Short Takes: Dividend Irrelevance, Housing Bears, and more

A popular type of investing is factor investing.  This means seeking out companies with attributes that performed strongly in the past, such as small caps (low total market capitalization) and value stocks (low price-to-earnings ratios).  I can’t say I’ve studied this area extensively, but one observation I’ve made is that these factors always seem to disappoint investors after they become popular.

It’s hard to figure out exactly why factors seem to disappoint, but I’m not inclined to pay the extra costs to pursue factor investing beyond my current allocation to stocks that are both small caps and value stocks.  Several years ago this combination was my best guess of the factor stocks most likely to outperform.  I’m still not inclined to try others.

Here is how I think about whether someone is ready for DIY investing:

What You Need to Know Before Investing in All-In-One ETFs

Here are some short takes and some weekend reading:

Ben Felix explains why dividends are irrelevant.  His extensive references to peer-reviewed literature make his arguments tough for dividend lovers to refute, but they can always go with “ya, well, I like Fortis.”

John Robertson hasn’t found it easy being a housing bear over the years, but now that prices are falling, he looks at what type of buyer would enter the market at different reduced price levels.

Justin Bender examines the merits of bond ETFs vs. GIC ladders.  Investors who want to reduce duration to reduce interest rate risk can consider an ETF of short-term bonds as well.  The way I look at the bond duration choice is whether I’d be happy to hold a 10+ year bond to maturity at current interest rates.  Interest rates have improved lately, but I still prefer to stick with short duration for now.