Biggest problem of income investing
* It's based on theory.
* Higher income or diversification don't guarantee better performance or lower volatility.
* It's based on I feel, it works for me, I love it because it replaces my pay check...none of these are based on basic math, performance and volatility.
The ones who use it refuse to look or discuss performance or volatility because these are the only tools that can quantify investment success.
* If income is superior, every paper/research/article should prove it easily and we should have a much higher % of funds investing this way.
The reality is different, the richest investors or the most successful have concentrated portfolio and are not obsessed about income. They would buy a security based on potential performance and volatility/risk first.
* Why income investing has been promoted by a lot more by "experts" that want to charge you money?
Your discussion about investing and analysts focus on the rich. But the reality is that their financial goals are very different from those of most investors.
Wealthiest investors often don’t actually need income from their portfolios. Their wealth is tied up in massive stock holdings that continue to grow over time and become placed in trusts that allow the rich to borrow against them and never pay any taxes. Because of that, their main focus is usually avoiding taxes while letting their assets compound for as long as possible.
Most regular investors are in a completely different situation.
At some point, people want their investments to start paying them back. Whether it’s early retirement, cutting back on work, or simply covering part of their living expenses, investors eventually need
income, not just a higher account balance on paper.
That’s where dividends can play an important role.
Dividends provide cash flow without requiring you to sell shares. For many investors, that predictability matters. Instead of worrying about market timing or deciding when to sell, a dividend portfolio can produce regular income that shows up automatically.
And the tax treatment isn’t nearly as bad as many people assume. In fact, for a retired couple with little other income, it’s possible to receive around $98,000 per year in qualified dividends from a taxable account and still owe zero federal income tax.
In other words, dividends can provide both income and tax efficiency for the people who actually need their investments to support their lifestyle. This is not the case for large portfolios for very high wealth individuals.
This is why debates about dividends often miss the bigger picture. Critics tend to frame everything from the perspective of ultra-wealthy investors who are trying to maximize long-term asset growth and avoid taxes which dividends can trigger. This is actually what Warren Buffet advocates. But most investors aren’t billionaires with endless time horizons and a multimillion dollar expense account..
They’re people who eventually want their money to produce income they can live on.
And for that goal, dividends can be one of the simplest and most practical tools available.
