Financial media is always interested in content, fresh ideas, and the latest cutting edge. There is a lot of value here, but there is also a lot of trouble because it can lead susceptible investors to play "gin rummy" with their portfolio by constantly buying/selling stocks.
To use an example, Apple is the most widely held stock on Robinhood over the past five years. It has returned 418% over that time frame, 462% with dividends reinvested. An extraordinary return!
But there's the catch (there's always a catch). The average Robinhood user only achieved 11% returns for a cumulative return of 70%, presumably 91% with dividends reinvested.
Something is going wrong if an investment if you are only capturing a fifth of what it gives. And that is in a bull market with one of the best stocks to own.
There was a period from 2017 to 2019 when Apple provided no gains. That is not a hardship but 2019 is when $AAPL had the highest turnover from retail investors. They abandoned the stock precisely when they should have been buying it.
And the crazy thing is... five years isn't even a long time in the scheme of the market (Abbot Labs $ABT once took 17 years to deliver outperformance). And yet, investors can't hold onto a stock nearly quintupling in value in just five years...
Even though it's out of vogue now, this is the reason why I appreciated the income investing framework. You commit to collecting your Johnson & Johnson $JNJ or any Dividend Aristocrat dividends, and instead of worrying where you are in relation to the S&P 500, you take the cash.
I have often viewed income investing as something that should be appreciated by those who struggle with delayed gratification. You get sent cash every 90 days. And it grows over time. And if you buy 25 stocks, you will average a dividend every couple days.
Not only do you get the cash which you can withdraw from brokerage land and spend in the real world on real estate, goods, services, or better yet, new investments, but you also become a better investor because you hold for the entire investment period and don't sell early.
When it comes to operating a business, you need to be doing things to make money. But when it comes to owning a business, you should take the cash and build up other ownership stakes. Wash, rinse, repeat, and drown in cash. It will make you happier and wealthier.
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