1Yr
Thank you for your detailed thoughts on the subject! Whether your GenYs and GenZs are so representative, I do not know (I, GenY, find myself and my friends only partially, pension gap does not play a significant role). It is striking that GenY thinks much less about investing money than GenZ. But that may simply be due to the 10-year stock market boom and the fact that GenY has already experienced at least two crises. That is still to come for GenZ and then we will see who is left. Otherwise, I find your point about dividends as instant gratification very interesting. There is probably something to it. But if that's the case, then it reminds me more of the well-known experiment with candy for the kids. 1 candy right away or 2 after 15 minutes. Some of the kids can wait, some can't. High-yield strategy at a young age as a sign of lacking psychological maturity? The consequence: in the long run, the children who cannot wait 15 minutes for the 2 candies have a harder time than the others: They have less money, worse relationships, worse health, less satisfaction. The next crisis will hit GenZ very hard, the suffering will be greater than that of GenY. But that's their beer, I'm not a therapist. But after your post, I'm also not sure anymore if it makes sense to talk the umpteenth GenZ HighYieldStrategist out of his strategy. If the motivation is instant gratification, then the strategy is almost perfect. And a more rational DivGrowth strategy, for example, is then simply not psychologically manageable. No matter what 100 arguments, 100 years of stock market history and 1000 studies say.
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1Yr
@Epi 1 Instant gratification is inappropriate. The text is about independence and freedom. This "normal path": go to school and get good grades -> get the best job possible where you climb the career ladder for the next 40 years -> buy a house on credit and pay it off until you retire. For me and others in Generation Z, this is probably a nightmare of the same old, same old. We want more time for family, hobbies and travel. Somehow you have to finance it all. Life isn't just about work, and for many people, self-fulfillment doesn't start until after work. The depot is not a parking lot for us, but rather a second source of income for many. It is also stupid that in Germany half of every salary increase goes to the state. That's why many people start a tax-free €520 side job or start their own business. 2. On the subject of psychological maturity: Why do financial studies always focus only on quantitative factors? Emotions are the most important thing in long-term investing and everyone should feel comfortable with their strategy. Investing in stocks (ETFs), whether with or without dividends, is still better than leaving the money in a savings account. For high yield investments, I would say that the majority does more harm than good in the long run. 3. "The next crisis will hit GenZ very hard, the suffering will be greater than GenY's. But that's their beer, I'm not a therapist." - What kind of unnecessary sentence is that and what does the dividend strategy have to do with it? We are not responsible for the next crisis, previous generations are. Crises are thorny opportunities and success belongs to the optimists! 4. If you had $1,000,000 in an accumulating S&P 500 in 2000 and took out $4,000 every month, you would have run out of money by 2017. I know this doesn't affect you with your strategy, but this would be the alternative to a distributing ETF for people who don't study finance extensively.
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•1Yr
@itZNico Thanks for your detailed answers and interesting thoughts! to 1.: As for GenZ's attitude to work - means rather than ends - I'm right there with her/you. (Basically, it's a regression from the Protestant work ethic to the old Catholic one - whether GenZ knows it or not, whether she's read Max Weber or not). That's not even what the dividend discussion is about. Rather, it is about the way to achieve that goal and, in doing so, why GenZ wants to go down a demonstrably inefficient path (DivInvesting). Instant gratification would be a plausible approach to explain the irrationality that is inexplicable for GenY. to 2: With your objection that not profit but emotions are the most important thing in investing, you confirm the attempt to explain via instant gratification. For what should the child, who takes the instant gratification instead of the two later ones, say except: it depends on the current feeling, not on the later quantity. That may be true for the moment. But after 15 min the impatient child has no more candy and the patient one has two, can eat one and be happy about the second one. Of course, child 1 might then grumble about the injustice of the system and demand redistribution, but basically you and all ETF savers, whether with a high-yield strategy or not, are already halfway there ;-). If you don't spend your entire income immediately, but save a part of it, you haven't completely subjected yourself to instant gratification. Those who then can't get out of their skin are driving the short-term emotionally uplifting but long-term frustrating high-yield strategy. to 3: The sentence may seem unnecessary at the moment and after 10 years of boom. But the emotional approach will by definition suffer more from a crash than the rational one. This has only insofar to do with the DivStrategy: if the emotional approach is the reason for the DivStrategy, then the next crash will cause emotional suffering. No matter who is responsible for the next crisis, how GenZ handles it is their responsibility alone. The very first thing to do is to want to clarify the question of guilt and immediately point the finger at the others. Because that's no way to get out of the crisis. to 4: I backtested your statement about the SP500. Start 2000: 1.000.000USD, withdrawal 4000$/Mon, end: 2023: 375.000USD. So money would not have run out! Even a call money account would still have 163,000USD. In 2017, the capital is only finished if the withdrawal is inflation-adjusted, i.e. much higher than the 4000$/mon. at the end. If one does not start in 2000, but 1 year later, the SP500 deposit would still exist (about 130,000€). If you start in 1994 (the earliest time at portfoliovisualizer), SP500 is clearly ahead with 6,6Mio vs. Value with 5,2Mio. And it is about these long time periods, isn't it? Here the link for self-testing: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1987&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=1000000&annualOperation=2&annualAdjustment=4000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=0&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=portfolio+2&portfolioName3=portfolio+3&symbol1=SPY&allocation1_1=100&symbol2=CASHX&symbol3=VIVAX&allocation3_3=100
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