Published Mon, 07 Aug 2017 14:55:00 -0400 on Seeking Alpha
Dividend growth investing is a fantastic way to build a large chunk of your portfolio. During this bull market, many investors have fared well by owning dividend stocks which got bid up due to low interest rates. However, with valuations very high, and risk rising, it is time for people to look more deeply at the guts of their investment approach.
Asset Allocation Will Control Your Risk This article is not about asset allocation, but I think it's important to start out with a brief word on the topic. Studies have shown that asset allocation will be the key determinant of the volatility in your portfolio.
We have all heard that asset allocation affects 93% of your portfolio. Many investors assume that means the returns in their portfolio. That's not true. The study that refers to 93% has to do with portfolio volatility.
Carefully considering your asset allocation in order to reduce volatility has more impact on how well you sleep than anything. Wildly volatile portfolios can be (but generally aren't) very profitable, but, if wild volatility gives you sleepless nights and a heart attack, future gains probably don't matter much.
The chart below, pulled straight off of Nasdaq's website, shows that diversification, an outgrowth of asset allocation, requires only small basket of stocks to be diversified. The caveat is that you can't have all of your money in correlated sectors or categories.
In a special report I provided to Margin of Safety... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|SPDR S&P DIVIDEND ETF||91.62||0.0||0.00||2.10||2.23|
|VANGUARD DIVIDEND APPRECIATION ETF||102.83||0.0||0.00||0.00||2.10|
|POWERSHARES QQQ TRUST SERIES 1||167.21||0.0||0.00||1.30||0.76|
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