The Stingy News Weekly (03/20/2016)
Dividend stock downside
"I had started with a hypothesis: by avoiding dividends might we actually improve 'dividend investing'? But by removing the dividend, it inadvertently refocused the selection methodology on pure value. My research turned out to be a backdoor way of reminding myself that value investing and dividend investing - while often confused as the same thing - are actually distinct strategies. And more times than not, value wins out." [Dividends]
Is value coming back?
"Lots of money is flowing out of value strategies, and the stocks are cheap. I've lost several clients, and may lose some more. Oddly, it is the losing of clients that gives me the most hope. You need people to leave a strategy when it is down and out for the strategy to bottom." [Value Investing]
Identify a growth trap
"Growth Traps are companies that are rapidly expanding their businesses. Rapid expansion requires investment in operating assets. That investment places strain on a firm's infrastructure and results in declining margins. Because investors were overly optimistic for the stocks prospects, it is likely that these high flyers will not grow into their valuations and shareholder returns will suffer." [Growth Investing]
Mastery or ignorance
"Who among stock brokers and investment analysts in 1900 could have foreseen the eclipse of railroads? However, just like de Tocqueville said about the Roman aqueducts and roads, the miles of unused railroad tracks today are monuments (albeit not as conspicuous) not just to a young nation's will to master a continent, but also to the 19th century's ignorance of internal combustion and air travel." [History]
Bond returns imperilled
"As bond yields have relentlessly fallen towards - and even beyond - zero over the past few years, investor returns are very vulnerable to small movements in prices and yields." [Bonds]
How to beat the S&P 500 index
"From 1991 until 2016, his strategy gained an average compound return of 12.76 percent per year. In a tax deferred account (not including transaction costs) it would have turned $10,000 into $201,315. Investors in Vanguard.s S&P 500 Index (VFINX) would have averaged a compound annual return of 9.7 percent per year. The same $10,000 would have grown to $101,265." [Dividends]
The curse of the Dow
"The so-called Curse of the Dow, an old Wall Street adage, holds that companies usually rally leading up to the day they join the blue-chip index, but then underperform in the year after." [Indexing]
RBC fund became a tax headache
"RBC had triggered the capital gain - and a related one in 2014 - when it sold the fund's individual stocks and bonds and replaced them with RBC's own mutual funds." [Taxes]
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