Karl Popper And Dividend Growth Investing

by: Roger Nusbaum

I read a couple of good articles at Seeking Alpha that were each about the role that dividend growth investing can potentially play in the withdrawal phase that comes with retiring. I have no quibble with either article, but as I have said before, it is not my preference to own an entire portfolio of stocks with so many overlapping attributes. One of the articles mentions owning all mega cap dividend growers. I happen to think that is not ideal diversification, but that really boils down to people's individual preferences.

The comments on both articles are, perhaps, more interesting. We've talked before about what reads like religious sort of devotion about how great the strategy is, how it cannot fail and also a big thread on why more advisors don't advocate for the strategy-- the group seems to think it is because advisors can't get paid. There were also comments about advisors trying to promote the idea that individuals can possibly do it by themselves.

To the idea of not being able to fail; that reminds me of Karl Popper who said that all the positive outcomes in the world cannot prove something to be true but it only takes one negative outcome to disprove something.

I have no idea if dividend investing will ever have some sort of event that is not reasonably predicted (the definition of a black swan) that ends up damaging a lot of people. But the idea that I think I am reading that it can't happen is not something I would want to hang my financial hat on. I hope the folks that continually comment on all of the countless DGI articles spend some time reading content that challenges their opinion instead of confirming it. If you love some investment strategy, and you only take in content from other people who also love that same strategy, you are learning less than you could be.

As far as the advisor bashing, it makes for an interesting group think. First, like any profession there are plenty of people who are unethical, incompetent or both, but of course there plenty who are both ethical and competent. I have always maintained that for most people, investing on their own boils down to the time that they are willing and able to devote to the task. A big blind spot in these comment threads on this topic is that those folks are part of a very narrow slice of the population that is more than willing to spend the time, a lot of time. The comments read like they can't conceive of someone not wanting to spend a lot of time on their portfolio.

It is people who simply don't want to spend the time that are candidates to hire an advisor. Another swathe of people who might hire an advisor are people who wonder whether the older version of themselves will be able to make investment decisions as well as the 50 year old version. Our firm also has clients who manage some of their own and hire us for a portion.

One final thing I will add, that I'm sure will get me flamed if this post makes it over to Seeking Alpha is a lot of the commenters display some very textbook cognitive deficits and do so repeatedly. The point is not to dump on them or imply they can't manage their own portfolio. Many of the usual suspects are clearly very smart and very successful but I think the group would be well served if some of their own tried to promote a more constructive analysis of the strategy as opposed to something like and here's another reason why dividend investing is so great!