Passive income from dividends. Is it a mistake?

[Zoot Allures]

In an article in the Globe & Mail, Benjamin Felix claimed focusing on dividend stocks would prevent from getting an optimal return and that index ETF investing is a lot better. Ben's says focusing on dividend investing leads to poor diversification.

Are dividends taxed 100% assuming you made the minimum $ to get into higher tax bracket?
While capital gains have higher taxes they are taxed 50%

 

[NotADcotor]

In an article in the Globe & Mail, Benjamin Felix claimed focusing on dividend stocks would prevent from getting an optimal return and that index ETF investing is a lot better. Ben's says focusing on dividend investing leads to poor diversification.

Are dividends taxed 100% assuming you made the minimum $ to get into higher tax bracket?
While capital gains have higher taxes they are taxed 50%

Not in Canada, we have the dividend tax credit which as Borat would say is very nice.

I focus on dividends, I get enough income spend about a third of it on prostitutes and to waste the other 2/3 on shelter, food, transport etc. Works fine for me

If dividends were ever cut in half [which happened with BMO with the combination of WW2 and the Great Depression when payout ratios were much higher, or National in the 80s or Manulife more recently I'd have enough wiggle room to make due.

This way I don't have to worry about what happens in the stock market, and if dividends are being cut by the major banks [see BMO above] I'd be even more in a world of shit if I was invested in the general market and having to sell shares at pennies on the dollar to cover expenses. Doesn't hurt that according to other globe and mail commentators, bank stocks at least serve as a proxy for the greater market as they have their hands in everything so it is quasi diversified

Also these random asshats say all sorts of shit and much of it is shit.

 

[Zoot Allures]

Not in Canada, we have the dividend tax credit which as Borat would say is very nice.

Ben Felix is Canadian speaking from Canadian perspective. He is not a " random asshat "
nor is Warren Buffet who will buy a dividend paying company but only because of sound
fundamentals not to accrue a dividend as dividends paid over years is the
mark of a sound company

A index of banks seems safer than buying one stock

Why only buy banks ? Any company that has a history of dividends seems like a solid company and the
tsx aristocrats index does just that

Why not bonds instead? How do their tax rates compare to dividends?
They fall much less than stocks and you still get the yields.
They also rise less in a bull. And then there is the ultimate safety of GICs which seem
to pay enough to cover inflation but that is it

I am leaning towards dividends for needed monies and the rest goes to non dividend indexes
which is the majority of stocks

If you DRIP what happens to dividend tax credit ?






The Canadian Dividend Tax Credit is a tax benefit designed to reduce the amount of taxes an individual pays on dividends received from Canadian corporations. Here’s how it works:

1. Dividends and Gross-Up:
   • When you receive dividends, the corporation has already paid taxes on its profits. To account for this, dividends are “grossed up” by specific percentages.
   • For eligible dividends, the gross-up rate is 38%. For non-eligible dividends, it’s 15%.
   • For example, if you receive $20 in eligible dividends, you’ll report $27.60 ($20 × 1.38) as taxable income.
2. Tax Credit Calculation:
   • The federal government grants a dividend tax credit to offset the grossed-up amount.
   • The credit is non-refundable and helps reduce your actual tax payable.
   • Let’s say you have an effective tax rate of 25%:
     • Total grossed-up dividends: $575 ($250 eligible + $200 non-eligible)
     • Tax on this income: $575 × 0.25 = $143.75
     • Federal dividend tax credit:
       • Eligible dividends: $345 × 15.0198% = $51.82
       • Non-eligible dividends: $230 × 9.0301% = $20.77
     • Reduced tax liability: $143.75 – $72.59 = $71.161.
3. Claiming the Credit:
   • You claim the dividend tax credit on your income tax return.
   • Remember that there are both federal and provincial tax credits available, and additional credits may apply based on your province of residence.

In summary, the dividend tax credit helps level the playing field by accounting for corporate taxes and ensuring fair treatment for all taxpayers

 

[Cbr20152012]

His video is called “the irrelevance of dividends” - silly title and hard pass accordingly.

Comment about diversification sounds correct, but focusing on one thing seems a flawed premise from the start anyways. But also, how diversified is the SP500 these days - how much value is tied up in 7 companies and would you really want to buy now?

You are taxed when you receive the dividend - what you do with said dividend (cash / purchase / drip purchase) is irrelevant to the taxation of the dividend.

 

[NotADcotor]

Ben Felix is Canadian speaking from Canadian perspective. He is not a " random asshat "
nor is Warren Buffet who will buy a dividend paying company but only because of sound
fundamentals not to accrue a dividend as dividends paid over years is the
mark of a sound company

A index of banks seems safer than buying one stock

Why only buy banks ? Any company that has a history of dividends seems like a solid company

Why not bonds instead? How do their tax rates compare to dividends?
They fall much less than stocks and you still get the yields.
They also rise less in a bull. And then there is the ultimate safety of GICs.

I am leaning towards dividends for needed monies and the rest goes to non dividend indexes
If you DRIP what happens to dividend tax credit ?
...

