I received this thoughtful comment on my post on Why is it so hard to understand this concept?:
If I have understood you correctly, then I have similar sentiments to you. It feels like people understand investment strategies in silos; they are not able to generalize to a broader mathematical and logical concept. This idea of dividend investing (and living off the dividends) is often brought up as a unique and entirely different strategy compared to a typical accumulating portfolio / fund, when the makeup can actually be very similar in nature. I like the illustration that you have brought up, it shows in an interesting manner how issuing dividends and liquidating units can be equivalent; but I’m not sure whether the illustration alone will help them understand. My guess is that many investors instinctively see dividends as “income from capital” and selling units as “consuming capital”, even when the underlying economics can be similar.
Your article also reminds me of a related idea that has shaped my thoughts about dividends. In the book Essays of Warren Buffett it mentions that dividend policy is fundamentally a capital allocation issue; dividends should only be paid out if the company cannot reinvest those earnings at an attractive rate of return, and the shareholder is better off investing that dividend elsewhere. Both your article and the Buffett idea lead me to similar conclusions, that there is nothing inherently special about dividends, and it’s more important to prioritize the underlying quality of the investment.
I would like to thank the commenter for helping me think that the world is worth saving because at least some investors were able to understand that… if you put a bunch of dividend stocks into a unit trust fund, or a VCC fund, your hopes and dreams are the same.
I had coffee with a reader yesterday and this topic also came up for discussion. I am glad he understands the difference. I thank him as well for creating a small joy in my day knowing those who are sophisticated enough can distill things better.
But I cannot say the same for other investors especially the people that triggered me enough to do the illustration post.
I think it is not just this but the way they can’t seem to be able to glean the real essence of selling units and the real meaning behind Safe Withdrawal Rate framework.
I try my best to explain that their understanding is wrong, but I think they just don’t get it.
Some of the incorrect interpretations of income planning and SWR:
- All dividend portfolio implementations by every day people are all the same. And all their future outcome sequences are similar.
- If they do well with their investing and income strategy in this short 20 year period, then even in other 20-70 year, perpetual periods, this strategy would work perfectly. Don’t have to think of challenging sequences.
- You can change your SWR anytime. So wait until you hit market or inflation challenges then you change your SWR.
- SWR is only for investing in growth stocks. If your portfolio don’t grow big and fast enough, then it’s not meaningful, just like if you don’t grow your dividend stock portfolio large enough, then your dividend stocks is not meaningful.
The last one is actually right just not only growth stocks part.
I often explain privately to investors how to use SWR more as a risk-management metric to give them a sensing if they can take out more than their dividends and all.
I can see in some of the comments made, there are usually silent ones who actually understand the concept pretty well. This shows up in the answers.
I welcome disagreements, but the issue is that if you believe the world is flat instead of a globe, we are debating over weird things. Most importantly, I just don’t like to see people suffer if things turn out badly. Trying to have an income so that you don’t need to work a single day in your life is a critically different goal than working towards a financial goal if you have income or options to fall back on.
I think folks inability to focus on the critical things, and think less important things like getting a dividends may lead them down a situation of not feeling peaceful about their plan.
If I were to pin the reason: It is that folks are too endowed with a preference, perhaps a bit of ego that they understand things really well? And maybe trusting AI LLM too much and not understand its short comings?
Rest of 2026
I also don’t wish to explain much more because work is going to be more busy.
Some readers might notice that this two weeks, I wrote less posts. Still manage to get 2 videos out. I think I write more if I have more time to spend pondering about finance stuff.
But if I have to devote my time to something that requires focus, I probably have time to ponder about other things. It is earnings season and I kind of know the regional banks are doing okay, most banks are doing okay, Netflix is shit, ServiceNow has a better narrative.
That’s all.
My work at Providend involves establishing the tools and frameworks, decision trees that our advisory team uses in their planning. Every year, I kind of get an idea what are the mini (or massive) projects that I need to involve with at the start of the year.
Most of them are livable for me. Here is a glimpse how I think. I kind of have a mental model or rough decision-tree for a lot of things and even if we haven’t done anything from scratch, I kind of know it is not hard putting out something. I would also know if my mental model is pretty raw and it needs work. If I have no mental framework, then I would usually sound out that we need more time.
The main piece in the first half is pretty raw and I did spend quite a fair bit of time. But at least we know how critical or less critical was that mini-project.
The second half of 2026 is catering for something software and hardware focus. My involvement only starts like a couple of weeks ago. But the main work by my colleagues happen even late last year.
What I needed to do sounds… straightforward. I don’t know if it sounds straightforward but… if you asked someone that spends 15 years in IT, my understanding of what goes beneath the hood is very different. It is not just what kind of functionality do we want to achieve but more like…. if we want to create a sound application, with usable (not great mind you) functionality, how complex is that?
For most of the year, I have this lingering threads of thoughts of where are the common IT complexities that would fumble organizations from achieving what they want. Vendor competency, inhouse competency, management & user scope creep, development process, budget & budget creep.
I just have to trust others and management that they know what their doing.
But whether I like it or not, little bits of information gets fed to me. And the more that I hear, the more WTF I get. I will keep most of it under wrap.
At a certain point, I tell myself: “Kyith, be mentally ready. Second half of the year is possibly going to be mental when you start to actually work on it.” So I make sure I sped up all other mini-projects on hand so that in the second half its just time for this software application stuff.
And so now I am basically in Siege Mentality.
Very focus, no stupid AliExpress or Shopee browsing unless needed. If need something just pay money and get on with it. No holidays, take strategic breaks so that can last to the end of the year.
I will probably step off only when mentally I see that we have a sound and viable plan to work through all the mental technical complexities.
What for to be so stress over ‘this’?
This is not being overdramatic. I am not saying everything needs to be so focus. But there are some pivotal part of the milestones if you do well, you have a great platform in the future. If you fxxk it up, you have a horde of unhappy people. This to me is it. If Providend is suppose to be the shining light for the financial world, ‘this’ thing done right is the most critical in my mental IT lattice.
Actually if you don’t understand why I am stress enough, you probably don’t understand the problem well enough. I take solace that I am not the only one having similar anxiety.
Again it boils down to what do people understand.
Did you glean the right things. If you did, you would understand what are the critical stuff to consider for income planning.
Despite this, I think I have a couple of Income YouTube ideas that should not be too difficult to put through. Hope you guys can stay tuned.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Fee-only Wealth Advisory Firm Providend. All opinions on Investment Moats are his own and does not represent the views of Providend.
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