted by olyveoil You certainly implied and outright stated. You are the one that keeps mentioning dividend only vs total return via your charts and in your words. I am not inserting anything. I am quoting you. ...

Yes, for the comparisons, I compare the div-sector to total market. That's how to compare them. If I buried them as 15% of a portfolio (or whatever), it would be hard to see if there was a difference. There's no benefit to that in trying to eek out differences.

If a sector under-performs, it under-performs. If that sector was 15% of the portfolio, 15% of the portfolio would under-perform. Makes no difference to the comparison. That doesn't help the portfolio, it hurts, just to a lesser degree.

Now, if the div-sector was relatively uncorrelated to the Total Market, it might help along with re-balancing (like bonds can). But we see very high correlation in those charts.

So run those charts with a mix, and see if an X% allocation to those div-sector funds/ETFs boost performance. I don't see how it can, but I await your data.

-ERD50

[racy]

Quote:

Originally Posted by braumeister FWIW, the OP made his decision, thanked everyone, and logged off a week ago. Hasn't been back since.

LOL. You beat me to it!

[Montecfo]

Quote:

Originally Posted by ERD50 Yes, for the comparisons, I compare the div-sector to total market. That's how to compare them. If I buried them as 15% of a portfolio (or whatever), it would be hard to see if there was a difference. There's no benefit to that in trying to eek out differences. If a sector under-performs, it under-performs. If that sector was 15% of the portfolio, 15% of the portfolio would under-perform. Makes no difference to the comparison. That doesn't help the portfolio, it hurts, just to a lesser degree. Now, if the div-sector was relatively uncorrelated to the Total Market, it might help along with re-balancing (like bonds can). But we see very high correlation in those charts. So run those charts with a mix, and see if an X% allocation to those div-sector funds/ETFs boost performance. I don't see how it can, but I await your data. -ERD50

I'm surprised no one has put together a broad market index excluding the dividend payers. Would perform so much better without that, you know, drag.

[ERD50]

Quote:

Originally Posted by Montecfo I'm surprised no one has put together a broad market index excluding the dividend payers. Would perform so much better without that, you know, drag.

Actually, while I was off doing other things in my life, that thought occurred to me.

I'd appreciate the fact that my divs would be lower, I'd have more flexibility in managing my taxable income, Roth conversions, etc. And, at least based on our limited data set, performance could be expected to improve.

It would be a win-win for me.

I guess it could be worked out mathematically. Look at the top 10 holdings in those div-sector funds, find their % representation in VTI, subtract their performance, but add in that much more VTI (leveraging it, in effect).

Shorting them means I still need to have funds on hand to cover, so that's not the same (I think?).

Too much work for me, but I sure wish a Vanguard or Fidelity would put out an index like that, managed by computer to keep expenses low.

-ERD50

[Exchme]

Oddly, that wasn't the biggest problem in the portfolio in post #20, the real risk of course was that the high divs were individual stocks. The lack of diversification by holding individual stocks seems much more likely to be disappointing than the factor used to select them. But luck plays a role, so maybe it all works out.

[bada bing]

I personally don't do dividend tilts. I take the dividends that VTI and VXUS throws off. I am pretty much sold on the concept that dividends are tax inefficient and indicate a company that has no good internal investment opportunities. Not a perfect indicator but a reasonably useful one.

I worked for a company that paid a pretty hefty dividend yield most of the time and went through several business cycles where maintaining the dividend was a severe burden and distorted business decisions. As an example, Exxon (who I've never worked for), cancelled their 401K matching for all employees last year in an effort to support their dividend. Stupid business move among many they have made recently that resulted in them being dropped from the DOW 30. Paying dividends does not necessarily indicate stable fundamentals, a strong balance sheet or business environment, not in the least.