In investments, they are ALL random asshats with their own and diverging views. There are some basics and even then you can find someone to shit all over it.
As for Buffet, he is going for maximum capital generation through companies who he has time time and inclination to research the fuck out of. I just want passive income, that generates enough income with a buffer just in case [and I can spend that excess on coitus] I'll let Buffet do him, I'll do me. But it isn't a mistake. There are people who shit on the idea of passive income as a concept, anyone who does is wrong. It's a tool much like an AK-47. Not exactly the sort you want when walking to Timmies but it is very good for what it does. So anyone who shits on passive income form dividends or calls them irrelevant is a misinformed asshat.

Actually buying the worst bank of the year either by performance, PE ratio or the one with the highest dividend yield historically works better than buying all the banks, the same idea behind the dogs of the dow strategy. The Canadian banks are sort of in the same business and all heavily regulated and reversion to the mean is a thing.
I explained why banks in my post

Ah shit, I misread your post about dividend tax rates as a statement not a question. Sorry about that.

Bonds? Seriously? Bottom yields lower than dividend return, no growth in interest. With bank dividends at least you can baring some fubar event expect them to grow at a rate exceeding inflation in the long run, and even if they don't I got wiggle room.

I avoid Drips outside of the TFSA [and RRSP if I had one] I learned my lesson with the horror of doing my taxes with the REITs, granted the banks do all the math for you these days and the IIRC T5008 forms but still, I prefer to keep it simple. Also you get the dividend, the DRIP buys stocks, then the tax bill comes due, same as normal dividends. ALso the dividends outside of my TFSA I actually use so I can't be buying more shares them them. Until escorts start taking shares as payment.
Interest is also taxed at 100%.

What I do isn't for everyone, but I get my dividends over the year, I pay almost no tax on it [just the health levy unless I got capital gains] and I spend it. Market goes up, market goes down, I have no fornication to give. As long as the dividends keep coming.

I must admit, if Donald "Smoot-Hawley" Trump does what he is talking about doing with tarrifs, I'd be tempted to get out of the market all together for a few years.

 

[NotADcotor]

His video is called “the irrelevance of dividends” - silly title and hard pass accordingly.

Comment about diversification sounds correct, but focusing on one thing seems a flawed premise from the start anyways. But also, how diversified is the SP500 these days - how much value is tied up in 7 companies and would you really want to buy now?

You are taxed when you receive the dividend - what you do with said dividend (cash / purchase / drip purchase) is irrelevant to the taxation of the dividend.

IIRC most of the returns on the Dow is generated by a few tech companies, which is fine, but I don't want to be that much into tech because these things have a habit of changing really fast both ways.

Only issue with DRIPS is that if it isn't sheltered, it's a beast if you have to caluclate your cost base for taxation purposes. RBC does it for me, but there was a time... still keeps me up at nights.

 

[themaxx]

I'm going to be 60 in a few weeks. I graduated from York U wayyy back in the 1980's, started my career with a major Canadian Investment Dealer when the "4 pillars" was still a real thing, spent time on Bay St, Wall St, the City, and Central (pre 1997, of course) after one of the Big 5 gobbled us up, and walked away from it all just after 9/11 (I was on a call with a buddy from Cantor Fitz when the call dropped around 8:45 that morning, I started complaining that the "F&ckin C0c#sucker" hung up on me" and within a few minutes we started getting the news of what had happened).
I've been living off investment income. mainly Canadian dividends, some REITS and some fixed-income since that time, occasionally working a few years off & on, in a few different skilled trades, mainly because I enjoy working (its especially fun when you don't need to work for money).
I have a B.Comm and a CFA designation, and made a very good income while working in the industry.
In no particular order, here's what I've learned:

1) I spent time as a trader. I did fixed-income, and then derivatives, and finally equities. Trading is a mugs game, its only a matter of time before you're on the wrong side of the market and then you're on the sidewalk while HR brings you a box holding the contents of your desk. Thats what happens when its the firms money; when its your own money I couldnt imagine what it could mean. Lesson 1 - stop trading, start investing. If you don't know the difference, you shouldnt be trying to do either.

2) In some of the more senior positions I'd held, I had system access to view client accounts, and watched billions of dollars disappear from thousands & thousands of accounts from "investing" in garbage - junk bonds of the mid-to-late 1980's, Bre-x, Nortel, Enron. The list is endless and will be neverending. Lesson 2 - educate yourself! Read a book on the subject.....a real book. A college or university level text book. Something by Graham and Dodd, or required by the CFA or CMA or CGA or Actuarial Foundation. If you're not willing or able to put in the work, or do put in the work but still don't quite get it, don't risk your wellbeing or money by trying this on your own.

3) If you can't do it on your own but still insist on doing it, get assistance from a professional. Wealth management is a HUGE profit center for those businesses that offer it. Dont delude yourself they are looking after YOUR best interest, because, unless you already know what "Fiduciary duty" means, its unlikely a firm is going to tell you. All banks, insurance co's mutual fund co's, etc etc have someone who likely has some title and/or designation, but that person is a salesperson for that company and have a product to sell you. I recently went to open an account for a family member, with low six-figure funding (from me!), and we were recommended an ETF made up of mutual funds (or mutual fund made up of ETF's) all managed by that particular firm. The selling point was low fees and diversification, two buzzwords important to this type of selling Anyone care to guess our reaction to this sales pitch? Lesson 3 - same as lesson 2. Educate yourself.

