Mike

Mike

I agree about not beating the market – I have no illusions about doing that. I’m not saying it can’t be done but I feel it’s a safer bet to stick with the market which is why a good portion of my portfolio will be passive (soon) etfs.

Mike

2 we agree

3 Dividend stocks – I agree I am using this term very loosely – I don’t have an exact definition but the Mergent’s Dividend Achievers list is exactly the kind of stock I’m referring to.

4 I hope you don’t expect me to start using specifics on this site! Way too much work!
I said that I think they “probably” won’t outperform the market – I don’t know either way but I think it’s unlikely – I’m not suggesting they will underperform the market either.

By “market” I mean the TSX composite index with respect to Canadian stocks and the S&P500 for USA stocks.

To clarify #4 – I believe in the efficient market hypothesis so when a certain asset class outperforms for a period of time, it’s not unreasonable to think that this class could underperform in the future. The Canadian banks are a good example – they are probably among the best investments over the last 10 years. This run could go for another 30 years or it might not, but eventually everything returns to the mean.

Mike

Regarding THE PAST – It’s one of those things though where everyone will always tell you that the past does not matter, but let’s face it…what else do we really have? If for the past 40 years dividend stocks had returned 2% per year, I wouldn’t be invested in them. When you are analyzing mutual funds do you ever glance at past performance? It may not be the deciding factor, but it needs to be strong.

What makes sense to me is that as long as the earth turns, companies will have a strong incentive to make more and more money every year. I think involving myself in that system by owning small parts of good companies is wise, since we have this free market, share ownership society. Short of owning my own small business, it seems like a logical way to grow money. It has worked in the past and will work in the future.

I sometimes wonder if the obsession with ‘beating’ the market is messing people up. I am pretty happy with my returns – I’m on track to retire when I plan to (although I would like to do it earlier) and if my portfolio keeps growing at its moderate pace I’ll be fine. I may not beat the market, but then again I’m not a professional investor. My goal is to meet my goals, not to continually outperform gigantic mutual funds with full-time custodians.

1.Even if it is true (where did you obtain this information?) that the long term average dividend increases for the universe of dividend stocks have been 5%; that’s only half the story when referring to the total return of stocks long term. If I am an investor I care about the worth of my piece of paper not just what that paper is paying me annually.

2. I totally agree with your point about real estate. The recent past often clouds the mind. You must look long term and across geographies to get and accurate picture. Demographics must also be considered. What is the demand for home ownership now vs. last year and vs. 20 years ago – why is this the case…interest rates..demographics..etc.

3. I think using the term ‘Dividend Stocks’ to refer to a general asset is not accurate. For example companies like General Electric and Johnson and Johnson have been raising their dividend aggressively for much, much longer than 10 years. Proving that dividend increases have been excessive in the last 10 years as compared with a length of time before that would be a task in itself where one would have to look at dividend payers from Canada, U.S., and globally across all sectors.

4. Your statement ‘Canadian dividend stocks probably won’t outperform the market over the long haul’….sounds like you are making a bet on that. Who’s to say that they aren’t in the middle of a long 3o year run where they outperform the market. By the way, what’s ‘the market’?