No Dividends? No Dice!

The other day I wrote a blog post about the difference between being speculative and being reckless. The context was in response to Jack Bogle making the rounds and referring to everything except owning broad based index funds as being speculative. Seeking Alpha then re-ran the post and an interesting line of thought emerged in the comments there from a couple of different people.

They said that only something that pays a dividend is an investment and anything that doesn’t is a speculation. That was a new one to me. This sort of thing tends to draw very defined opinions from people—IE they feel very strongly about these ideas.

My final comment on the Seeking Alpha version of the post asked the following;

Well I don't agree with the premise for a few reasons but what about innovation? Many start ups go on to provide great things to the world, they start with seed money and grow into something on a growth track that lasts for decades before paying a dividend IE Microsoft. So one day it was a speculation then the day it declared that first dividend (2003 I think) it became an investment?

I did not give the reader enough time to reply before writing this post.

My idea of a properly diversified portfolio means having exposure to all sorts of stocks from all sectors and from many countries with different attributes. At times the dividend payers are the best hold but at times the hot potato, high valuation names are the best holds. If you don’t want to have to be exactly right about which will do better now then you need to own both. Additionally, owning stocks with different attributes usually results in lower portfolio volatility even if some of the individual components are very volatile.

These sorts of religious lines in the sand that some people draw about stock holdings seem to ignore that the world evolves and further do you really think that any single method can be best for all market conditions? As to the dividend people above, many of the levered ETFs pay dividends so are they investments?

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