4) Lesson 4 - heres the payoff for anyone whos stuck it out this far. Its what Ben Graham teaches, Buffett preaches, banks practice and you must also. Unless you're already extremely wealthy, its extremely unlikely that you're going to get in on the ground floor of the NBT (next big thing), and its equally unlikely you'll find it yourself on the TSXV. If you have, say, $10K and think you're ready to start investing on your own, buy 1 QUALITY company and HOLD for the long term. Repeat this process as money accumulates and buy a different QUALITY company next time. Repeat as necessary. With equities, you are buying a business. I doubt anyone here would buy an actual business without somehow paying themselves while owning it - be it salary or dividend, instead hoping that you'll make your money buy selling it for more than you bought it.

Its now 3:00pm and I've got stuff to do, so Good Day and Good Luck to all!

 

[Ceiling Cat]

The majority of investors do not know what they are doing. If you are able to read a chart and predict the direction of the market you can do better than just a passive income from dividends. I do have dividend stocks to keep my reserves earning. I also have a portion of my portfolio in short term buys. If you can master the moving averages you can earn 10% plus returns a month. I do a might better than that monthly.


themaxx,

Would you agree with these statements :

- Wealth Management will only get you the safe and moderately sure investments at minimum risk.

- The NBT ( Next big thing ) is very rare and you can actually trip over it and not know it. I prefer the next small thing, If you are able to read a chart and can catch the next 5-8% move up in a stock, is it not better to catch many next small things than to catch the next big thing and watch it go up only for it to come back down. I can catch the 2-3% aristos and the 5-8% temporarily strong gainers 8 or 9 times out of 10. Many small gains are better than one big gain.

A personal observation.

The brokers of yesteryear were merely sales people to bring in people to put their money into the accounts of the firm. The brokers were offered the research and resources of the firm that were not available to the average Joe. With the commissions they made, the brokers grew their accounts. Even though these resources are available via internet today, the average person has to know how to use them to be successful.

 

[Zoot Allures]

In investments, they are ALL random asshats with their own and diverging views. There are some basics and even then you can find someone to shit all over it.
As for Buffet, he is going for maximum capital generation through companies who he has time time and inclination to research the fuck out of. I just want passive income, that generates enough income with a buffer just in case [and I can spend that excess on coitus] I'll let Buffet do him, I'll do me. But it isn't a mistake. There are people who shit on the idea of passive income as a concept, anyone who does is wrong. It's a tool much like an AK-47. Not exactly the sort you want when walking to Timmies but it is very good for what it does. So anyone who shits on passive income form dividends or calls them irrelevant is a misinformed asshat.

Actually buying the worst bank of the year either by performance, PE ratio or the one with the highest dividend yield historically works better than buying all the banks, the same idea behind the dogs of the dow strategy. The Canadian banks are sort of in the same business and all heavily regulated and reversion to the mean is a thing.
I explained why banks in my post

Ah shit, I misread your post about dividend tax rates as a statement not a question. Sorry about that.

Bonds? Seriously? Bottom yields lower than dividend return, no growth in interest. With bank dividends at least you can baring some fubar event expect them to grow at a rate exceeding inflation in the long run, and even if they don't I got wiggle room.

I avoid Drips outside of the TFSA [and RRSP if I had one] I learned my lesson with the horror of doing my taxes with the REITs, granted the banks do all the math for you these days and the IIRC T5008 forms but still, I prefer to keep it simple. Also you get the dividend, the DRIP buys stocks, then the tax bill comes due, same as normal dividends. ALso the dividends outside of my TFSA I actually use so I can't be buying more shares them them. Until escorts start taking shares as payment.
Interest is also taxed at 100%.

What I do isn't for everyone, but I get my dividends over the year, I pay almost no tax on it [just the health levy unless I got capital gains] and I spend it. Market goes up, market goes down, I have no fornication to give. As long as the dividends keep coming.

I must admit, if Donald "Smoot-Hawley" Trump does what he is talking about doing with tarrifs, I'd be tempted to get out of the market all together for a few years.

Anyway, what do you think of this thought

Buy index funds, with no consideration of dividends, because of three reasons

1 they are free compared to mutual funds which give no value in return

2 stock picking is a horrible idea as you assume you know more than the market, which you do not

3 if you buy only dividend stock you are factor investing and the factor dividend stocks has no history of beating the
market like the factor of small caps do, for example

If market plumments switch some index money into a dividend index as you are selling low but also buying low so that is a wash then live of those dividends until market rebounds

Reasoning is dividends underperform the market as a whole because of lack of diversification IE you are ignoring over half the market -
so you can always sell stock when needed but by switching to dividend stock when market is in bear you are not selling low

But now that I think of it, dividends force you to sell when market is low because a dividend is a selling of your stck as a $1
dividend means stock has lowered b $1 so maybe that is not a good idea

But they also force you to sell when market is high so that is a good idea

but my idea means market timing which cannot be done

So why not ... oh nevermind ....

