The "Total Return" Argument
Growth investors love to point out that a company like Amazon (AMZN) or NVIDIA (NVDA) has crushed Coca-Cola (KO) over the last decade. They argue that companies should reinvest profits, not pay them out.
Growth Strategy (The Pros)
- ✅ Tax Efficiency: You control when you pay taxes (only when you sell).
- ✅ Compounding Speed: Reinvesting internally often yields higher ROIC.
- ✅ Massive Upside: No dividend stock will go up 1000% in 5 years.
The "Sequence of Returns" Danger
Growth works great... until you need the money. Imagine you retired in 2021 with $1M in Growth stocks. By 2022, your portfolio was down 30% to $700k.
If you needed to "sell 4%" for income, you were selling shares at the bottom. This is called Sequence of Returns Risk, and it kills retirement plans.
Dividend Strategy (The Pros)
- ✅ Cash Flow Independence: You get paid whether the market is up or down.
- ✅ Psychological Safety: You never have to sell a share to pay a bill.
- ✅ Valuation anchor: High yields often put a "floor" under stock prices.
The Verdict: Match Your Runway
The winner is not a strategy. The winner is the investor who picks the strategy that matches their life stage.
Build Phase (Age 20-45)
You have a salary. You don't need income. You need massive capital appreciation.
Winner: Growth (80%) / Div Growth (20%)
Income Phase (Age 50+)
You are replacing your salary. You cannot afford to sell shares in a crash.
Winner: Dividends (80%) / Cash (20%)