Asset Allocation Vs dividend reinvestment ?

Category	Asset Allocation	Dividend Growth Investing
Principal Long-Term Goal	Wealth	Income
Secondary Long-Term Goal(s)	Safety of principal -- Best risk-adjusted returns	Minimization of risk to income stream -- Wealth
Most Proponents Are…	Registered Investment Advisors and other investment professionals	Self-directed individual investors
Role of Investor	Passive	Active
Portfolio Building Blocks	Funds representing non-correlated asset classes	Dividend growth stocks
Theoretical Foundations and Supporting Data	Academic studies -- Peer-reviewed professional journals -- Back-testing	Personal experience, including multi-generational family experience -- Numerous non-academic studies -- Multi-decade performance record of dividend growth stocks
Pick Stocks?	No	Yes
Use Funds/ETFs?	Yes, usually exclusively	Not often
How Many Building Blocks in Typical Portfolio?	5-20	10-40
Role of Dividends	Minor-they add perhaps 1%-2% to total returns across entire portfolio.	Central-They provide the income which is the primary goal.
Role of "Value"	Moderate-Is one defining characteristic of a few stock asset classes.	Central-Purchasing at good valuations is part of due diligence process.
Ever Sell/Trade?	Yes, to rebalance. -- Yes, to change allocations based on changed life circumstances. -- Yes, if assumptions upon which plan was based change.	Yes, when a stock cuts its dividend or displays other warning signs of danger to dividend. -- Yes, when a stock balloons in value and profits can be redeployed to increase portfolio's yield.
Typical Views of Proponents	Only sensible goal of investing is to maximize risk-adjusted total returns. -- Individual investors are riddled with human flaws and therefore make bad investing decisions. -- Don't assume you can pick stocks successfully, because most investors can't. -- Most individual investors delude themselves about how well they are doing and don't know what their returns actually are. -- There is no timing involved. Rebalancing is not timing. -- Dividend growth portfolios take on too much risk, because they are exclusively made up of the asset class "stocks"	Main goal is sufficient and rising income, not total returns. -- Can tolerate capital declines, because they usually do not influence rising dividend streams. -- If you live off income in retirement, you cannot run out of money. -- Market declines provide buying opportunities. -- When market declines, I get "paid to wait."
Common Misconceptions about Each Approach	That asset allocation seeks alpha. Rather, goal is to replicate blended returns of "all" asset classes. -- That 2008 "proves" that the approach does not work.	That dividend growth investors seek alpha. Rather, they seek reliable growing income. -- That 2008 "proves" that the approach does not work. -- That dividend risk is correlated with stock market risk -- That all dividend growth investors allocate 100% of their assets to this method
Something that Really Frustrates "Other Side"	Refusal to post actual results, even of model or illustrative portfolios -- Name-calling -- Mocking, dismissive, or condescending attitude -- Apparent inability to see growing income as worthy objective or alternative to total returns -- Equating retirement with withdrawals	Swarming to answer questions or criticisms -- Questioning conventional wisdom -- Lack of academic/professional foundation for approach
How Ideally Finance Retirement?	Withdrawals: Selling assets without ever running out of assets to sell.	Collecting income and rarely or never having to sell assets.
How Can That Work?	If remaining assets expand in value to offset liquidations.	If income (from all sources) is enough to cover all retirement expenses.
Typical Stocks Held	Thousands (via funds). Few individual stocks are purchased.	Intel (INTC) Procter & Gamble (PG) Johnson & Johnson (JNJ)
Issues Within Approach	What truly is an asset class? -- How many asset classes are there? -- Should a portfolio contain any individual stocks or other instruments in addition to funds/ETFs?	Yield on cost-useful or useless metric? -- High yield, slow growth or low yield, high growth? Is that even a valid distinction? -- How many stocks are needed for sufficient diversification? -- What is a minimum useful yield?