This is too complex for me LOL

 

[Zoot Allures]

1) I spent time as a trader. I did fixed-income, and then derivatives, and finally equities. Trading is a mugs game, its only a matter of time before you're on the wrong side of the market and then you're on the sidewalk while HR brings you a box holding the contents of your desk. Thats what happens when its the firms money; when its your own money I couldnt imagine what it could mean. Lesson 1 - stop trading, start investing. If you don't know the difference, you shouldnt be trying to do either.

100% as those who think they know more than the market suffer from dunning kruger effect

2) In some of the more senior positions I'd held, I had system access to view client accounts, and watched billions of dollars disappear from thousands & thousands of accounts from "investing" in garbage - junk bonds of the mid-to-late 1980's, Bre-x, Nortel, Enron. The list is endless and will be neverending. Lesson 2 - educate yourself! Read a book on the subject.....a real book. A college or university level text book. Something by Graham and Dodd, or required by the CFA or CMA or CGA or Actuarial Foundation. If you're not willing or able to put in the work, or do put in the work but still don't quite get it, don't risk your wellbeing or money by trying this on your own.

I agree that picking stocks esp junk bonds , derivatives, going short etc is a horrible idea but investing is easy , just buy index funds

3) If you can't do it on your own but still insist on doing it, get assistance from a professional. Wealth management is a HUGE profit center for those businesses that offer it. Dont delude yourself they are looking after YOUR best interest, because, unless you already know what "Fiduciary duty" means, its unlikely a firm is going to tell you. All banks, insurance co's mutual fund co's, etc etc have someone who likely has some title and/or designation, but that person is a salesperson for that company and have a product to sell you. I recently went to open an account for a family member, with low six-figure funding (from me!), and we were recommended an ETF made up of mutual funds (or mutual fund made up of ETF's) all managed by that particular firm. The selling point was low fees and diversification, two buzzwords important to this type of selling Anyone care to guess our reaction to this sales pitch? Lesson 3 - same as lesson 2. Educate yourself.

100% . Most mutual funds are run by banks and do not beat the market, after they grab 2.5% they will not match market. They just have smoke and mirrror show given by a salesman, not an advisor LOL, to make it appear they do while extremely cheap etf (index funds) guarantee to match market

4) Lesson 4 - heres the payoff for anyone whos stuck it out this far. Its what Ben Graham teaches, Buffett preaches, banks practice and you must also. Unless you're already extremely wealthy, its extremely unlikely that you're going to get in on the ground floor of the NBT (next big thing), and its equally unlikely you'll find it yourself on the TSXV. If you have, say, $10K and think you're ready to start investing on your own, buy 1 QUALITY company and HOLD for the long term. Repeat this process as money accumulates and buy a different QUALITY company next time. Repeat as necessary. With equities, you are buying a business. I doubt anyone here would buy an actual business without somehow paying themselves while owning it - be it salary or dividend, instead hoping that you'll make your money buy selling it for more than you bought it.

Here is where I disagree with your experience and wisdom


Buffet says the brokers who can beat the market he can count on one hand and he has been
in this business before they invented the wheel

He also does not say buy one solid company and hold, that is what he does not you !!!!

You buy all the companies, not just one, in an index fund or ETF then hold, that is exactly what Buffet says
along with Jack Boogle who invented index funds through Vanguard

Google their advice

 

[NotADcotor]

Anyway, what do you think of this thought

Buy index funds, with no consideration of dividends, because of three reasons

1 they are free compared to mutual funds which give no value in return

2 stock picking is a horrible idea as you assume you know more than the market, which you do not

3 if you buy only dividend stock you are factor investing and the factor dividend stocks has no history of beating the
market like the factor of small caps do, for example

If market plumments switch some index money into a dividend index as you are selling low but also buying low so that is a wash then live of those dividends until market rebounds

Reasoning is dividends underperform the market as a whole because of lack of diversification IE you are ignoring over half the market -
so you can always sell stock when needed but by switching to dividend stock when market is in bear you are not selling low

But now that I think of it, dividends force you to sell when market is low anyways so maybe that is not a good idea

But they also force you to sell when market is high so that is a good idea

but my idea means market timing which cannot be done

So why not ... oh nevermind ....

This is too complex for me LOL

What you buy should depend on what you are looking for. Some people shouldn't be in the market at all. If every little move and shake will cause you to stroke out, don't do it.

