OK, before I go into the details of my dividend strategy, some general points about the why and the how. I think I first write about why, then about how and at last as an example my dividend strategy.
Why the hell don’t I trust myself and use a rule-based completely mechanical strategy that a computer could trade for me? Because my brain works the same as most brains since we were cavemen. We survived because of that but it works very badly in investing.
Two of the most known phenomena are fear and greed, we sell at the worst moment because we fear dead and we buy at the worst moment because we get greedy.
The legendary fund manager Peter Lynch once said something like: “I made 29% per year during 20 years. Yet most of my clients did lose money; they bought my fund high and sold it low.”
Now this has to be digested: the probably best stock picker in the world could not make his clients make money because of their cavemen brains!
There are over 100 psychological bias, covered in many books, I think I did read more than 100 books on financial themes. Yet, psychologists are not the richest men on earth. They may be rich, but only because they charge a lot, you don’t get really rich working and I did work for 37 years to find out. We may know every detail of a bias and still fall for it. Life is hard!
Most private investors in stocks lose money. ETF did help a little, but I am not keen of ETF for several reasons. I may go into more details later if you wish. And one of the most important parts of investing is money management; you have to do that if you invest in ETF too!
If you don’t have rules there is the queue problem: you switch queues and end up mostly in the slower one.
And of course there is age. My brain does not work as good as a few decades ago. When I suffered from a bad illness during years I had to consult my written strategies to find out what to do. Lucky I did write it down.
Trying to catch highs and lows is a losers game. Once you understand this you may start to make real money instead of gambling.
Objective rules are better than subjective trading; our mood could destroy everything without strong rules!
And there is the ease of mind you reach when you always and in every situation know exactly what to do. No decision making when shots are fired in your direction; those decisions would be bad most of the times.