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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 02:11 PM   #41
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Re: Strategy for a (substantially) higher withdraw

I recently adopted the "coffeehouse" approach for
my personal IRA which is 2/3 of my port, and use
Target Retirement 2025 for the other 1/3. The
coffeehouse method is to allocate 10% each to 6
different stock classes (large cap, large value, small
cap, small value, international and REITs) and 40%
to bonds. The stocks hankjoy prefers fit generally
in the small cap value and REIT classes, it appears.

If I were 40 instead of 70 I might consider picking
stocks in those classes myself. say 5% Small Value
and 5% REIT and measure myself against the
indexes. It probably would not take very many
years to show me the error of my ways.

However, like Bob_Smith and unclemick, I just can't
take that risk anymore and don't trust my ability that much anyway.

Cheers,

Charlie
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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 02:36 PM   #42
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Re: Strategy for a (substantially) higher withdraw

TH,

I think the dividend per share would hold fairly
constant as the NAV of the High Yield fund
fluctuated. The High Yield Corporate fund seems to
do best during good economic times since defaults
are reduced. Also, rising interest rates don't seem
to affect this class as much as the fundamentals of
the companies themselves. In any case the duration
of the fund is in the intermediate range.

I admit it would be tempting to take a bite if the
interest rate rose to 8%, but I personally would not
commit more than 10%,

Cheers,

Charlie
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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 03:15 PM   #43
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Re: Strategy for a (substantially) higher withdraw

I put 10% of her portfolio (cleaned out idle cash) into Vanguard High Yield Corporate the last time it was at 8%. Take the income and plan on holding 'forever'. I admit to not watching it - like I do my hobby stocks. It is intended as another small cash stream like a pension booster while still staying in a low tax bracket.

My Depression era mom still has way more cash than makes any sense - looking at Target Retirement(retiremnt) or VG Lifestrategy income. She is 87.
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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 03:41 PM   #44
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Re: Strategy for a (substantially) higher withdraw

Quote:
I know some downside price risk from interest rates, but that shouldnt change the net dividend, should it?

Hi TH. There are several risks. The biggest is defaults. Defaults take away income at the same time they lower NAV. Historically, good high yield funds have been a buy when they are at the high end of their yield margin over AAAs. So you have 2 factors, the basic long term yield as given by AAA credits, and the basis over that.

I would reject them outright because no class of income investments dominates cash long term at a time of low interest rates.

I haven't done the research lately, but I also think that the margin(or basis) of high yields over AAAs is so-so at this time.

What is wrong with cash? I feel a bit like Cotton Mather trying to explain why his flock really ought not to sleep with one another's wives, even though can be fun.

For a scholarly look at this , see " The Longer You Play, The More You Lose"

http://www.smithers.co.uk/newsdyn.ph...mime=&pgndx=59

Mikey
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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 06:24 PM   #45
 
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Re: Strategy for a (substantially) higher withdraw

I went pretty heavy into a high yield bond fund when CD
rates tanked. Plan is to never touch the original
investment. So far, so good. I put the same amount into Freddie Mac notes. Again, so far so good.
These investments and other simliar are paying me around 7% combined. I am counting on an average of 6% on my
"forever" money. Right now, I don't see why I can't
maintain that, and again with no stocks invited to the
party.

John Galt
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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 09:28 PM   #46
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Re: Strategy for a (substantially) higher withdraw

John Galt:
Are you withdrawing 7% because that is what you are getting, 6% because that is what you are budgeting or only 4% because that is what the conventional wisdom says is a safe withdrawal rate?
Hank Joy
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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 09:45 PM   #47
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Re: Strategy for a (substantially) higher withdraw

Michael:
"If you can find reliable data on the long term performance of high yield stocks, you can insert the data into an Excel spreadsheet and calculate past safe withdrawal rates for this asset class. *Without this type of information, any conclusions on how it would have performed in the past are just guess work."

