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Post by kathiel on Mar 4, 2022 2:34:10 GMT
When I retired, a friend of mine retired about the same time. She was a Federal employee, so her investment experience was in the Thrift Savings Plan - generic S&P 500, government bond fund, etc. She was interested in what I was doing, and loved the idea of having investments furnish a monthly income, so she wouldn't have to worry about needing to sell stocks when the market is down.
I explained my approach very simply - buy only dividend paying stocks, and hold on to them. I reviewed her stock purchases at the start, but then left her alone. She has now been retired for 8 years, She periodically checked in with me, but made her own investment decisions. Last week, amid great volatility, she asked me to look at her portfolio.She had done pretty well. Her portfolio was worth much more than it was 8 years ago. I advised her to sell some stocks that weren't paying her much, and advised her to sell half of her Microsoft, which had grown to 10% of her portfolio. Her portfolio now earns over $20,000 a year.
She is a happy income investor.
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Post by acksurf on Mar 4, 2022 14:51:52 GMT
Yes, I agree. For many people having regular monthly/frequent income provides a lot of peace of mind. I am planning on having a regular monthly stream when I start retirement. It's not to say I won't also have a growth part of the portfolio as well. It doesn't have to be all or nothing!
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Post by FD1000 on Mar 11, 2022 15:27:08 GMT
Yes, I agree. For many people having regular monthly/frequent income provides a lot of peace of mind. I am planning on having a regular monthly stream when I start retirement. It's not to say I won't also have a growth part of the portfolio as well. It doesn't have to be all or nothing! Well said. In fact, the decision should be based mainly on performance + risk attributes (SD, Sharpe, Sortino). The other major problem is the fact most income investors own single stocks which require a lot more research, knowledge and time and that lead in most cases to more trading. The following is a typical story. A friend of mine was so proud to tell me how good it is to invest in higher-income stocks, he loves ATT(many own this) + IBM. So, I asked him if he knows about MSFT and if he thinks it was a better company 10 years ago compared to the other two. He replied, of course I know it, I owned it, and I know for sure it's better BUT I WANT INCOME STOCKS TOO. All I had to do is show him the last 10 years of performance, see ( link) + below what happen to that 2 portfolios, one = MSFT, the other ATT+IBM. Both started with $500K + pay $20K annually. After 10 years: MSFT made 27.75 annually vs just 1.6. MSFT grew to 4.7 million after paying every year $20K. The other portfolio shrank from $500K to just $364K The higher income portfolio paid more in the beginning but could not keep up with MSFT and eventually MSFT income was higher too. The above opened his eyes.Attachments:
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Post by Deleted on Mar 11, 2022 15:52:25 GMT
FD - I hope it opened his eyes wide enough to hire someone to manage his money properly if he didn't realize this when making choices!
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Post by Deleted on Mar 11, 2022 18:44:12 GMT
I think Josh Peters showed quite well you can have S&P matching returns and more than double the yield.
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Post by alvinthechipmunk on Mar 11, 2022 22:29:29 GMT
I think Josh Peters showed quite well you can have S&P matching returns and more than double the yield. Predictions never happen exactly as predicted, but your observations reminds me of my own recent post: My own current particular mix of stocks and bonds tells Morningstar X-Ray that I will capture 98% of the SP500 EPS growth over the next 5 years. (Particularly iffy due to both the war in Ukraine and inflation.) At the same time, current YIELD on my stuff = SP500 yield PLUS 85% more. What the hell am I doing right? |
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Post by Deleted on Mar 11, 2022 23:15:00 GMT
I think Josh Peters showed quite well you can have S&P matching returns and more than double the yield. Predictions never happen exactly as predicted, but your observations reminds me of my own recent post: My own current particular mix of stocks and bonds tells Morningstar X-Ray that I will capture 98% of the SP500 EPS growth over the next 5 years. (Particularly iffy due to both the war in Ukraine and inflation.) At the same time, current YIELD on my stuff = SP500 yield PLUS 85% more. What the hell am I doing right? M* X-Ray only measures your equity positions when calculating EPS growth. Portfolio yield includes both your equity and bond holdings. |
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Post by kathiel on Mar 11, 2022 23:20:06 GMT
Thanks for your comments. My friend took the opportunity offered by the volatility in the last 10 days or so to make some changes in her portfolio. She sold some stocks on the up days and bought other stocks on the down days. As I said on another thread, I also used this volatile time to buy and sell. I wanted to make sure I had enough income from my portfolio to cover my RMD. The trades I made boosted my income by several thousand dollars a year.
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Post by Deleted on Mar 11, 2022 23:59:55 GMT
I am slowly increasing my annual income by buying and selling as well. My target income is where I need it and I am years away from retirement. I have the growth part to sell off as needed.
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Post by kathiel on Mar 12, 2022 3:34:42 GMT
Sara, it sounds like you are doing great! Remember that there are growth stocks that also pay a (generally small) dividend. My biggest growth stock is Apple, and my friend's biggest growth stock is Microsoft.
There are also stocks that offer both income and cap gains, like ABBV.
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Post by Deleted on Jun 13, 2022 1:03:23 GMT
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Post by FD1000 on Jun 13, 2022 3:24:13 GMT
Sara, it sounds like you are doing great! Remember that there are growth stocks that also pay a (generally small) dividend. My biggest growth stock is Apple, and my friend's biggest growth stock is Microsoft. There are also stocks that offer both income and cap gains, like ABBV. That's good, but, the problem is when someone looks for higher than "normal" div and disregard other criteria...how many income investors owned ATT over 10 years while we all knew it's a bad company? So, sure, start looking for your best ideas companies and only after you narrow it down, select higher div. If a company must have a div, even small, it's a good compromise. |
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Post by steelpony10 on Jun 13, 2022 11:24:43 GMT
The income method diminishes the dependence on Mr. Market which we deemed a good trait after the flash crash in the late 80’s. Just look at the trap many investors are in now while they wait an indeterminate amount of time for markets to turn around while in for most a 15-20 year retirement period. We next tried accumulating dividend stocks of well run solid companies like JNJ, KO HD etc. diversifying our income stream concluding 15-20 positions were our management limit. Acknowledging all investment methods have flaws we began to realize what we saw as the flaws in dividend investing. The worse for us was too much hands on maintenance required. This in absent in index investing where you live and die by headlines and long term real factual problems so you need to pick your poison here. Neither seemed suitable to drop on a neophyte investor when an experienced one passes on or as one loses there mental faculties as they age. This led us to our final or to date method. Basically 25% equity indexed, 25% safe money both on reinvestment and eventually we’ll have 50% high yield CEF investments in the 7-10% general range which generate 2-3 times our personal inflation range to start with their own set of flaws. Among the benefits were money flows way above our current needs for years, 50% of our portfolio is held in reserve, we have 3 income sources to tap, plenty of cash, under 20 automated holdings, we were much richer at the start of retirement, any maintenance is really optional, since I’m the main driver cash flows whether I’m around or not, portfolio value grows with excess cash generation, dividend reinvestment or capital gains, and a reserve is available to invest in more income or to spend down for sudden permanent increases in income needs. An all weather portfolio where we feel the benefits mentioned really outweigh the the flaws of toal dependence on Mr. Market, low yields and cash. |
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