Sorry for late reply, I have been in moving mode.
You wrote"
I don't think I took it the wrong way, or denied the market could fall more.
A year ago as the market was hitting new highs, buying preferreds instead of looking to buy an "undervalued"
dividend growth stock, was caution. Don't pretend to know when a pullback would happen, or the depth, but
pretty sure anyone who has been in the market any length of time, knew it would come.
I'd be curious how others use caution, or if they do.
What would you say an investor like David Van Knapp should do as far as caution? Where does caution fit
with DGI? I think he does a great service. He prides himself on buying "undervalued" dividend growth
stocks. His only defense lately is to sell some lower yields for higher yields, and step out to some extremely
high yield with some QYLD. When the market really left him in the dust, he said it was because of the
FANG stocks and a few other tech stocks were going crazy. Now that they have fallen big, he still hasn't
caught up. He has more income than he had last year, which evidently makes him a winner, although once
again, he could buy more income if he had invested in SPY. Jmho, and regardless how long it takes, when
the market recovers, he is going to need binoculars to see it, and it will be even more obvious he should
have just bought SPY.
For the record, end of August:
DVK $168,315
SPY 3986
I have a friend who manages money professionally and her sweet spot is DGI. She usually ranks in the top 5%. She uses about 10 metrics in order to buy and very strict price limits so that she usually buys the better stocks when there is an overall market crash. She is also good at dumping stocks when the metrics sour.
I consider high yield to be higher risk than DGI. There is a market reason for higher yielding stocks or bonds. There are several risks and one is inflation / interest rate. Interest rate increases will decrease the value high yielding securities. There is also the potential risk of default.
In the market, one investing is potential risk. DGI when taken from a portfolio perspective is lower risk than many other investment styles. Lower risk generally assumes lower potential profits. If you invest in VDs or treasuries, your risk of principal loss is nil albeit you may be paid back with lower value dollars.
Most DGI investors, do not follow the practice strictly. They diversify into non dividend paying stocks, high yield and even some very speculative securities.
The only metrics that matter are long term. The only time that I marked my portfolio against popular averages, it was over a 10-year span and because of a divorce. I beat the S&P over that period although some years the S&P was on top. I care more about long term performance as opposed to quarter to quarter fluctuations.
You are probably right, just buying SPY is probably the best approach for many investors. I will not argue that point. Investing is very personal, and many people are only comfortable with minimal risk. My father never trusted the stock market.
How do you manage risk> A lot of ways, including selling covered calls, buying puts, liquidating a portion of portfolio, shorting, diversification. Land is a great hedge. |