1: Index mutual funds and ETFs are not free, just have a lower management expense ratio, much lower. BTW you are comparing actively traded mutual funds vs index mutual funds [and then you have ETFs] the two former are still mutual funds.
2: Stock picking at least for seeking capital gains is, well even the experts don't beat the market so what chance do you have. Yes I select the stocks I own, but I am only interested in the dividend stream, and that is a much simpler process. I am also not trying to beat out anyone. Again different strokes for different folks. If you are seeking gains, indexs either Mutual Funds or ETFs are the way to go. Or just put all your money in Dutch Tulips like a boss.
3: If that's important to you, fine. It isn't for me.
4: Again it's been said that Canadian Banks are a proxy for index funds because they are into everything, and in the past few decades it would have done really well. Also again, if you only care about an income stream, who cares about underperforming and overperforming. There is a risk involved in seeking gains. Also if you have index funds you have plenty of financials and utilities in there just saying.
5: The whole point for me with dividends is that I am never forced to sell. I live off the dividends. I only sell to switch to the crappiest bank at the end of the year or to capture some capital gains to avoid them getting to high and then reinvesting * You are no more forced to sell dividend stocks than any other when the market is low. However if you rely on your investments to live on as opposed to work income, pensions, pimping and drug dealing etc than you are forced to sell more when prices are low with low dividend stocks than high. I get about 37K dividends every year plus GST checks HST checks etc, I only need 25K a year for important expenses. If I were 100% into low dividend stocks, when the market drops I'd have to sell low whenever the market is down.
6: I do plan on taking out some capital gains should my dividends grow beyond the inflation rate. If I get 100 in dividends and it goes to 105 by the basket of goods I buy is only 102, I can sell roughly 3% use that for more whoring money and still be able to finance my lifestyle. In a sort of way it's kinda sell high, just not exact in that dividend growth and stock price should mostly but not always be correlated. Likewise if my stocks are sucking the big ones and the dividend increases are not there, I live off the dividends and hold my dick tight.


I am not suggesting anyone do what I do. My plan is based on my very particular financial situation and is also for someone who knows the idea behind it and what they are doing. It's not the worst thing in the world for others to do, but still I don't want to be responsible for other people.
If you are young and need gains, buy the index, or international indexes. Avril Lavinge was right, it doesn't have to be so complicated. But if you are done with work and need to draw an income, a focus on dividends can isolate you partially from market ups and down, and when you get older, the ability to sleep is important. That is assuming you can generate enough money from dividends to pay your way with a buffer.
When I get really old, depending on my health I'll consider annuities which normally suck balls, but they have their uses.


* I do sell some shares because I want to spend the dividends I make in my TFSA without taking money out of it, also I sell shares to put more money into the TFSA every year. However I consider that not really a net sale but more just a transfer of funds back and forth between two accounts without actually moving the money because CRA reasons.

 

[Zoot Allures]

What you buy should depend on what you are looking for. Some people shouldn't be in the market at all. If every little move and shake will cause you to stroke out, don't do it.

I agree. To them I suggest bond funds as they do not flucate nearly as much as market or GIC or high interest savings account index fund

1: Index mutual funds and ETFs are not free, just have a lower management expense ratio, much lower. BTW you are comparing actively traded mutual funds vs index mutual funds [and then you have ETFs] the two former are still mutual funds.

Some index funds are .01 % and ETF is $10 per trade, that is free in my books.

Actively managed index funds are up to 1%.


If you buy a mutual fund from a broker it is 2.5 % if you buy the fund on your own you save 1%.

So, let us say market rises by 5% in one year, which is average.
The mutual fund company takes half the profit at 2.5% and inflation eats 2 points
so you are left with no profit and you invested 100% of the principal !!

Mutual Funds suck eggs

2: Stock picking at least for seeking capital gains is, well even the experts don't beat the market so what chance do you have. Yes I select the stocks I own, but I am only interested in the dividend stream, and that is a much simpler process. I am also not trying to beat out anyone. Again different strokes for different folks. If you are seeking gains, indexs either Mutual Funds or ETFs are the way to go. Or just put all your money in Dutch Tulips like a boss.

Seriously, you have 100% chance of matching the market with a index fund the only question is which
index do you want to match and that depends on the risk you are willing to take

4: Again it's been said that Canadian Banks are a proxy for index funds because they are into everything, and in the past few decades it would have done really well. Also again, if you only care about an income stream, who cares about underperforming and overperforming. There is a risk involved in seeking gains. Also if you have index funds you have plenty of financials and utilities in there just saying.

TSX Canadian Dividend Aristocrats Index ETF

has beaten market for some time so why restrict yourself to just bank dividends? I assure you any extra value or safety
in banks has been taken into account by the market and has priced bank stocks accordingly


Past performance of the Aristocrats index fund does not impress me as anomalies happen so never chase past perfoirmance
that is less than 20 years old

Dividend banks stocks cannot beat the market as most solid companies do not give dividends and by definition you are not investing in the best companies. Period.

5: The whole point for me with dividends is that I am never forced to sell. I live off the dividends. I only sell to switch to the crappiest bank at the end of the year or to capture some capital gains to avoid them getting to high and then reinvesting * You are no more forced to sell dividend stocks than any other when the market is low. However if you rely on your investments to live on as opposed to work income, pensions, pimping and drug dealing etc than you are forced to sell more when prices are low with low dividend stocks than high. I get about 37K dividends every year plus GST checks HST checks etc, I only need 25K a year for important expenses. If I were 100% into low dividend stocks, when the market drops I'd have to sell low whenever the market is down.

