Time to write about something completely different
2026-05-11
Written by: Joshua Kave
Welcome back to the intellectual demolition zone. Today we will discuss factor investing, the small cap premium, international diversification, and the unfortunate souls who believe dividends are magical free money that appear from corporate heavens.
We will also address the tragic individuals who chant VOO QQQ SCHD like it is a secret spell that will unlock generational wealth. Spoiler alert. It will not. What it unlocks is a lifetime subscription to financial mediocrity.
Sit down. Hold your ego. It is about to be tenderized.
People love to present their VOO QQQ SCHD split with the same pride as a five year old showing off macaroni art. They genuinely believe they have cracked the code.
Let us be honest. You are not diversifying. You are buying the exact same thing three times in slightly different font styles.
VOO gives you large cap America. QQQ gives you large cap America but this time with more hype. SCHD gives you large cap America but with a marketing campaign that appeals to people who think dividends equal wisdom.
This is not diversification. This is creative redundancy.
Dividend investors occupy a unique corner of the financial world. They walk around bragging about dividends like they discovered electricity. They say things like I love getting paid to hold and My dividends pay my bills as if dividends are a magical form of passive income and not simply your own capital being handed back to you after the company pays taxes on it.
Let us review a painful truth.
Dividends are irrelevant. Not metaphorically irrelevant. Not figuratively irrelevant. Literally irrelevant according to actual financial theory.
A dividend does not create value The moment a dividend is paid the stock price drops by the exact amount. It is not free money. It is not a bonus. It is your own asset being sliced off and handed back to you like a cashier returning your change.
Companies decide arbitrarily whether they pay them Dividends are not a sign of strength. Often they are a sign that management has no better ideas.
Dividends are taxed immediately Congratulations. You chose the most tax inefficient way to withdraw your own money.
Total return is what matters Price appreciation plus dividends minus your delusions.
Dividend investors love to brag about receiving 3 percent annually like it is a spiritual achievement. Meanwhile small cap and value factors historically outperformed by far larger margins but that requires reading and patience which dividend cultists lack.
Dividend investors are the people who visit a restaurant, order a steak, insist on cutting off ten percent of it themselves, pay extra tax on it, and proudly say Look at this free piece of steak the restaurant gave me.
The US only investor stands proudly in their financial sandbox and loudly declares that the rest of the global economy is useless. They say things like Why invest internationally when America always wins and The US has the best companies.
Not only is this naïve. It is historically false. For long stretches of time international markets dominated. Entire decades belonged to Europe and emerging markets. Japan was once the global darling. Anyone with a functioning memory would know this.
But US only investors do not use memory. They use recency. Their brains are wired to believe that the last ten years are eternal truth. This is why they think US outperformance is a law of nature and not a cycle.
International diversification exists because global economies do not move together. Currency fluctuations add diversification. Valuations differ. Factor exposures differ. Economic cycles differ.
But the American maximalist insists on ignoring all of this. Then they swagger into financial discussions and brag that they hold only the S and P 500 with the same energy as someone who proudly announces they only eat chicken tenders because other cuisines are scary.
Factor investing is for people who read. Not for people who saw two TikToks and decided they understand markets.
The documented factors are size, value, momentum, quality, profitability and low volatility. These have academic backing. They have cross country validation. They have survived multiple decades of scrutiny.
Meanwhile the VOO QQQ SCHD investor believes factors are fake because they read one forum comment written by a guy whose entire financial philosophy is God bless America and buy VOO.
Small caps outperform large caps over long periods. This is not an opinion. This is not a rumor. This is not a conspiracy created by people who dislike Apple and Microsoft. This is statistical fact.
Small caps beat large caps because:
Large cap investors are addicted to size. They believe being big equals being safe and equals being superior. They love large caps because large caps make them feel secure and validated. This is less a financial strategy and more an emotional support blanket.
Dividend investing is a vibe. Factor investing is data.
Dividend investing is nostalgia dressed up as discipline. Factor investing is quantifiable research.
Dividend investors talk about yield like it is a mystical force. Factor investors talk about premiums, regressions, hazard ratios and historical persistence.
Dividend investors think income is the goal. Factor investors know total return is the goal.
Dividend investors are often retired or wish they were retired. Their entire strategy is based on wanting cash flow now instead of optimizing wealth later.
Factor investors understand that dividends are not necessary for systematic withdrawals. Anyone can create their own synthetic dividend by selling shares. This is called being intelligent with your money.
Dividend lovers worship SCHD as if it descended from the heavens. They believe it is safe, stable and superior. They fail to understand that SCHD is just another flavor of large cap US stocks with a filter that screens for companies that like to cut checks.
SCHD is not a factor fund. SCHD is not a value fund. SCHD is not a tax efficient growth strategy.
SCHD is a giant neon sign that reads I do not understand how dividends work but I like cash hitting my brokerage account.
People brag about their SCHD yield like they are earning royalties on a hit album. Meanwhile they ignore the fact that SCHD sacrifices growth, sacrifices diversification and sacrifices basic logic in exchange for immediate gratification.
This investor profile is incredibly consistent:
They are the MLM victims of investing. The products differ but the psychology is identical.
If you want real diversification you need:
This is not financially edgy. This is the minimum standard for someone who has opened a finance textbook.
If you worship dividends you should absolutely feel targeted. If you believe VOO QQQ SCHD makes you diversified you should feel exposed. If you believe international investing is pointless you should feel embarrassed.
Factor investing exists because there is real research behind it. Dividend worship exists because people misunderstand basic mathematics.
You can continue proudly holding your dividend checks and telling yourself you are getting paid. Just understand that you are not receiving magical money. You are simply receiving your own money back with extra tax liability.
You can continue ignoring international diversification if you want. Just understand that you are willingly crippling your own long term returns out of misplaced nationalism.
You can continue pretending VOO QQQ SCHD is diversification. Just do not call it smart.