If dividend yields were higher, as they were in the past, I could somewhat see the argument for seeking them. But they have been artificially suppressed, like all other yields by the "Fed Era" and as a result their share prices appear to me to be at greater risk now relative to the total market. The whole argument that there could be a market change relatively advantageous to dividend payers seems unlikely now. The recent divergence in dividends payer vs total market share prices seems to support this, as rates bottom out and inch back up. But then again, I don't market time or sector pick, so its just an academic discussion for me.

[Montecfo]

Quote:

Originally Posted by ERD50 Actually, while I was off doing other things in my life, that thought occurred to me. I'd appreciate the fact that my divs would be lower, I'd have more flexibility in managing my taxable income, Roth conversions, etc. And, at least based on our limited data set, performance could be expected to improve. It would be a win-win for me. I guess it could be worked out mathematically. Look at the top 10 holdings in those div-sector funds, find their % representation in VTI, subtract their performance, but add in that much more VTI (leveraging it, in effect). Shorting them means I still need to have funds on hand to cover, so that's not the same (I think?). Too much work for me, but I sure wish a Vanguard or Fidelity would put out an index like that, managed by computer to keep expenses low. -ERD50

It's so obvious, you kind of have to wonder why there isn't one.

[USGrant1962]

Quote:

Originally Posted by Montecfo It's so obvious, you kind of have to wonder why there isn't one.

Try VIGAX (growth stock index, 0.5% yield) vs VTSAX (total stock market) vs VYM (high dividend yield index ETF, 2.75% yield).

[Bossman]

To all concerned,

I have been following the continuing discussion, but without being logged into the forum. Regardless, I did create the income portfolio as previously indicated and will be getting my first dividend payment at the end of the month.

Good luck to all and stay safe.

[pb4uski]

Quote:

Originally Posted by USGrant1962 Try VIGAX (growth stock index, 0.5% yield) vs VTSAX (total stock market) vs VYM (high dividend yield index ETF, 2.75% yield).

https://www.portfoliovisualizer.com/...ocation3_3=100

Very interesting.... I focus on rolling returns... VIGAX are 13.12%-13.60%... VTI are 11.28%-12.15% and VYM are 10.07-11.33%.

[Bruno]

Quote:

Originally Posted by braumeister FWIW, the OP made his decision, thanked everyone, and logged off a week ago. Hasn't been back since.

Well maybe he is like me. We post a question or idea ONLY to be beat up by the ER MAGA Posters how WRONG we always are. It was not that long ago i didnt know what i was talking about MYGA annuitys and how all annuities are BAD. Now some of these same MEGA posters are experts on them.

[MRG]

Quote:

Originally Posted by Bossman To all concerned, I have been following the continuing discussion, but without being logged into the forum. Regardless, I did create the income portfolio as previously indicated and will be getting my first dividend payment at the end of the month. Good luck to all and stay safe.

Thanks for posting.[emoji854] Good luck and best wishes.

[ERD50]

Quote:

Originally Posted by USGrant1962 Try VIGAX (growth stock index, 0.5% yield) vs VTSAX (total stock market) vs VYM (high dividend yield index ETF, 2.75% yield).

Quote:

Originally Posted by pb4uski https://www.portfoliovisualizer.com/...ocation3_3=100 Very interesting.... I focus on rolling returns... VIGAX are 13.12%-13.60%... VTI are 11.28%-12.15% and VYM are 10.07-11.33%.

I did another run to get more data, an old Vanguard 500 fund, and the investor version of VIGAX (VIGRX), and I included the 3.5% inflation adjusted w/d.

VIGRX pulls out at the end, but seemed behind most of the time, trading places occasionally.

https://bit.ly/3wDodji

It would be interesting to me to see a strict computer generated (passive management) "VTI minus the high div payers" fund. With the proper resources, it could be constructed in the rear view mirror for analysis. At a glance of the holdings, VIGRX isn't excluding div payers in the major holdings (though those divs are low, HD the highest at ~ 2% ?), it's actively managed to look for growth.

-ERD50

[ERD50]

Quote:

Originally Posted by Bruno Well maybe he is like me. We post a question or idea ONLY to be beat up by the ER MAGA Posters how WRONG we always are. ...

