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  • Starting Your Child With $10,000 - Where I Would Invest [View article]
    As small cap value has been academically shown to produce alpha premium over 8 decades and therefore falls within the highest decile stock universes, a young investor can use a tactical asset allocation process within a Roth IRA using a low expense small cap value ETF in order to build assets. As small cap value tends to go "in and out of favor" over multi year sequences, the investor has time on their side and can patiently invest through many in favor / out of favor sequences, thus garnering the long range compounding and appreciation ultimately realized. As compounding is best in early contribution years, the first year contribution should be large, comparatively, then subsequent smaller and gradually increasing contributions are made.
    Further description here:
    May 26, 2015. 10:21 PM | Likes Like |Link to Comment
  • Lessons Learned From The Grand Canyon [View article]
    The odds of picking 5 stocks that will provide excess return above a benchmark over a multi decade sample may be 50 /50, as picking 1 brings the odds down below 50% ).

    The practicality of owning 5 stocks is unrealistic. Looking at a median of returns of much larger portfolios ( "large" being an investing premise to which prudent investing and many DG authors subscribe) and over a number of different metrics, , shows them falling somewhere in the mid to upper 10% range. This via a thorough analysis of 100 quality stocks chosen in 1993 table 1 here:

    A simple value stock universe / treasury bond strategy utilizing Fidelity Value ( FDLVX ) and Vanguard Long treasury ( VUSTX ) has produced alpha premium compared to DG with commensurate risk. An investor could use it as part of a diversified portfolio towards total return, with the stock "picking" strategy, and the attendant "clairvoyance" needed to pick the "right" individual future dividend growth leaders, being it's own part of the portfolio. It also provides diversity against possible idiosyncratic risk of heavily relied upon corporate "dividend" policy being slowly corrupted/degraded and dividend payouts / growth rates declining going forward; a concern recently voiced by Bob Wells and Stan Duckenmiller ....
    May 25, 2015. 11:09 PM | Likes Like |Link to Comment
  • Why You Shouldn't Put Too Much Weight On Dividends [View article]
    An investor could alternatively use a simple value stock universe / treasury bond strategy utilizing Fidelity Value ( FDLVX ) and Vanguard Long treasury ( VUSTX ). This has produced alpha premium compared to DG and eliminates the "clairvoyance" needed to pick the "right" individual future dividend growth leaders by just using two investment vehicles.
    May 20, 2015. 10:08 PM | 1 Like Like |Link to Comment
  • Warning: Don't Let Market Hype Cause You To Miss This Total Return Opportunity [View article]
    Not sure why a DG article would bring up general market valuation measures anyway as it most likely will not have any bearing on the core philosophy/behavior behind buying and holding a DG portfolio. An investor will either have the fortitude and resources to ride out market volatility or not.
    May 19, 2015. 09:39 AM | Likes Like |Link to Comment
  • The Truth About 'Sell In May And Go Away' [View article]
    Well done, except that it's too complicated for the average individual to make 2 transactions a year, it produced TOO much return, and FDVLX holds way too many stocks.
    We're supposed to make it easy on ourselves and curate a list of 20+ individual, quality dividend paying stocks:
    1) with div yields not above x %
    2) monitor them monthly to make sure that:
    a) the dividend yield, and the payout ratio don't go above / fall below X percent;
    b) the dividend isn't frozen or cut
    3) that they are companies with wide MOATs and low debt to equity ratios
    4) that we diversify amongst 12 + sectors ( except banks because they were risky in the 2008 debacle )
    5) that each individual issue's price is no more than 15 times average earnings of the past three years
    6) Moderate Ratio of Price to Assets
    7) Dividends are growing over X consecutive years and by X percent
    8) healthy intrinsic value V* = EPS x (8.5 + 2g )
    V = Intrinsic Value
    EPS = Trailing Twelve Months Earnings Per Share
    8.5 = P/E base for a no-growth company
    g = reasonably expected 7 to 10 year growth rate