This is a very good point. I do not know of any publically available raw data that would allow the multiple overlapping time periods like monte carlo or firecalc would do. Lowell Miller has commissioned from Ibotson the data mining for his use for private clients and his managed accounts and mutual funds available to the public. In his book "The Single best investment" their findings in average annual compound returns over long periods is released in tables but not the underlying raw data for us to manipulate and number crunch to run multiple what ifs.
But you have raised a solid point! Thank you, Hank Joy
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Re: Strategy for a (substantially) higher withdraw
Old 05-20-2004, 10:25 PM   #48
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Re: Strategy for a (substantially) higher withdraw

Michael:
"My guess is that a lot depends upon whether the dividend is supportable over long periods of time, and whether dividends reliably grow to keep pace with inflation."

Yes! That is exactly my point. Two examples; ALD and FRT, both have paid dividends for over 40 years without fail, so there are records of sustainability. While either one could stop raising, reduce, or even suspend the dividend tomorrow, it is unlikely and if you diversify correctly the damage caused by a few doing that is overweighed by the average yield of the portfolio.

*"There is usually a reason that some stocks have higher yield. *The market does not normally leave free money sitting on the table for decades at a time, the length of many retirements."

Basically you are espousing the efficient market theory, that all information is known and quickly acted upon. however when a business and tax implications are different and poorly understood investors shy away and buy what they understand. Things like REITs, MLPs, BDCs, and Royalty Trusts require a little extra homework to understand business model and the tax implications. Normally when a company is paying out more in dividends than what they report as taxable earnings that is unsustainable and a poor investment, but these types of companies have high value assests that allows them to reduce reportable earnings on paper (by depreciating assets that are actually appreciation in value) but actual cash flow exceeds reportable earning by a wide margin. This allows them to payout more than reported earning and still have money left over to grow and replace worn out equipment.
Those who don't take the time to look into these things consider them risky investments because of high and normally unsustainable payout ratios, but actually they are safer and more sustainable than many blue chips So is there a cost to sustainable higher yields? yes but not in risk but rather in some extra time to check out which of these companies are paying a high yield because they are in trouble ( and will soon cut the dividend (like IBM a few years back) and which ones can sustain a high and growing yield for decades to come.
Another thing you mention is they have to sustain a high yield for decades. No they do not. You only have to catch them at a low price during the year and when they go back up the yield you captured is yours for all the decades you own it even if they never go that low in price again.

*"Still, if you are unusually adept at picking value stocks, you might make it work. *Buffet has outperformed the market for decades due to his skill. *You may have a rare talent for picking high yield stocks that survive for the long term, and grow their dividends to keep pace with inflation."
Warren Buffet does not consider himself highly skilled. He follows the teachings of Benjamin Graham and says they are so simple that anyone can do it but that few will stick to so simple a method. They think it is too simple and have to modify it and that is their downfall. He uses value line which anyone can read at the public library, he freely discusses in BRK's annual reports the criteria he uses to pick undrevalued companies. There are now several money managers who have started following his method and have good results so far.

I do not believe I need above average talent to pick the right sustainable high yielders that will grow their dividends, just the self discipline to stick to the method without trying to modify it.
What do you think? Hank Joy
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 12:27 AM   #49
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Re: Strategy for a (substantially) higher withdraw

Quote:
What are the risks of waiting until this puppy hits 8%, and buying in with the intention of taking only the yield and not touching the principal indefinitely?
Bond fund dividends do not usually grow with inflation. *If you live off of the dividends, under a best case scenario inflation will gradually erode your standard of living. *If a prolonged recession hits, dividends will fall as more corporations default during such times. *Vanguard's high yield fund has fallen in price in a zig zag fashion since its inception 20 plus years ago. *There is no reliable long term information on high yield, so we simply don't know how it performs under a variety of conditions. However, I am given pause by the fact that Vanguard's high yield fund has a 10 year total return lower than that of the regular intermediate bond fund. Corporate defaults on debt reduced returns over the period below that of regular bonds. This is not very promising.
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 01:02 AM   #50
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Re: Strategy for a (substantially) higher withdraw

Quote:
Warren Buffet does not consider himself highly skilled. *He follows the teachings of Benjamin Graham and says they are so simple that anyone can do it but that few will stick to so simple a method.
Warren has modified Ben's approach somewhat. *He is also currently heavily in cash, foreign currencies, and commodities because he sees few good equity values in the present day market. *Warren also tends to take an active management approach in the companies he buys. *He can make sure they continue to do things right, which the average investor cannot do.