That's not a very nice thing to say.

A lot of data, information and work was contributed to this thread by a number of posters. But you say the ONLY thing to happen was to "beat up" the OP?

If the data shows a claim to be wrong, then it raises doubts about that claim. Isn't that worth shining some light on?

Where is the "beating"? I think you owe this thread an apology.

OK, there was an early "sigh" response, that could come across as dismissive, and maybe rude. But if you have seen how many times the div-payers have posted the supposed virtues of these investments, and ignore the data without providing any of their own, you might find it understandable (restrained even!).

And what the heck is a "MEGA Poster"?

-ERD50

[Montecfo]

Quote:

Originally Posted by pb4uski https://www.portfoliovisualizer.com/...ocation3_3=100 Very interesting.... I focus on rolling returns... VIGAX are 13.12%-13.60%... VTI are 11.28%-12.15% and VYM are 10.07-11.33%.

This result illustrates the point I was making: The Fed Era, with low rates and money creation, favors growth stocks. High quality dividend stocks straddle growth and value. We all know how poorly value has performed on a relative basis during the Fed Era ( and hopefully we know why).

This has not been the unusual environment historically. So drawing conclusions about future relative performance based upon this period is probably unwise.

[olyveoil]

Quote:

Originally Posted by ERD50 Yes, for the comparisons, I compare the div-sector to total market. That's how to compare them. If I buried them as 15% of a portfolio (or whatever), it would be hard to see if there was a difference. There's no benefit to that in trying to eek out differences. If a sector under-performs, it under-performs. If that sector was 15% of the portfolio, 15% of the portfolio would under-perform. Makes no difference to the comparison. That doesn't help the portfolio, it hurts, just to a lesser degree. Now, if the div-sector was relatively uncorrelated to the Total Market, it might help along with re-balancing (like bonds can). But we see very high correlation in those charts. So run those charts with a mix, and see if an X% allocation to those div-sector funds/ETFs boost performance. I don't see how it can, but I await your data. -ERD50

False comparison. Stop asking people to not insert words when no one is inserting words. You made the comparisons.....question is, why? AS they are not relevant to what is being proposed.

[olyveoil]

Quote:

Originally Posted by Exchme Oddly, that wasn't the biggest problem in the portfolio in post #20, the real risk of course was that the high divs were individual stocks. The lack of diversification by holding individual stocks seems much more likely to be disappointing than the factor used to select them. But luck plays a role, so maybe it all works out.

True. Kinda. Post #20 includes ETF's and a MF as well. IF (big if) someone wants to build/monitor enough there can be plenty of diversification.

[olyveoil]

Quote:

Originally Posted by bada bing I personally don't do dividend tilts. I take the dividends that VTI and VXUS throws off. I am pretty much sold on the concept that dividends are tax inefficient and indicate a company that has no good internal investment opportunities. Not a perfect indicator but a reasonably useful one. I worked for a company that paid a pretty hefty dividend yield most of the time and went through several business cycles where maintaining the dividend was a severe burden and distorted business decisions. As an example, Exxon (who I've never worked for), cancelled their 401K matching for all employees last year in an effort to support their dividend. Stupid business move among many they have made recently that resulted in them being dropped from the DOW 30. Paying dividends does not necessarily indicate stable fundamentals, a strong balance sheet or business environment, not in the least. If dividend yields were higher, as they were in the past, I could somewhat see the argument for seeking them. But they have been artificially suppressed, like all other yields by the "Fed Era" and as a result their share prices appear to me to be at greater risk now relative to the total market. The whole argument that there could be a market change relatively advantageous to dividend payers seems unlikely now. The recent divergence in dividends payer vs total market share prices seems to support this, as rates bottom out and inch back up. But then again, I don't market time or sector pick, so its just an academic discussion for me.

Good points. Dividend income focus as part of portfolio is not for everyone. I would argue that there already has been some recent rotation Nov-April away from high growth to larger cap/dividend payers.