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Fourth Quarter 2015

  • What does the market value in most cases depend upon? (answer below on this page)

• The main reason dividend growth investors run our own income 'fund' is because we can perform much better: ♣ We can concentrate on superior dividend growers - funds over diversify with hundreds of stocks, a lot are losers. ♣ In aggregate our income rises each year - most funds do not increase distributions annually. ♣ Dividend growth investors pass all the income along to ourselves - some funds don't. Imagine! ♣ We reduce risk with at least fair price purchases by using yield, Graham value and cape - most funds are always fully invested. ♣ We are disciplined and patient - managers often follow the crowd to keep their job. ♣ We hold for the growing yield - they trade (eight months is the average holding period with funds). ♣ We do not pay capital gains tax on profit we do not receive - fund holders do. ♣ We do not pay annual fees - most fund owners pay over 2% per year.

  • “The classic 60/40 balanced portfolio is not true diversification. Indeed, one of the best-kept secrets of the investing community is that stock market return so dominates the risk of a 60/40 portfolio that the portfolio exhibits a 98–99 percent correlation with stocks!” Rob Arnott

Answer: According to Ben Graham in his 1934 book Security Analysis (Chapter 7), the market value in most cases has depended primarily upon the dividend rate. Don't believe it? You will have trouble being successful at investing. Why? You will be depending upon someone else buying your piece of paper (stock) at a higher price. A stock which does not pay a dividend has no intrinsic value. Don't believe it. That's your problem. Sorry. The dividend rate is initial yield plus dividend growth. This is what builds wealth. Would you purchase an apartment building in which the tenants do not pay rent?

fourth_quarter_2015.1449999846.txt.gz · Last modified: 2015/12/13 04:44 by tom
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