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Post by liftlock on May 14, 2023 3:58:26 GMT
"But then again, the subject of this thread isn't retirees. It is: why income is superior over TR."If income is a component of total return, how can income be superior to total return? When total return is negative, positive income reduces the need to liquidate shares to meet income needs. In a distribution portfolio, there would be little need for income if security prices were non-volatile and always rose at a constant steady rate. In that case, shares could always be sold at higher prices to meet income needs. The distribution investor's challenge is how to avoid selling shares when prices are down. |
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Post by FD1000 on May 14, 2023 4:47:20 GMT
Mustang, you could be correct, regradless, I would not change anything I said.
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Post by archer on May 14, 2023 4:49:35 GMT
In the many income vs TR debates on this forum, selling shares is presented as more of a problem than it really is. The value of ones PF and its ability to cover expenses isn't measured by number of shares. It is measured in dollars. Over many decades, years of negative return comes to a low percentage for the long term investor. There have been times where income stocks have done better, and times where they have not.
The problem with pitting the two types of investing against each other is that they don't serve the same purpose. If more money is the objective, I think we can agree that TR results in more money, since that is how TR is defined. If one doesn't want to take action to advantage themselves in an ever changing market, and to be more hands off in their investing, then it makes more sense to diversify, passively receive income, and let our brokerages manage RMDs. As to which is better, we have to ask, "better for what?" This topic goes on and on because of different personal preference. Period.
Are there ANY income investors on this forum that care whether or not their PF value is lesser or greater than a TR approach? If so, I have some good and very obvious advice. :-)
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Post by oldskeet on May 14, 2023 13:24:09 GMT
Hi guys. I am àn income and growth investor as my portfolio leans more towards income generation over growth with an asset allocation of 20, 40, 40 (cash, bonds & stocks). With this, it is a total return portfolio as well since capital appreciation, interest income, dividends and capital gain distributions are all factors in determining total return performance. I have found that most times the number of shares owned are used to determine the amount of distribution more so than asset value. Thus, it is important, if ones wants to grow their income stream they need to increase the foot print of their portfolio by increasing the number of shares owned. In this way, over time, not only does the income stream increase but the overall value of the portfolio does as well through organic growth. And, now you know Old_Skeet's mythology of investing.
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Post by FD1000 on May 14, 2023 13:55:59 GMT
In the many income vs TR debates on this forum, selling shares is presented as more of a problem than it really is. The value of ones PF and its ability to cover expenses isn't measured by number of shares. It is measured in dollars. Over many decades, years of negative return comes to a low percentage for the long term investor. There have been times where income stocks have done better, and times where they have not. FD: correct, retirees should worry about the amount of money they have and how much risk/SD they are willing to have, not how high are the distributions..The problem with pitting the two types of investing against each other is that they don't serve the same purpose. If more money is the objective, I think we can agree that TR results in more money, since that is how TR is defined. If one doesn't want to take action to advantage themselves in an ever changing market, and to be more hands off in their investing, then it makes more sense to diversify, passively receive income, and let our brokerages manage RMDs. As to which is better, we have to ask, "better for what?" This topic goes on and on because of different personal preference. Period. Are there ANY income investors on this forum that care whether or not their PF value is lesser or greater than a TR approach? If so, I have some good and very obvious advice. :-) FD: Easily solvable. Let me show you how you can set up an easy sell in 2 minute from your funds and let it run for years. In this case I used PRWCX. At Schwab: Step 1: I set up a monthly trade to sell on a specific date, see below. Schwab let you set up weekly, twice monthly, quarterly and more. Step 2: I set up a monthly transfer 1-2 days later from my Schwab account to my bank. In the above, I created a monthly $1000 cash withdrawal. Attachments:
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Post by Norbert on May 14, 2023 17:01:39 GMT
"But then again, the subject of this thread isn't retirees. It is: why income is superior over TR."If income is a component of total return, how can income be superior to total return? Because capital returns (share price changes) are sometimes negative, while income is always positive. The basic theory of Income Investing is that, while share prices may fluctuate thanks to Mr. Market's crazy moods, income (dividends + interest) is relatively stable. Obviously, security selection is critical for both Income and Total Return investors. A smart Income investor doesn't blindly chase yield; he's very careful about leveraged products; and he doesn't put money into flakey instruments like ADVDX. He's focused on dividend and interest sustainability. He knows perfectly well that companies sometimes fail and stop paying dividends. I can see the appeal of Income Investing for an investor who doesn't want to worry about market price swings. It could be especially appealing for a new retiree, who has already generated considerable wealth. He can simply live off of income, and not worry about things like sustainable withdrawal rates. It's clearly true that disciplined Total Return investors have generated more wealth than Income investors over the long haul. Income Investing wouldn't seem to make sense for active professionals who already have a substantial income. Just mho. N. |
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Post by kathiel on May 14, 2023 17:16:28 GMT
Let me offer some clarification: I am retired and have been taking RMDs for several years. I have long invested in both income and growth stocks. The balance of income and growth has changed over the years. Several years before I retired, I remember making the conscious decision to emphasize income and gradually re-balanced my portfolio. I don't choose the highest yielding stocks. And I own no funds, so I don't have any leveraged investments.