You are so wrong.

You are forced to sell stock because the dividends are stock turned into cash.

No 2 ways about it as a $1 dividend means stock has lowered by $1

It is with non dividend stock that you are not forced to sell

 

[NotADcotor]

I agree. To them I suggest bond funds as they do not flucate nearly as much as market or GIC or high interest savings account index fund


Some index funds are .01 % and ETF is $10 per trade, that is free in my books.

Actively managed index funds are up to 1%.


If you buy a mutual fund from a broker it is 2.5 % if you buy the fund on your own you save 1%.

So, let us say market rises by 5% in one year, which is average.
The mutual fund company takes half the profit at 2.5% and inflation eats 2 points
so you are left with no profit and you invested 100% of the principal !!

Mutual Funds suck eggs




Seriously, you have 100% chance of matching the market with a index fund the only question is which
index do you want to match and that depends on the risk you are willing to take


TSX Canadian Dividend Aristocrats Index ETF

has beaten market for some time so why restrict yourself to just bank dividends? I assure you any extra value or safety
in banks has been taken into account by the market and has priced bank stocks accordingly


Past performance of the Aristocrats index fund does not impress me as anomalies happen so never chase past perfoirmance
that is less than 20 years old

Dividend banks stocks cannot beat the market as most solid companies do not give dividends and by definition you are not investing in the best companies. Period.



You are so wrong.

You are forced to sell stock because the dividends are stock turned into cash.

No 2 ways about it as a $1 dividend means stock has lowered by $1

It is with non dividend stock that you are not forced to sell

I don't see the point of bond funds or money market funds [is that their name] I'd rather own directly. But that's just me.

Yeah, a price can be so low that it is effectively free.
Again, index mutual funds are mutual funds. it's actively managed funds that suck and don't even take it in the mouth.

I think if you look at the dividends and the capital gains they even out. It's just how you get the returns. If you were to take two companies, one keeps everything, the other pays out everything but you reinvest it, it's kinda sort of a wash ignoring tax issues and a whole host of other things.

And You are not forced to sell the stock, maybe your wording on point but I have dividend stocks and I am less likely to be forced to sell them than a low dividend stock because, I can live off the dividends except for the caviet I mentioned above.
Even if you change your wording to being forced o cash out, there is nothing that prevents me from reinvesting the dividend back in the company, even at advantage as with the Drips in my TFSA. If I get a buck in dividends and the price goes down by a buck, but I buy a buck worth of stock, I am back on top. If the DRIP gets me an extra 2% I am ahead. Or I could perhaps buy something else, that flexability is there. Ignoring transaction costs, but I am cis gendered so I don't have to worry about that.

I could go into utilities or lifecos [and have owned some of the latter] but there are issues with both that irk me, past performance or not. Also the built in diversification of banks in nice and the whole buying the dog of the banks is easier. That's a me thing. I wouldn't object if someone wanted to spread out the dividend stock love, there is nothing wrong with it, it's a perfectly legitimate lifestyle as Seinfeld and crew would say.
Anyways I got my income stream and more, so meh. YMMV.

 

[Zoot Allures]

I don't see the point of bond funds or money market funds [is that their name] I'd rather own directly. But that's just me.

Yes bond funds are a loan like GICs . A money market fund pays out money with very little risk but the cost is they are
way behind avereage stock return as low risk means lost potential and high risk means higher potential return the market
is effecient to assure that is the case

I do not consider dividend funds to be a money market fund even though they payout money as you own the stock

Yeah, a price can be so low that it is effectively free.
Again, index mutual funds are mutual funds. it's actively managed funds that suck and don't even take it in the mouth.

yes but some index funds are managed and therfore charge more and become managed mutual fund like

I think if you look at the dividends and the capital gains they even out. It's just how you get the returns. If you were to take two companies, one keeps everything, the other pays out everything but you reinvest it, it's kinda sort of a wash ignoring tax issues and a whole host of other things.

taxes are another concern but I think taxes are less relevant than return

And You are not forced to sell the stock, maybe your wording on point but I have dividend stocks and I am less likely to be forced to sell them than a low dividend stock because, I can live off the dividends except for the caviet I mentioned above.
Even if you change your wording to being forced o cash out, there is nothing that prevents me from reinvesting the dividend back in the company, even at advantage as with the Drips in my TFSA. If I get a buck in dividends and the price goes down by a buck, but I buy a buck worth of stock, I am back on top. If the DRIP gets me an extra 2% I am ahead. Or I could perhaps buy something else, that flexability is there. Ignoring transaction costs, but I am cis gendered so I don't have to worry about that.

yes you can DRIP or reinvest on your own regardless the sale was forced on you,
even in a drip as come tax time you have to pay taxes on the sale

I could go into utilities or lifecos [and have owned some of the latter] but there are issues with both that irk me, past performance or not. Also the built in diversification of banks in nice and the whole buying the dog of the banks is easier. That's a me thing. I wouldn't object if someone wanted to spread out the dividend stock love, there is nothing wrong with it, it's a perfectly legitimate lifestyle as Seinfeld and crew would say.
Anyways I got my income stream and more, so meh. YMMV.

