I’m glad your investments have worked out for you Mike. That is great.

However, it is not 20/20 hindsight to suggest it does not matter if your returns are driven by dividends or price increases. If you had been invested in say Index funds over the past 20 years (and yes, reinvested the dividends from those funds) you would have still had a great Outcome.

Once it’s time to start living off your investments it makes no difference if your income is coming from dividends or from you selling shares of your portfolio.

If a company you are invested in issues $10,000 in dividends, the value of that company decreases by $10,000.

If you receive $10,000 in dividends or $10,000 from selling shares you still have $10,000. The only real difference would be that selling shares is more tax efficient in a taxable account.

Income is income whether it’s from a capital gain or a dividend, the money is still green (or funny colours if your Canadian like me).

The primary reason people are drawn to dividend investing is because we have a bias called “loss eversion”. Receiving dividends makes us feel more secure than selling shares. That is what make dividend strategies “not rational”. They exist to cater to our bias.

That doesn’t mean you can’t have a good outcome from a strategy that is not the most rational. It sounds like you did have a good outcome which is great to hear.

At any rate certainly not trying to put down your approach. My point in writing this article is to share the findings of academic research and economists so that those who want to start investing can have a tested framework to follow.

Thanks for the engaging discussion, I truly appreciate you taking the time to discuss and best of luck to you and your investments in 2020!

Economic policy wonk by day. Personal finance writer by night. I write about investing, debt, and all things related to money. Editor of Making of a Millionaire

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