Many dividend investors fall into emotional traps—panic-selling, chasing high yields, and holding onto underperforming stocks due to attachment. This article explores a powerful decision-making technique inspired by Nobel laureate Daniel Kahneman to help investors think more objectively.Key takeaways include:How the brain’s "inside view" leads to poor investment choices.The power of switching to an "outside view" for rational decision-making.A simple question—"What would I think if this were someone else's portfolio?"—that helps investors avoid emotional biases.Practical applications for selling, buying, and evaluating dividend stocks more objectively.By applying this mindset shift, investors can make clearer, more disciplined decisions and improve their long-term returns.
I just went through this when I read your previous article, "Best Buys in March 2025".
You highlighted Newell brands. I looked it up, saw a juicy >4% dividend yield, and became emotional.
"Whoa! This could be something!"
That's me putting on the "inside view" hat.
Now I put the "outside view" hat on. I pretended someone else bought it and showed it to you or Pieter. As professionals, both of you would have been polite but the investment would have been stamped "clunker".
Then I spin the "outside hat" around and looked at it as an analyst. Does it pass my smell test to warrant further investigation? Would it smell good enough to recommend to someone else?
No.
Dividend cutter.
High debt to cash.
Low Return on "Anything".
That's enough for me to pass on it. There are better places for a 4% yield.
Inside / Outside.
I just went through this when I read your previous article, "Best Buys in March 2025".
You highlighted Newell brands. I looked it up, saw a juicy >4% dividend yield, and became emotional.
"Whoa! This could be something!"
That's me putting on the "inside view" hat.
Now I put the "outside view" hat on. I pretended someone else bought it and showed it to you or Pieter. As professionals, both of you would have been polite but the investment would have been stamped "clunker".
Then I spin the "outside hat" around and looked at it as an analyst. Does it pass my smell test to warrant further investigation? Would it smell good enough to recommend to someone else?
No.
Dividend cutter.
High debt to cash.
Low Return on "Anything".
That's enough for me to pass on it. There are better places for a 4% yield.
I had a look at Newell as well - but the erratic revenue, inconsistent earnings and weak balance sheet made me pass quickly as well. Nice work Boris!