That is how most bank dividend buyers feel, I just think you could do better but my
opinion is controversial but rest assured that a dividend is not free money, not even close

 

[themaxx]

The majority of investors do not know what they are doing. If you are able to read a chart and predict the direction of the market you can do better than just a passive income from dividends. I do have dividend stocks to keep my reserves earning. I also have a portion of my portfolio in short term buys. If you can master the moving averages you can earn 10% plus returns a month. I do a might better than that monthly.
IMO, the majority of "true" investors do know what they're doing by following basic principles. Those investors are pension funds, banks, insurance companies, etc. But even so they are never 100% correct 100% of the time, and rely on very sophisticated technology and complex techniques to protect their (clients) money. But yes, the majority of individuals who think that they're "investing" do not know what they're doing. Reading a chart is a useful skill, but the chart is indicative of whats already happened and, as they say, past performance is no guarantee of future results. Thousands of professionals go to work everyday and try to predict the direction of the market....some are bulls, some are bears, and both are equally right, The difficulty is predicting WHEN its going to go up or down. You cant time the market. Technical analysts swear by their methods of charts & graphs, fundamentalist use financial statements and economic indicators, both are right. You could spend 12hr/day pouring over charts and cashflow statements and whatnot and MAYBE get a better return, but thats not passive investing then, is it? I've got some stocks that are paying me 300-400% dividend yield on cost, and I dont lift a finger for it other than buying and holding. If you enjoy it, if it brings you pleasure, go for it. It sounds like you enjoy what you're doing, and you've got other things going on, which makes for a well positioned or balanced, whatever terminology you like. account or portfolio. But dont think that any method will consistantly outperform the market. The market does what it does, market participants react, usually either over-or-underreact, the market does what it does again


themaxx,

Would you agree with these statements :

- Wealth Management will only get you the safe and moderately sure investments at minimum risk.

- The NBT ( Next big thing ) is very rare and you can actually trip over it and not know it. I prefer the next small thing, If you are able to read a chart and can catch the next 5-8% move up in a stock, is it not better to catch many next small things than to catch the next big thing and watch it go up only for it to come back down. I can catch the 2-3% aristos and the 5-8% temporarily strong gainers 8 or 9 times out of 10. Many small gains are better than one big gain.
Wealth management's MAIN objective is to produce an income stream for the firm providing the service, first & foremost, so that they can then provide an income stream to the owners and creditors of the firm. If you can consistently earn regular small gains moving in & out of a stock, you should go work for one of the firms that provide wealth management services, because they will pay you ALOT in salary and especially bonuses. But no-one can do it consistently beyond the short term (some can't even do it in the short term). These gains can often be made just by trading ex-dividend, if you can read the charts. But you could also make great gains over the long term by buying and holding, collecting that 5% dividend that mgmt grows 3-5% year over year.

A personal observation.

The brokers of yesteryear were merely sales people to bring in people to put their money into the accounts of the firm. The brokers were offered the research and resources of the firm that were not available to the average Joe. With the commissions they made, the brokers grew their accounts. Even though these resources are available via internet today, the average person has to know how to use them to be successful.
Todays firms are the same, they are selling a product that will create a steady income stream for them through management fees. expense ratios etc etc. Most people put more research into buying their next TV than they do researching investment instruments and/or opportunities. You might beat the market in the short term, but theres decades upon decades of research indicating buy & hold, and time IN the market, yields best returns, over timing the market. Happiness is the greatest return, do whichever approach make you happy.

 

[themaxx]

[QUOTE="Zoot Allures, post: 8550617, member: 256691"

Here is where I disagree with your experience and wisdom


Buffet says the brokers who can beat the market he can count on one hand and he has been
in this business before they invented the wheel

He also does not say buy one solid company and hold, that is what he does not you !!!!

You buy all the companies, not just one, in an index fund or ETF then hold, that is exactly what Buffet says
along with Jack Boogle who invented index funds through Vanguard

Google their advice
[/QUOTE]

Thanks for the tip.
Perhaps I wasnt clear, or perhaps i'm misunderstanding you.
I advocate buying quality companies and holding for the long term. Stay clear of market fluctuations & make investment decisions based on business and economic fundamentals (not advocating fundamental over technical analysis, both have their merits). Its the approach i follow, and i've been living of my investment income for quite some time now.
I certainly did not intend to infer that you only buy 1 company.
Buffett is a value investor, which is characterized by finding undervalued companies. He recommends that most people buy index funds because most people arent stock pickers, and the main reason for that is most people wont put in the years of study required to become even a semi-competant stock picker. An index fund will attempt to match market performance, less any fees. A stock picker, in the vernacular, will try to identify potential stars from probable dogs, and if successful, outperform the market. However, its impossible to do 100% accurately 100% of the time. But ,as with Ceiling Cats approach, it can potentially outperform the market in the short term.
I read something in one of your posts about being forced to sell shares, which, unless its a margin call, or your getting into derivatives, why or how would anyone be forced to sell, or buy? its a free market.
Ben Graham's first rule of investing is "Dont lose money", and his second rule is "never break rule #1". If youre being forced to sell at a loss, youve made some serious mistakes and perhaps shouldnt be trying to invest on your own.
Have a great night

 

[jeff2]

I agree with a lot of opinions on here. Not much time at the moment but I will throw this link in. Perhaps you know this also.

