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David Jackson

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Latest  |  Highest rated
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    giorgiolb, John Bogle would say that everyone would indeed be a lot better off in aggregate if we did all buy the indexes. As to which indexes go in the basket and with what allocations, that might be a function of your financial needs and risk tolerance. Retirees, for example, would skew more to fixed income (but maybe not in the current low interest rate environment), and young children to equities.
    Feb 8 07:22 AM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    mbkelly75, thanks for your kind and informative comment. I hadn't seen Peter Lynch's 20 Golden Rules, but his approach to diversification reminds me of Bill Miller's. Bill Miller, who is one of the smartest investors ever, wrote explicitly that diversification is the enemy of stock picking. Assuming you can rank your top picks, why would you want to buy your 20th best pick, instead of just your top 10? And as Peter Lynch says in your quote, who has time to really understand more than a handful of stocks?

    In Bill Miller's case, he got hit hard when financials imploded, due to his lack of diversification. Roger Nusbaum wrote an article about what went wrong (http://seekingalpha.co...) with the following insight:

    "I have no idea what his process is but I think a big part of a potentially successful process needs to include mitigating the consequences for when we are wrong. Avoiding 32% in one sector would be a good place to start."

    In other words, while concentration leads to fantastic results when we get it right, we also need to worry about what happens if we get it wrong. In that case, a concentrated portfolio can be disastrous.

    On a personal note, this is a subject of great interest to me. In my investing career, I've made extremely concentrated bets, including on small cap stocks and some private companies. Overall, the returns have been great. But I now look back with horror at the risks I took. If I hadn't been so lucky, the results could have been horrendous.

    Was it Warren Buffett who said that the number one rule in investing is not to lose money?
    Feb 7 06:21 PM | 2 Likes Like |Link to Comment
  • Equal Weighted Over Value Weighted: RSP Vs. SPY [View article]
    I'm glad you're on top of this. There's a lack of good literature on rebalancing, including a comparison of various rebalancing strategies. When I wrote the chapter on my online ETF Investing Guide a few years ago (http://bit.ly/yGSUwT), there was almost no academic literature on rebalancing.
    Feb 7 05:24 PM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    poortorich, I wish it was that easy. The mutual fund industry is full of professional stock pickers who "have both knowledge and temperament to do this", but mutual funds rarely outperform their benchmarks over extended periods.

    Some people can certainly do better picking stocks, but many of us don't adequately check our after-tax, after-fees performance and compare that to indexing.
    Feb 7 04:42 PM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    Robert, 5 years might not be enough, because it's been an unusually low (real) interest rate environment compared to historical norms.
    Feb 7 04:17 PM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    birder, you're right to point out that I didn't provide data to back up the claim in the article. There's been a lot of research evaluating various equity strategies historically. As far as I know, they've all shown that value strategies outperform, particularly small cap value.

    You can find the data in books and articles. "Triumph of the Optimists" presents the data elegantly in book form, but it's expensive. William Bernstein covers the data in "The Intelligent Asset Allocator", but that was published a while ago. (Perhaps it's been updated and republished since I bought my copy.) David Swenson's book, Pioneering Portfolio Management, is outstanding.

    For articles, Larry Swedroe (http://bit.ly/A14Okp) basis his approach to investing solidly on the data. Some of the index and ETF providers such as S&P, iShares and SSgA present data on their websites. WisdomTree is the largest provider of dividend ETFs and has some interesting papers on its website about the performance of dividend investing as a strategy, particularly if you're sensitive to what isn't being said.

    Hope that's helpful.
    Feb 7 04:15 PM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    Thanks Robert. I was surprised that you'd be comfortable with a 10-stock portfolio, but now it's clear you were referring to a "satellite" portfolio of 10 stocks over a "core" portfolio that's much more diversified.

    If you were convinced that we're heading into a secular bear market in equities (not saying you are, but "if"), and you also felt that Treasuries were in a bubble, where would you invest?
    Feb 7 01:49 PM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    J.A, I think there are two issues here:
    (1) Do investors think about asset allocation? See http://seekingalpha.co...
    (2) Once you've decided how much exposure you should have to stocks, do you get that exposure with index funds or individual stocks?

    I'm glad that going the individual stock route is working well for you. Since you mentioned Buffett, it's interesting to note that he himself recommends that most investors use index funds.
    Feb 7 01:06 PM | 1 Like Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    Thanks for linking to John Hussman's commentary. He's outstanding.
    Feb 7 12:48 PM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    Thanks for your comment, Robert.

    How far would you take "different strokes for different folks"? In this specific case, where there's a clear goal to maximize total return over a 35 year period (or a 10 year period as Norman Tweed states in his comment above),

    (1) How many stocks (concentration) would you set as a minimum? Would you encourage clients to hold only 10 stocks in a portfolio?

    (2) If your client was convinced we were heading into a secular bear market, would you view that as consistent with being 100% in equities?
    Feb 7 12:44 PM | 0 Likes Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    La Marque, you're right - many 401Ks don't have good options. I'm hoping that many 401Ks will start offering low cost ETFs soon.

    I also like GARP, but if you're really expecting a secular bear market, it might not be sensible to be in equities at all.
    Feb 7 12:09 PM | 1 Like Like |Link to Comment
  • Investing For The Long Term: Dividend Growth Stocks Or S&P 500? [View article]
    Thank you for commenting, Norman. Some questions to consider:
    - Are 10 positions enough to diversify risk? If one of those stocks blows up, that's 1/10th of the portfolio. If two blow up, that's a fifth of the portfolio.
    - Are one or two foreign stocks enough to give you exposure to faster growing economies?
    - If you really are expecting a secular bear market, then are equities the right place to be?

    I wish you lots of success with whatever you choose!
    Feb 7 12:08 PM | 1 Like Like |Link to Comment
  • Asset Allocation 'Vs.' Dividend Growth Investing: A Handy Comparator [View article]
    Norman,

    I found your comment so thought provoking that my reply turned into an entire article. I hope you enjoy it, and as always am interested to hear your thoughts on it:

    http://bit.ly/waR3qU

    - David
    Feb 7 10:27 AM | 1 Like Like |Link to Comment
  • Why I'm Selling My Target Date Funds [View article]
    Yup - lower expenses, better control.

    Really enjoyed the article, BTW - it was excellent. It's so refreshing when people discuss their mistakes. I bet I wasn't the only reader of your article thinking that my investing mess ups are a lot worse than yours :-)
    Feb 6 04:00 PM | 2 Likes Like |Link to Comment
  • Why I'm Selling My Target Date Funds [View article]
    Three potential problems with target funds:

    1. Expenses are high, often because the target funds charge a wrapper fee and own other funds for individual asset classes which themselves charge a fee. So you're paying fees on fees.

    2. If the funds hold cash, that will be a drag on your performance, and you're paying a steep management fee on the cash.

    3. Target date funds from a single provider can't shop around for the best index funds for each asset class. So you get a sub-optimal set of funds inside the target fund.
    Feb 6 03:49 PM | 3 Likes Like |Link to Comment
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