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Old 02-02-2014, 11:32 AM   #21
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I'll make one more comment that I hope is on track. When I face questions like this, I make a spreadsheet showing what happens when I do one thing and then do the other. If the spreadsheet shows that you wind up with more money by selling off some of the principal, it seems indisputable* that you are better off that way. You can always rebalance your portfolio to where you would have been had you preserved capital, plus have some left over to invest. I think this would also get you over your 3-4% sell off bias that you admit is an overstatement but I bet you are still overestimating how much you'd have to sell. Working it all on a spreadsheet would give you real numbers to consider.

* of course you have to make assumptions about future returns or base them off of past returns that may not hold up, but you have to start somewhere.

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Old 02-02-2014, 05:24 PM   #22
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Originally Posted by marko View Post
Rebalancing by moving money from stocks to bonds to stocks is one thing, but what am I supposed to buy back those stock shares with if I've spent the money on expenses?

Maybe here is where I'm stuck: I have $X portfolio with X shares. As time goes on the value goes up but the number of shares doesn't.

It's like having 1000 acres of land. If I rent the land to farmers, they pay me dividends and after 20 years, I still own the 1000 acres. OTOH, if I sell a few acres each year, eventually I'll end up with just one acre of land.

And yes, I'm not entirely against selling shares if the stock is a dog or if the WR is in the 1-2% range. Its the idea of selling 3-4% each year to make ends meet that spooks me.
Think of 1 acre = $1000. Then as your portfolio grows, you are adding acres. Sometimes you get dividends, which is like the nearby city taking your land by eminent domain but paying for it with cash. If you diversify a bit and quit buying all your land next to the city, you can decide how much of your land to sell, and when. The city will still take some, but you also have some choice about selling more. It is possible (and even likely) that you will sell less land than you added in any one year (the portfolio is growing).

Investing for total return should leave you with more land in the future than investing everything for dividends because you have less investing constraints and more options.

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Old 02-02-2014, 05:54 PM   #23
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Late to the thread, but I think you need to get your head around to the idea that you saved this money to enjoy it and spend it not to hoard it.

I'm a total return investor because I have faith that in the long run it is better.

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dividends, stock

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