The new hot topic in investment circles is yield.  Everyone is chasing the somewhat elusive concept of yield. Despite so many investors trying to locate and invest in the best monthly dividend payers, very few actually end up building long term wealth from dividends. There are a variety of reasons for this sad state of affairs.

I have studied this situation and have discovered three primary reasons most long term dividend investors fail to accumulate substantial wealth.

Believe it or not the reasons do not include not investing in stocks that pay high dividends or even avoiding the best fixed income funds. The actual reasons primarily have to do with portfolio construction and trader psychology.

Let me explain the  three most common reasons why income traders fail:

1. Not diversifying

While every income portfolio should have several ultra high yielding stocks, the portfolio should not be focused on these names. Ultra high yields come with ultra high risks. This means that a portfolio built from just ultra high yielding stocks is simply too risky.

2. Avoiding expensive stocks

Many of the best long term dividend stocks have a high share price. This is because of the fact that they are in demand due to the steady and growing dividend yields. Investors often shy away from stocks with high prices which eliminates many of the best long term dividend stocks. It’s critical to always remember that price does not equal value. Price is truly irrelevant when it comes to percentage returns on a portfolio.

3. Inability to take small losses

Our entire lives we are taught to win. Investing requires losing to win so that is a difficult concept for many investors to grasp. No matter how good an investor you are, you will make mistakes and have losses in your portfolio. Recognizing loses and taking the loss is the only way to prevent a single large loss from damaging your portfolio.

I like to think of every investing loss that I take early is one step closer to the goal of a substantial winner