That said, the small cap value approach has produced better returns over the long run, at a higher volatility. *Adding 30% SCV to an S&P index, and rebalancing annually, increased returns and reduced overall volatility (since 1927, the limit of the French data base). *However, a 100% SCV allocation decreased total returns during most starting periods, because of its high volatility. *During the top 2 deciles, it increased performance. *Your proposed portolio is essentially a 100% SCV one, so I would expect similar results. *That is, smaller total 30 year returns than the S&P during most starting periods, but a greater return during about 20% of starting periods.

I own a REIT index fund that I bought in Y2K when they were real cheap, so I agree that buying SCV when they are cheap is a good idea. *The long term total returns tend to be commeasurate with the risk of an asset class, but in the short term assets can become over or under valued. *The danger of living off all of the dividends of a diversified portfolio of companies like ALD is that the dividends may not grow enough to keep up with inflation. *Especially as a few of them will inevitably fall on hard times. *High yielders tend to be slow growers, so the survivors will not necessarily grow enough to compensate for the companies that fall. *Still, if you are sufficiently adept at applying the princples of Ben and Warren, you might make it work. *I can't really say one way or the other.

One alternative you might consider is to live on less than 100% of your dividends, and as your portfolio increases in size you can take the same percentage *of your dividends from the larger portfolio. *Hopefully, reinvesting the difference between dividend yield and your withdrawals will make your portfolio grow each year. *This will allow you a margin of safety in case dividends don't grow as much as you expect them to. *You are on uncharted territory here, so some caution is reasonable. There is no way to predict how this type of portfolio might perform in the future.
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 03:39 AM   #51
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Re: Strategy for a (substantially) higher withdraw

Mikey:

Thanks for putting up the link to the Smithers article.

Smithers makes a point that I believe lends a bit of support to the idea being put forward by Hankjoy. Smithers compares putting money in stocks at today's price levels with putting money down at the roulette table. The comparison is that it is possible both at roulette and at investing in overpriced stocks to make money in the short term. In the long term, however, the mathematcical realities are so strongly against you that you are all but certain not to realize a good outcome. The smart gambler is the one who walks away from the table after a few lucky spins, and the smart investor in overpriced stocks is the one who abandons his buy-and-hold philosophy before the mathematics of a long-term investment in that asset class catches up with him.

For purposes of the idea being discussed on this thread, however, it is important to note that the tables that Smithers employs to make his point are tables showing results for broad indexes of stocks. So his point really only applies to a broad index. He is not saying that an investor cannot overcome the mathematical realities that generally apply through effective stock picking. My guess is that this would be a hard thing to do, but it would seem to me that one would be far more likely to beat the averages through effective stock picking than through hoping that for some unknown reason the mathematical realities will not apply this go-around as they always have in the past.

The increases in stock valuations that we have seen in recent years have turned the conventional wisdom re indexing on its head. It used to be that indexing was thought to provide a superior long-term return because you limited your transaction costs while locking in the superior long-term returns provided by stocks. Now that valuation levels have gone so high and dividend payout levels have gone so low, what you are locking in is not something good but something bad--the long-run certainty (presuming that the future is like the past) of unappealing returns.

It still seems to me that the withdrawal levels that Hankjoy is suggesting are possible for his approach are too far on the high side to be believable. I remain skeptical as to the details of his approach. But it makes sense to me that an approach rooted in the idea of effective stock picking would provide a withdrawal rate higher than what could be reasonably justified for retirees invested in a broad index of stocks. Aspiring early retirees determined to maintain a high-stock portfolio at today's valuation levels might want to explore the idea of moving out of indexes until the SWR for the index approach becomes more atttractive once again.

I would like to see more analysis both pro and con as to Hankjoy's particular approach to stock selection. Much of what he is saying makes sense to me, but, again, I am skeptical that the sorts of withdrawals he is suggesting are possible can be counted on for the long term. Either way, I again applaud him for putting the question on the table. I've learned some new things about how to effectively invest for early retirement during the course of reading and participating on this thread.
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 04:24 AM   #52
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Re: Strategy for a (substantially) higher withdraw

I do not believe I need above average talent to pick the right sustainable high yielders that will grow their dividends, just the self discipline to stick to the method without trying to modify it.

