The strategies shouldn't even be compared, because they aim at different goals. I couldn't accomplish my goals with indexing, hence I find DGI superior for my goals. I rather use dividends to DCA fairly valued quality companies that keeps getting cheaper than paying market price for everything (good and bad companies). But not everyone has the same investing goals, and that's what makes a market. All I'm saying is that the same way DGI is not for everyone, indexing is not for everyone either.freilona wrote: ↑ I have a lot of respect for you, Rod, and used to defend you in every thread where you were "trolled" - and never thought I would be arguing with you. But now that I gained some experience and ran my own experiments, I see where your comparisons (if not strategy) are flawed (and can't even see the results for 2015 and 2016 - maybe because I'm sorting threads with "latest post on top"? For me, your links point to posts and pages that have no results, and I tried going back and fourth a few pages to find them but gave up..)
The main difference between indexers and stock pickers is that "true indexer" buys whenever they have cash. For a comparison, you add to index ETFs only when you buy some stocks that are undervalued at the time. In real life, an indexer will either lump sum or DCA, so their personal returns will be quite different.
I mentioned MERs in the other thread, in this one it seems even more of a non-argument. Buying 62 Canadian stocks would cost $5-10 in commissions each, $310-$620 in total. An indexer with a 1M balanced portfolio would have 20% in Canadian index, or 200K, or $120 per year at 0.06% MER. With smaller portfolios it would take even longer to "break even" (Buy/Sell commissions vs MER) - and I doubt there're a lot of millionaires here
In short, see How Warren Buffett broke my heart - it's for Unlimited Subscribers, will post a quote in a bit...
Indexing is not meant to live on perpetual income without selling the principal. The same way that dividend growth investing primary goal is not towards total return (although that will be there in the long run, since DGI cares about quality and valuation).
DGI is meant to allow a stream of growing income in any market condition; it's meant to allow a retiree to be 100% invested in equities (that keeps growing dividends), so one can live off dividend realibly and perpetually. The same cannot be achieved with indexing (and that's not the purpose of an indexer anyway).
Berkshire (an DGI) always underperforms the index in bull markets and do better in flat and bear markets. However, when the market turns flat or bear, capital gains are diminished, while dividends keep growing. The longer one is doing DGI, the lesser it matters if it will underperform the index, because it puts the investor in a position to never sell their stocks to meet their required income - which will keep growing, regardless if the market goes flat or crash again. Combine that with some growth investing and (serious) trading then one has a winning portfolio for any market condition.
BTW, I personally find the Buffett article misleading for 2 reasons: First, failing to mention all the growing cash that BRK gets with dividends (which allows them to reinvest whenever the companies are priced reasonably). The market has been overvalued for some time, that doesn't make less of a value investing strategy, it only grows the gap for the market to "correct" for a proper level. Yet, the individual investor can evaluate which companies are on sale and buy only those. Second, BRK can only afford to trade very large companies. The (relative) small investor has a bigger advantage to explore inneficiencies of smaller companies that BRK couldn't do it given their size. It's for that very reason that it's harder and harder for BRK to outperform the index. However, the individual investor that apllies their methodology can see the same impressive returns that they had when they were smaller.
BTW, buying 62 stocks in IB or VB would cost $62 or less. That's a one-time purchase, and future dividends can be reinvested monthly at $12 or $24 per year. I wouldn't use a brokerage that charges $5 to $10 per transaction.