Comments by "JP 72" (@739jep) on "Dividend Growth Investing" video.

@thomasd5488 that’s not an easy question to answer, there’s probably no definition of what perfect diversification is (at least it’s up for debate). It’s probably easier to tell when someone is not diversified enough within a specific asset class though. For stocks I wouldn’t consider any of the numbers you used to be good diversification , even if they were held at sensible weights. I would say though that holding individual stocks opposed to broadly diversified/low fee etfs/index funds would leave you under diversified. Some may even argue that even investing in a broad based index fund would leave you under diversified as you’re only exposed to market risk rather than the other know independent systematic risks.
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If you can’t see that those two statements are not mutually exclusive then it may be you who is disingenuous. I mean the whole video was about why both those statements are true. You can have it both ways. The reason the dividend aristocratics have outperformed the S&P500 is due to other factors - not dividends. He began the video by saying one of the biggest challenges to investors is understanding that dividends do not matter to your returns. Maybe you just haven’t understood , and he’s in fact telling the truth. As for stock buy backs being illegal until 1982. He was comparing how companies return capital to investors all the way to 2016. That’s 34 years they were legal to analyse the trend.
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Still irrelevant. Mature profits that produce profits can either pay a dividend or not pay a dividend. Focussing on dividends will exclude companies that are mature / profitable that don’t pay dividends. This leads to under-diversification.
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You forgot one part of the Warren Buffet quote. Everyone is ‘ignorant’ of what the future is bringing. Therefore we all should aim to diversify. Diversification is also a way to capture higher returns not just to lower non-systematic risk. Individual stock returns are positively skewed , as jack Bogle famously said , don’t look for the needle - buy the haystack. There are a small minority of investors and funds that beat the market. The important question is how they do it. If they do by being exposed to more risk like Buffet did then it’s nothing extraordinary, if they did if because they were lucky it also isn’t extraordinary. With the research we have on luck vs skill , you will find that hardly anybody beats the market based on their skill. Etfs create mediocre results? I guess it depends on the etf , not all etfs are created equal. But if you just wanted to keep it simple and invest in a broadly diversified, market weighted index tracker with a low fee and you held that asset long term you would have outperformed almost everybody who didn’t do the same. And that’s without any extra tilt towards individual risk factors! I wouldn’t call that mediocre results.
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@thomasd5488 best of luck to you ✌️
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No. Picking stocks is not rational because you will be under diversified , dividend investing is not rational because you will be under diversified. The same reason for both - they are not in conflict with each other. Investing in broadly diversified low few etfs is rational because you will not be under diversified. If is the investing path most likely to allow you to achieve your financial goals. Not pessimistic at all. Good common sense. I’m also not sure how you could say that someone who regularly says don’t time the market and stay the course is fear mongering.
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@fatrat92 he does explain that dividends are an important component of total returns, pointing that out is hardly a gotcha moment. His point is that they are not a useful indicator in determining which stocks will have good future returns. Just stating that demonstrates you haven’t paid enough attention. If you’re holding on to the assumptions of the dividend irrelevance theory (which he talks about simply to say where the argument starts and provide context - it is not his main argument) then I think there is a flaw in your thinking. The theory is there merely to explain what we see in the data, the argument isn’t hanging on the thread of whether its assumptions are true, what truly matters is the evidence. If you see a problem with the theory, that doesn’t mean the default position is to say dividends are in fact relevant. They need to be shown to be relevant which many have tried to do. Unfortunately when regressions are run and dividends are analysed as a potential factor for explaining returns they don’t have explanatory power in the data. It’s that simple. 🤷‍♂️ the dividend irrelevance theory is just a way to explain that, no academic claims that the assumptions are true in the real world. Bens argument isn’t hanging on the dividend irrelevance theory , it’s relying on the empirical data which has shown other factors such as size, profitability and value are what drive returns - not dividends. Knowing this , and ignoring the dividend irrelevance theory , how would you respond to this data and that argument? What is your own dividend theory to explain why dividends have low explanatory power (R squared) when running regressions for stock returns?
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@dakotadak100 if you have two companies with identical discounted future earnings - but one had $1 million in retained earnings and the other had $1 in retained earnings - which would you be willing to spend more for?
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@dakotadak100 the first reason you gave wasn’t a very good so I don’t expect the second reason to be any better.
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@dakotadak100 yes you’ve said already. YouTube unfortunately has issues with its comment section. Your comments arnt being deliberately deleted. Are you saying dividends themselves are less volatile - or that the share prices of dividend stocks are less volatile than other stocks? Either way it’s irrelevant.
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The risk is not the same. This is just the inverse of the good company / good investment fallacy .
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It’s not futile , this video isn’t saying dividends are bad and whatever you choose to do with them must also be bad - it’s just that you shouldn’t use dividends as a metric for choosing funds or stocks. Receiving dividends is likely inevitable if you’re going to be a long term investor into broadly diversified etfs anyways.
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