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What to know: Here, retirement research guru Larry Swedroe explores the common preference many investors have for cash dividends, despite it being an anomaly in classical financial theory. One common but flawed belief is that dividends provide a hedge against stock price fluctuations. This ignores the fact that stock prices drop by the dividend amount, demonstrating what Swedroe calls the "fallacy of the free dividend."

Through a comparison of two hypothetical companies — one paying dividends and one not — Swedroe shows that cash dividends and "homemade dividends" (created by selling shares) are equivalent. Further, Swedroe explains that selling shares to generate cash flow is often more tax-efficient than receiving dividends because taxes are paid only on capital gains, not the entire dividend. Even in tax-advantaged accounts, capital gains are preferable because dividends might lead to higher taxes or lower foreign tax credit benefits. And lastly, the preference for dividends can lead to less diversification.

Key takeaways: Your personal financial goals won’t always align with the masses. Therefore, your “best” investment choice should consider far more than a general preference.