theglobeandmail.com
Stable Dividend Portfolio Outperforms Canadian Market Over 25 Years
Over 25 years, the Stable Dividend portfolio, a low-volatility, dividend-paying stock portfolio, yielded a 13.6 percent average annual return, significantly outperforming the Canadian market's 6.7 percent, and demonstrating resilience during market crashes.
- What are the key performance metrics of the Stable Dividend portfolio, and how do they compare to the broader Canadian stock market over the past 25 years?
- The Stable Dividend portfolio, composed of 20 low-volatility dividend-paying stocks, achieved an average annual return of 13.6 percent over 25 years, significantly outperforming the Canadian market's 6.7 percent average return. This outperformance is particularly notable during market downturns, where the portfolio experienced smaller declines than the broader market.
- How did the Stable Dividend portfolio's performance compare to the overall market during significant market downturns, such as the dot-com bubble, the 2008 financial crisis, and the COVID-19 pandemic?
- The portfolio's success is attributed to its strategy of selecting low-volatility dividend-paying stocks and rebalancing monthly (or less frequently with similar results). This approach mitigated the impact of market crashes, as seen during the dot-com bubble, the 2008 financial crisis, and the COVID-19 pandemic. The outperformance highlights the benefits of a diversified, low-volatility strategy.
- Considering the superior performance of the equally weighted portfolio, what are the potential implications of different rebalancing frequencies (monthly, quarterly, semi-annually, annually) on risk and return, and how could these be optimized?
- While the size-weighted version of the portfolio offered less frequent rebalancing, its performance was inferior, with lower returns and higher volatility. This suggests that equal weighting is crucial to the strategy's success, preventing a few stocks from dominating returns and increasing vulnerability during market downturns. Future research could explore optimal rebalancing frequencies for various risk tolerances.
Cognitive Concepts
Framing Bias
The article frames the Stable Dividend portfolio very positively, highlighting its superior performance compared to the market index and emphasizing its resilience during market downturns. The headline (not provided, but implied) would likely emphasize the portfolio's success. The introduction uses terms like "outsized returns" and "relatively smooth ride" to create a favorable impression. Negative aspects like the need for monthly rebalancing and the lopsided nature of the size-weighted version are mentioned but downplayed.
Language Bias
The article uses language that favors the Stable Dividend portfolio. Terms like "outsized returns," "relatively smooth ride," and "healthy average annual returns" present the portfolio in a positive light. Conversely, the size-weighted portfolio is described with terms like "lopsided" and "didn't grow as much." More neutral alternatives could be used, such as 'high returns', 'consistent performance', and 'less growth'.
Bias by Omission
The article focuses heavily on the Stable Dividend portfolio's performance and omits discussion of other potential investment strategies or market perspectives that could offer a more balanced view. While acknowledging market downturns, it doesn't delve into potential reasons for those downturns beyond broad references to events like the dot-com bubble and the 2008 financial crisis. The lack of diversification discussion beyond the portfolio itself limits the reader's understanding of broader investment choices.
False Dichotomy
The article presents a false dichotomy by framing the choice as solely between the Stable Dividend portfolio and the risk of a market crash. It doesn't consider alternative investment approaches or risk mitigation strategies beyond this portfolio.
Sustainable Development Goals
The Stable Dividend portfolio, with its focus on minimizing volatility and providing consistent returns, can contribute to reduced inequality by enabling a wider range of investors, particularly those less risk-tolerant, to participate in the market and potentially benefit from its growth. The portfolio's outperformance compared to the broader market suggests that it could help close the wealth gap over time.