Why Most Stocks Are Stinkers and What to Do About It | Kiplinger

 

[Zoot Allures]

[QUOTE="Zoot Allures, post: 8550617, member: 256691"

Here is where I disagree with your experience and wisdom


Buffet says the brokers who can beat the market he can count on one hand and he has been
in this business before they invented the wheel

He also does not say buy one solid company and hold, that is what he does not you !!!!

You buy all the companies, not just one, in an index fund or ETF then hold, that is exactly what Buffet says
along with Jack Boogle who invented index funds through Vanguard

Google their advice

Thanks for the tip.
Perhaps I wasnt clear, or perhaps i'm misunderstanding you.
I advocate buying quality companies and holding for the long term. Stay clear of market fluctuations & make investment decisions based on business and economic fundamentals (not advocating fundamental over technical analysis, both have their merits). Its the approach i follow, and i've been living of my investment income for quite some time now.
I certainly did not intend to infer that you only buy 1 company.
Buffett is a value investor, which is characterized by finding undervalued companies. He recommends that most people buy index funds because most people arent stock pickers, and the main reason for that is most people wont put in the years of study required to become even a semi-competant stock picker. An index fund will attempt to match market performance, less any fees. A stock picker, in the vernacular, will try to identify potential stars from probable dogs, and if successful, outperform the market. However, its impossible to do 100% accurately 100% of the time. But ,as with Ceiling Cats approach, it can potentially outperform the market in the short term.



Only in the short term.
Professional money managers cannot beat the long term market with their funds so how can you?
Some funds appear to but that is because they have so many funds that some will beat market by chance

Buffet loses on %90 of his buys and the other %10 get it back


I read something in one of your posts about being forced to sell shares, which, unless its a margin call, or your getting into derivatives, why or how would anyone be forced to sell, or buy? its a free market.


Dividends are forced upon you and $1 in dividends lowers the stock by $! which means you sold $1 of stock


Ben Graham's first rule of investing is "Dont lose money", and his second rule is "never break rule #1". If youre being forced to sell at a loss, youve made some serious mistakes and perhaps shouldnt be trying to invest on your own.
Have a great night


You never lose money on a stock until you sell so hold until
market comes back is true for the index but not for individual stock

 

[craig_hoxton]

I am looking into SCHD (U.S. dividend ETF) for my RRSP and perhaps Canadian Dividend Aristocrats for my TFSA. If I'm getting paid to own units of an ETF, why the hell not? Also hold small positions in an S&P 500 ETF and an Nvidia-focused covered call ETF. Am done with bag-holding individual stocks (had Hut 8, Galaxy Digital, still hold Palantir).

Plus "finfluencers" like this guy are just doing this for clout and sponsorship from fund companies. Good for him, but as Abraham Lincoln once said: "Never believe anything you see on the Internet".

This comment is just my opinion and should not be used as financial advice.

 

[themaxx]

Thanks for the tip.
Perhaps I wasnt clear, or perhaps i'm misunderstanding you.
I advocate buying quality companies and holding for the long term. Stay clear of market fluctuations & make investment decisions based on business and economic fundamentals (not advocating fundamental over technical analysis, both have their merits). Its the approach i follow, and i've been living of my investment income for quite some time now.
I certainly did not intend to infer that you only buy 1 company.
Buffett is a value investor, which is characterized by finding undervalued companies. He recommends that most people buy index funds because most people arent stock pickers, and the main reason for that is most people wont put in the years of study required to become even a semi-competant stock picker. An index fund will attempt to match market performance, less any fees. A stock picker, in the vernacular, will try to identify potential stars from probable dogs, and if successful, outperform the market. However, its impossible to do 100% accurately 100% of the time. But ,as with Ceiling Cats approach, it can potentially outperform the market in the short term.



Only in the short term.
Professional money managers cannot beat the long term market with their funds so how can you?
Some funds appear to but that is because they have so many funds that some will beat market by chance

Buffet loses on %90 of his buys and the other %10 get it back


I read something in one of your posts about being forced to sell shares, which, unless its a margin call, or your getting into derivatives, why or how would anyone be forced to sell, or buy? its a free market.


Dividends are forced upon you and $1 in dividends lowers the stock by $! which means you sold $1 of stock


Ben Graham's first rule of investing is "Dont lose money", and his second rule is "never break rule #1". If youre being forced to sell at a loss, youve made some serious mistakes and perhaps shouldnt be trying to invest on your own.
Have a great night


You never lose money on a stock until you sell so hold until
market comes back is true for the index but not for individual stock

Hmm, your ideas are intriguing to me and I wish to subscribe to your newsletter.