    And after that, get 10.5 to 12.5% CAGR Total return over 20 years ( which is just fine for a humble, ordinary individual, no matter what their circumstances).
    May 17, 2015. 04:20 PM | 5 Likes Like |Link to Comment
  • How To Beat The Market With Sector Rotation [View article]
    No, I think you're putting up roadblocks using the wrong example. "Folks" should make an attempt to educate themselves in financial matters and in the use of empirically proven, low turnover, mechanical trading methodogies, and move from a "trading/gambling" mindset and to a "stewardship of assets for the long term" mindset. It can be further embellished by building up assets using low fee index ETFs within a tax deferred IRA or similar account. This is not easy as: 1) it does not come about by going to an "online trading academy", a "rich man, poor man event", etc. and 2) it requires discipline, and cognitive and emotional training.
    May 14, 2015. 09:49 AM | Likes Like |Link to Comment
  • 3M's Premium Is Unjustified And The Stock Looks Expensive [View article]
    Let's hope that the pension liabilities of these companies don't become a drag on earnings in good times or if the economy turns south
    ( GM recently took a $1 bill write off for it's pension troubles )
    May 13, 2015. 10:45 AM | 1 Like Like |Link to Comment
  • Stress Test For Dividend Growth Investors [View article]
    And a prospective investment, in these times of general market overvaluation ( at least as measured by the conventional valuation metrics"), better have a positive return on equity and low debt !
    May 11, 2015. 03:11 PM | Likes Like |Link to Comment
  • Stress Test For Dividend Growth Investors [View article]
    It feels eerily "unhealthy" when the one of the only investment alternatives is stocks ...
    May 11, 2015. 03:06 PM | 1 Like Like |Link to Comment
  • Learning From The Masters: Q&A Session With Chowder [View article]
    Much of this individual portfolio management depends on the inclination of the investor. Some investors may have an inclination and subjective, interpretational skill towards this fundamental research, screening, and detailed analysis of individual issue characteristics. Some may have inclination towards broader, "mechanical" tactical index ETF allocation strategies. For example, if an investor were to run a relatively simple moving average strategy on an index and bond ETF universe ( example here: ), it may be less time consuming and more suited to an investor's skill and cognitive process than the "fine tooth comb" type analysis that Chowder conducts. Plus, through the QQQ ETF, an investor would get exposure to and portfolio diversification with some of the best quality and ethically managed companies in the world. This also relates to some modern investment theory that recommends that, depending on one's age, a "young" investor should start out with "beta" ( small cap value ) and compliment with more conservative universes as they age.

    When I compared the performance of Chowder taxable portfolio (on the Project $3 Million blog, Feb 2012 - present ) with comparative starting values and monthly $350 contribution / share purchases using 1) portfolios comprising of the ETF's QQQ, VBR ( Vanguard Small Cap Value ) and 2) running the moving average strategy described above, I found that the QQQ and Small Cap Value outperformed.
    May 10, 2015. 03:06 PM | 1 Like Like |Link to Comment
  • Investor Who Is 55+ - Start With The End In Mind [View article]
    Equating dividend growth pcts. within a div reinvested portfolio to the total terminal value of assets on the last day of accumulation phase, doesn't tell the whole total return story. What investors in this scenario ( average $175K saved of investible assets for the average 55+ aged household; much of the current boomer demographic according to the stats ) need, is to "maximize" the total return in the asset base with a growth stock universe, then, one the first day of de-accumulation phase, build the income generating portfolio.

    Doubtful that many of the best quality dividend growth survivors will match their "heyday" returns of the 70's and 80's when their cap was smaller ( chart 16 below yellow line) yet, growth ( NDX/QQQ ) still looks promising ( chart 15 green line)
    May 9, 2015. 01:41 PM | Likes Like |Link to Comment
  • 3 Dangerous And Misleading Quotes From Buffett And Templeton [View article]
    I often feel that there's a contradiction to the "simple, down home, conservative, and prudent" image that gets portrayed. Buffet has made (sometimes oversized ) investment moves that were as exotic as moves that someone like Soros / Drukenmiller would have made and didn't represent textbook examples of prudent value portfolio management principles.
    Examples .. He held 3 stocks in 1987 and proceeded to put 30+% of the portfolio in KO into the 1990's. He also "shorted" the dollar in the early 2000's and used derivatives and sophisticated debt structuring during 2009 to invest in companies that were supported with TARP money ( would Graham have approved of this ?); not necessarily the best examples of, in his supposed investment creed, "well run companies with "responsible" management". These moves seemed more like "hedge fund" moves than "deep value" portfolio analysis moves and there also could have a little "luck" along the way ...
    May 6, 2015. 07:32 PM | Likes Like |Link to Comment
  • Investing In Leveraged ETFs - Theory And Practice [View article]
    What return do you get when the rebalance is quarterly ?
    May 6, 2015. 02:05 PM | Likes Like |Link to Comment
  • Deleverage Your Portfolio Before The Market Forces You To [View article]
    Good work .. Stan Druckenmiller recently brought up the same points about company debt issuance, dividends, and buybacks ...
    May 5, 2015. 09:46 AM | 3 Likes Like |Link to Comment
  • Mr. Valuation Disagrees With Henry Blodget: 'It's A Market Of Stocks' Is Not A Meaningless Phrase [View article]
    Yeah, but no one seems to want an extra $1.2M with less fuss ... The phenomenon must be under some form of "social identity theory"

    or the skepticiscm towards simplicity
    May 5, 2015. 09:25 AM | 2 Likes Like |Link to Comment