Friday, January 8, 2016

A Dividend Mentor?

The Oxford Dictionary defines mentor as “an experienced and trusted adviser”. If you have ever benefited from the wisdom and guidance of a mentor in your career or personal life, you can attest to how helpful and valuable they can be. Calling on a trusted adviser to guide you through experiences that you lack can lead to great successes. With Canada experiencing our first bear market since 2008, I wondered if there is a dividend mentor to help guide us through the challenging market conditions.

The most often quoted investor in the dividend growth blogging community seems to be Warren Buffett. Although Mr. Buffett used the float from his portfolio of companies to create the biggest financial snowball of modern time, it’s hard to classify him as a dividend investor, yet alone a mentor. As exhibit A, I’d offer the fact that his company, Berkshire Hathaway, has never paid a dividend. Mr. Buffett has indicated that he has no plans to initiate a dividend as he feels reinvesting the profits will be in the best long-term interests of Berkshire's shareholders. As exhibit B, I’d offer Mr. Buffett’s advice that "A low-cost index fund is the most sensible equity investment for the great majority of investors". 

There are definitely bloggers in the dividend growth community who I look up to and am inspired by. That said, I find that some of my favorite dividend writers have personal circumstances that are quite different from mine. Being married, having a young son, living in a high-tax province, and working in a career that sometimes limits my investment options makes it challenging to relate to the examples of single individuals, situated in low taxes jurisdictions, that are self-employed. The path you choose to achieve financial independence based on your personal circumstances and risk tolerance should be different from anyone else.  For instance, I feel that I can afford to be more risk tolerant in my investment holdings due to my defined benefit pension plan through work and my wife’s relatively stable employment situation.  

Although I hope that someone proves my ignorance in the ‘Comments’ section of this post, I’m not aware of any bloggers who have achieved financial independence from dividend growth investing. The closest example in Canada is Derek Foster who used dividend stocks to retire at the young age of 34. With all due respect to Mr. Foster, he seems to have changed from financing his expenses with dividends to undertaking a second career as an author and public speaker. Additionally, his later books explore investment ideas that are quite different (and riskier) from his earlier work. In the United States, you could argue that Jason from dividendmantra achieved financial independence through dividend growth investing. My viewpoint is that he found his true calling as an inspirational financial writer, an accomplishment just as impressive as financial independence.

Although there might not be an obvious dividend mentor to guide us through this bear market, it shouldn’t stop you from continuing on your path to financial independence. If you’re anything like me, you’ll make some mistakes along the way, but as long as you learn from them, you’ll end up just fine. My closing advice – be your own dividend mentor!

Do you have a dividend mentor? Do you know of any dividend investors who achieved financial independence through dividend growth investing?

3 comments:

  1. A good and interesting read until the conclusion "be your own dividend mentor" which, I believe, is at odds with the definition of 'mentor'. For instance one who has not experienced a prolonged bear market or recession - much less traversed through one - would be hard pressed to lay claim to the 'experienced' portion of the definition even if 'trusted'.

    That said, as you point out, success in one area generally leads to further - often futile - attempts to monetize.

    I believe a mentor could be had - but not in totality - due to differences in age, risk tolerance, geography, personal goals, experience and means. Perhaps a 'think tank' of mentors will be the new normal.

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    1. Thanks for the thoughtful comment. Agree that my closing advice is at odds with the definition of 'mentor'. Although your 'think tank' of mentors approach is more practical, coordination would be a challenge.

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