I don' t see the subject of this thread as being "why income is superior over TR" but rather why I have opted for an income approach at this point in my life.
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Post by colorado on May 14, 2023 20:51:44 GMT
Let me offer some clarification: I am retired and have been taking RMDs for several years. I have long invested in both income and growth stocks. The balance of income and growth has changed over the years. Several years before I retired, I remember making the conscious decision to emphasize income and gradually re-balanced my portfolio. I don't choose the highest yielding stocks. And I own no funds, so I don't have any leveraged investments. I don' t see the subject of this thread as being "why income is superior over TR" but rather why I have opted for an income approach at this point in my life. kathie. thank you for clarifying. Other posters took over your thread and pushed it into unintended territory. |
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Post by mnfish on May 16, 2023 13:16:40 GMT
Watching the market (and my portfolio balances) fall, I'm so glad to be an income investor as I don't feel anxious about the decline in balances, as it has no impact on my income. In the last year I sold a number of dividend payers and used the proceeds to pay some cap gain tax and purchase T-bills and a money market fund, both with no anxiety caused by falling markets, that average a 4.7% income payment. My portfolio (after spenddown) is up 9.1% YTD and up 4.2% since Jan 2022. That's why I posted earlier that price gains and dividends are both important. My portfolio yield has also increased by .4% Stock Sold Price Current PriceGILD $82.60 $79.00
QCOM $132.00 $106.00
ABBV $153.44 $146.00
TTE $63.70 $60.00
MRK $112.61 $116.00
D $88.12 $54.00
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Post by johnberesfordtipton on Jun 6, 2023 14:08:56 GMT
Graham and others saw divs as signs of stability and good management, so perhaps there are arguments to hold stuff like my mother's Nucor even if one is not per se a div investor?
No gold neck chains, but my 1967 Vette in Goodwood Green is essential for trips to the frozen yogurt stand.
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Post by FD1000 on Jun 6, 2023 14:27:24 GMT
Graham and others saw divs as signs of stability and good management, so perhaps there are arguments to hold stuff like my mother's Nucor even if one is not per se a div investor? No gold neck chains, but my 1967 Vette in Goodwood Green is essential for trips to the frozen yogurt stand. Long, long time ago...AKA, until the 70s, it was true. Good companies pay divs. Then the tech revolution arrived, these companies had to evolve, change rapidly, and spend more money on R&D. They stop paying high divs. These companies grew much faster and made more money. Divs are not what they used to be. A great company doesn't have to pay high or any divs. Selecting stocks based primary on high divs is not a great choice. |
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Post by johnberesfordtipton on Jun 6, 2023 23:24:19 GMT
Can also depend of the maturity of the business
In the early days of a company, there's a tendency to plow back in for growth, but with maturation perhaps more divs
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Post by bb2 on Jun 8, 2023 15:11:27 GMT
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Post by steelpony10 on Jun 8, 2023 19:43:52 GMT
What’s the definition of safe and high yield? I worked from above the worst inflation rate (7.25%, Stagflation) I experienced to maintain my purchasing power as long as possible before spend down. I don’t really have to keep reshuffling the deck with every headline until I reach a sudden permanent increase in monthly income needs if ever. That’s security to me. The fact was over 7%. I guess we got to 5% this time. |
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Post by bb2 on Jun 9, 2023 0:51:39 GMT
The definitions are that of the author. DYOD. There's more in the article than specific investements. I found it interesting that she included QQQ as not to miss that clear trend, even in a dividend seeking portfolio.
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Post by steelpony10 on Jun 9, 2023 1:20:24 GMT
The definitions are that of the author. DYOD. There's more in the article than specific investements. I found it interesting that she included QQQ as not to miss that clear trend, even in a dividend seeking portfolio. You’re right. I’ve read her stuff before including that article. Ever read her background? Pretty mysterious. She lives very frugally except when she travels. Well being old school I was told “don’t invest any money in markets you can’t afford to lose”. I don’t know if the word safe ever applies to markets. Maybe more reliable is a better characterization. But the old adage more risk = more reward still seems to work long term. The income investors I know like the poster do hold equities for growth as additional secondary income when available in up markets. There’s money from somewhere coming in all the time no matter the headlines or state of the economy so far anyway. |
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Post by bb2 on Jun 9, 2023 18:36:32 GMT
"She lives very frugally except when she travels." Me too. First and great hotels/houses take out the bite. Personal pref. Paul Theroux was a 2 star guy.
Safe depends on time too; hopefully no really bad black swan: asteroid kind of thing.
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