The Dividend Irrelevance Theory

Today, I’m going to channel my inner “RDQ” and raise some peoples ire:
About one month ago, there was a post about dividends.  It contained quite a bit of what I will politely call, “magical thinking”. Despite my linking two excellent articles which debunk the dividend myth, clearly subsequent posters did not bother to read either of them and persisted in posting the dividend dogma that commonly persists.  I even resorted to asking Jonathan to chime in (which he kindly did) as too many folks seemed to still not be “getting it”,

ANDREW CARNEGIE USED to say that competitors were welcome to tour his factory, to see his production line up close. Why? Because of Carnegie Steel’s massive scale and complex operations, he was confident no one would ever be able to replicate what he’d built.
Hedge fund manager Seth Klarman is a modern-day Carnegie. Klarman founded the Boston-based Baupost Group in 1982, and while performance numbers aren’t publicly available, the firm’s track record is believed to be among the best in the industry.

I was reminded recently of how far stock trading has come when I inherited a small stack of old stock certificates from my great-uncle Billy. They were dated between 1927 and 1931, right through the turbulent years of the Great Depression. One was for a railroad, issued by Citibank itself. And yes—I checked—they’re now completely worthless. But holding those fragile pieces of paper in my hands brought history to life. Back then, making a trade was slow,

I have invested in the Fidelity Floating Rate High Income Fund (FFRHX) for many years. Morningstar classifies it as a bank loan fund. The expense ratio is 0.73% and it is yielding 7.78%. It loans money to BB and B rated companies and adjusts the interest charges every few months so duration is minimal. Is there any significant difference between a fund like this and private credit?

Readers’ responses to an earlier post on volunteering to teach a module on investing in index funds and ETFs to high school students electing to take a new personal finance course were very helpful (and brutally honest!), Consistent with those suggestions, the “text” will be Bogle’s deceptively simple, The Little Book of Common Sense Investing. Evans and Malkiel’s The Index Fund Solution: A Step-By-Step Investor’s Guide is the workbook. What follows will probably be the first overnight reading assignment aimed at defusing some of the reservations teenagers night have about investing in the market.

ONE OF THE MARKET’S worst-performing stocks over the past year was, not long ago, one of its best. Novo Nordisk is the Danish company that pioneered the hugely popular weight-loss drug Wegovy, also known as Ozempic. After it hit the market in 2021, the company’s stock rallied, tripling over the following three years. Since then, however, things have been far more challenging. Over the past 12 months, the stock has dropped 60%.
This highlights a key challenge for investors: On the one hand,

On the Fidelity account page that displays my holdings online, I noticed banners saying I could make extra money by lending my securities. I ignored this on the premise of “too good to be true.”  Then I got an email from Fidelity advertising their Fully Paid Lending Program and read what they had to say. By following a link, I was able to get an assessment of each of my accounts telling me which holdings might be eligible and how much they might yield.

President Trump signed an executive order Thursday 8/7 to allow 401(k) participants to invest in private  assets.
The directive instructs the Department of Labor and the Securities and Exchange Commission to draft guidance for defined-contribution plans to incorporate private-market investments, including private equity, venture capital, hedge funds, real estate, and possibly gold and crypto.
Plan sponsors are not required to offer these investments-and I hope they don’t. This is a bad, short-sighted idea.

That’s all we need in 401k plans,

I’m grappling with crypto at the moment. I’ve opened an account with eToro with a plan to make a $20,000 investment/gamble with the simple idea of leaving it for the next 10years to see what happens. I personally don’t recommend this unless you’re happy to lose your shirt.
With crypto in my mind I was interested to read an article this morning about how your President Trump has just signed an executive order that could change things up.

Jonathan Clements, through his decades of work and his recent “Getting Going on Savings Initiative,” has inspired countless people—including me—to think about how to empower the next generation. The initiative’s core mission is to give young adults a tangible head start by funding their Roth IRAs, a concept that perfectly aligns with the most important lesson I’ve ever learned about money: time is a young adult’s greatest asset.
For many years I’ve been that person who talks to younger people about saving for retirement and investing for their future.

I’m a first time poster and long time reader (including WSJ Getting Going) and saw an article today with behavioral finance observations.  It may be of interest to some.
The names of equity-income funds imply that they are aimed at investors who desire to withdraw their higher dividends as cash flow for spending. On the other hand, equity funds are aimed at investors who seek to reinvest their lower dividends for capital appreciation. However, more than 74% of equity-income investors reinvest their dividends—a reinvestment rate similar to that of investors in equity funds.

Suzie and I have a strange little anomaly in our mainly index tracker portfolios. This came to mind when I got a reminder to vote in the AGM of one of them. Our little anomaly is owning real shares in two separate businesses. We can’t seem to let go of them although I always think of breaking up. One is in the UK banking sector and the other is an asset management business. The banking shares have posted an impressive 53% capital gain on a rolling year basis with a 2.3% dividend and the investment company has had a more average 6% gain but an excellent near 8% dividend yield.

Two  roads diverged in a wood,
and I took the one less traveled by
And that has made all the difference
–Robert Frost
The Road Not Taken, 1915
I have volunteered to teach a module on stock fund investing for students taking a new elective course at a small private high school in Sacramento. Here is a fleshed out outline of what I’m thinking about presenting. I want to educate “my kids” about the factors that ushered in the advent of the index fund and ETF and how to distinguish between the virtues and vices of their investment options.

We’ve all been told that index funds are the smart investor’s secret weapon. Low fees. Broad diversification. Market-matching returns. What’s not to love? But here’s the thing: not every fund labeled as an index fund behaves like one.
In fact, sometimes an “index fund” is not truly an index fund at all. Let’s unpack what that means—and why it matters for your money.
The Original Promise of Index Funds
When Jack Bogle launched the first index fund for ordinary investors in 1976,

Has anyone used iShares Target Date iBond ETFs to build their bond ladder? If so, I’d love to know your experience as I start to consider my own ladder.
Here is how iShares describes this product: “iBonds exchange-traded funds (“ETFs”) are an innovative suite of bond funds that hold a diversified portfolio of bonds with similar maturity dates. Each ETF provides regular interest payments and distributes a final payout in its stated maturity year, similar to traditional bond laddering strategies.