Dividend Sensei, Featured Article

If Investing Seems Exciting You’re Doing It Wrong

Adam Galas

13 postsFebruary 6, 2021

There is a saying on Wall Street: “If you don’t know who you are, the stock market is an expensive place to find out.”

That’s very true, as is this next statement. It’s in my own words, but it’s a classic truth reiterated by countless experts…

There are very important differences between investing and speculation.

Speculation means the odds are against you. And any profits you make are primarily a matter of luck. While you might make money from it here or there, the longer you speculate, the more likely you are to lose money, potentially 100%.

Investing, on the other hand, is when sound analysis and fundamental facts indicate high likelihoods you’ll make adequate returns to compensate you for the risks involved. Over the long-term, sound investing principles almost always come through.

I bring this up, of course, because of the financial drama that’s been playing out in recent weeks. The world has been glued to the WallStreetBets short-squeeze saga surrounding such “meme stocks” as GameStop (GME), AMC Entertainment (AMC), and BlackBerry (BB).

Such drama and excitement may get headlines, but it has little place in a prudent investor’s portfolio.

If Investing Seems Exciting, You’re Doing It Wrong

For a while there (and perhaps still today), GameStop was considered the quintessential YOLO (you only live once) stock. The most famous WallStreetBet darlings invested 50%-100% of their life savings into the troubled retailer a few months ago.

Others used deep out-of-the-money long-term equity anticipation securities (LEAPS) calls, which are highly leveraged and extremely speculative options that almost always expire worthless.

Admittedly, a few of these people cashed out millions. One saw $50,000 turn into $50 million at its peak. Though that has since fallen to $7.5 million as GameStop plunged 85% and counting.

Meanwhile, AMC, BlackBerry, and other short-squeeze meme stocks have similarly collapsed.

I take no pleasure in the demise of so many of these gambler’s life savings. But this was the inevitable outcome of a short but historic bubble that saw GameStop hit an untenable market cap of $42 billion.

That’s more than Chipotle (CMG) and equal to Walgreens (WBA).

AMC, for its part, was worth 5x more than before the pandemic at its recent peak – a pandemic that still threatens to drive it into bankruptcy and its stock price to zero. S&P estimates the company has a 65%-70% chance of bankruptcy.

In “short,” the bullish behavior behind it makes no sense.

Speculative manias like GameStop and AMC sure are exciting. But sound long-term investing isn’t about excitement.

It’s about building enduring income and fortunes.

On Wall Street, Excitement Gets the Headlines, but Boring Helps You Get Rich

Dividend aristocrats are S&P 500 companies with 25+ year dividend-growth streaks. They represent some of the world’s highest-quality and most dependable companies out there.

They’re also some of the most boring but beautiful long-term blue-chip investments you can make… assuming you buy at fair value or better.

Dividend Aristocrats Total Returns Since 1990

Year	Aristocrats Returns
1990	5.70%
1991	38.50%
1992	10.10%
1993	4.30%
1994	0.90%
1995	34.60%
1996	20.90%
1997	34.50%
1998	16.80%
1999	-5.40%
2000	10.10%
2001	10.80%
2002	-9.90%
2003	25.40%
2004	15.50%
2005	3.70%
2006	17.30%
2007	-2.10%
2008	-21.90%
2009	26.60%
2010	19.40%
2011	8.30%
2012	16.90%
2013	32.30%
2014	15.80%
2015	0.90%
2016	11.80%
2017	21.70%
2018	-2.70%
2019	28%
2020	8.70%
Median Return Since 1990	Average Return Since 1990
11.80% annually	12.8% annually
Annualized Returns Since 1990	S&P 500 Since 1990
12.30% annually	10.10% annually

(Source: Ploutos)

Here is some more data to digest:

Dividend aristocrats’ total returns since 1990: 3,310%
S&P total return: 1,793%.

Aristocrats outperformed by just 2.2% annually. Yet after 30 years, that was enough to generate almost twice the wealth! That’s what you get from the most dependable dividend income on the planet.

Today, both the aristocrats and S&P 500 are overvalued. So here are the 30+ year consensus return potentials analysts expect:

Dividend aristocrats (17% overvalued): 10.1% annually
S&P 500 (36% overvalued): 7.9% annually.

Note that analysts still expect aristocrats to outperform the broader market by that historical 2% per year. The overall returns are simply reduced due to excessive valuation.

Fortunately, wonderful blue-chips are always on sale somewhere, including dividend aristocrats and kings. For instance:

Altria (MO) is 35% undervalued with an 8.1% very safe yield and a 51-year dividend growth streak.
National Fuel Gas (NFG) is 36% undervalued with a 4.3% very safe yield and a 50-year dividend growth streak.
AbbVie (ABBV) is 30% undervalued with a safe 4.8% yield and a 48-year dividend growth streak.

If you want amazing long-term results, you should avoid speculation. Use sound financial science instead to make the highest-probability, low-risk decisions that fit your needs.

That’s how you can stop praying for luck in the stock market and start your making your own.

Happy Investing

Adam Galas

13 posts

View all my Posts

Adam Galas is a retired Army Medical Services Officer with an economics degree from the University of Minnesota who combines his 23 years of investing experience with a disciplined application of time-tested methods. Adam is holding or has held positions as a professional analyst at The Motley Fool, Seeking Alpha, and Simply Safe Dividends. His work has also appeared on thestreet.com, Forbes and Stocknews.com.

Due to his love of Buffett-style investing in safe, undervalued, dividend growth stocks, Tipranks recently ranked him Americas 43rd best analyst. And he is the second-most followed writer on Seeking Alpha, where as he is also a co-founder of Dividend Kings.

Thanks to a love of Buffett-style investing in safe, undervalued, dividend growth stocks, he was recently ranked the 43rd best analyst in the country by Tipranks and is the second-most followed writer on Seeking Alpha.

The Super Bowl Is Over, but Our Game Just Keeps Going

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

If Investing Seems Exciting You’re Doing It Wrong

Adam Galas

13 postsFebruary 6, 2021

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