For dividend focused investors, the last three years have been a tough row to hoe. From year-end 2012 through year-end 2015, the speculative NASDAQ took a big lead over the more conservative and more Prudent-Man-centric Dividend Achievers Index. This seemingly long run (3yrs does not make an investment cycle) for speculative shares encouraged many to jump ship for what were believed to be greener pastures. Investors who had neither the ability nor willingness to ride out the wicked downturns that accompany such speculative portfolios allowed greed and relative performance comparisons to drive their investment decisions. Relative performance comparisons are a four-letter word for those interested in achieving long-term investment success. They lead to the type of closet-indexing that is pervasive among much of the actively managed mutual fund universe. More importantly for you, they tend to result in ill-timed portfolio changes. Investors end up selling what has lagged and buying what has outperformed.
So far this year, ill-timed is an understatement for the folk who loaded up the truck with NASDAQ shares in 2015. The speculative NASDAQ Composite Index is getting crushed by the more conservative Dividend Achievers Index. Once again, patience has proven to be a vital investment ally.
Jeremy Jones, CFA
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