I believe that you are making a very important point here, HankJoy.

The Efficient Market Theory suggests that there is no possibility for any one investor to gain anything other than an extremely temporary edge because there is so much information about stock investments widely available that any temporary edge is quickly undermined as the information is transmitted to other investors. One big flaw in the theory is that it ignores the question of whether investors are able to act on the information available to them.

Effective investing is only in part a question of becoming well informed about your investment choices. The harder task is to become emotionally able to take advantage of what you have learned. There is tons of evidence, both in the historical stock-return data and elsewhere, that it is a rare investor who possesses the emotional fortitude to invest as effectively as would be possible were emotions not a major factor in investment success. Most investors should be putting less energy into become informed about their investment choices (although some efforts in this regard are of course required) and more into becoming emotionally prepared to reap the harvest of what becoming informed reveals to them.

Supporters of the Efficient Market Theory will pooh-pooh your ideas on grounds that you would need to become some sort of Super Investor to hope to reap returns better than average. I have found little support for that claim in the data and other materials that I have examined in the nine years that I have been developing the data-based SWR tool. My belief is that two of the most important factors leading to investing success are possession of the emotional fortitude to make investing choices that go against the grain of conventional wisdom at the time they are being made and possession of a long-term plan that helps you stick with well-reasoned choices for the long term.

My sense is that you are on the right track in your thinking. I am especially impressed that you came to this discussion board seeking feedback, probably knowing that the general reaction was not going to be terribly positive. I believe that that hints at an inner confidence in your ideas that is liklely the product of a lot of prior research and analysis. I have doubts about the target numbers you have put forward, as you know. But if the community analyzes your questions properly, over the coming months and years we will figure out who is right re the numbers or whether the reality is somewhere between your current expectations of what is possible and mine.

You are questioning key components of the "Stocks for the Long Run" paradigm, just as I am. You are coming at the question from a very different angle (a more pro-stock angle), and that is of course fine. But I like it that you are thinking things though independently of what you have read in personal finance magazines. It is my view that the advice commonly voiced in most personal finance magazines today is dangerous to the hopes of aspiring early retirees to realize their life goals. So I believe that more independent thinking is very much in need at the various Retire Early boards (there is generally a good bit more of it in evidence at this board than at some others, to be sure). So I find your question a fresh, compelling, and constructive one.

The Executive Summary version of the message communicated above is--Thanks, guy!
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 06:17 AM   #53
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Re: Strategy for a (substantially) higher withdraw

To repeat - my 20% hobby has not overwhelmed my balanced index in the last ten years. A couple of points:

1. My hobby is more in the middle - dividend plus dividend growth, not Trusts, MLP's, conv/ord. preferred, etc. I tend toward utilities, oils, REITs, banks and drugs when cheap enough.

2. My portfolio in this area is continually creamed by buyouts/mergers. In seems when a stock gets 'cheap' enough - they get bought or merged. Down to one water utility from 4 or five in the 90's. This effect(beware the experience of one) may make any data analysis difficult.

***** - now that I think about it, I am in a way persuing 'multiple streams of income', which is another way of looking at it.

Hank - This area is under discussed on this forum but I hesitate as to how to frame the discussion/analysis. I view it as a spectrum from high yield bonds - preferreds, MLP's, REITs, utilities and plain old div/div growth stocks. I also own Gabelli conv inc. closed end - yet another critter. Also what you take out and what you reinvest to keep up with inflation is another area. Right now I'm in DRIPS - reinesting div.

Again - just a hobby. 'Real ER' is balanced index.
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 06:38 AM   #54
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Re: Strategy for a (substantially) higher withdraw

You might want to look at USA, (that's the symbol)Liberty Equity All Star Fund..a closed end fund that I have owned for years..this is not a recommendation to buy or sell.

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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 03:10 PM   #55
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Re: Strategy for a (substantially) higher withdraw

JWR1945
"First, about the S&P500 index and the historical record, dividend yields used to be much higher than they are today. Yields of 6% to 8% were commonplace. They have been declining for the last three or four decades as stocks have become more popular. You can check this out by looking at Professor Robert Shiller's database (which is what FIRECalc uses). www.econ.yale.edu/~shiller/"

Yes! The reason the yield was declining is not because the dividends went down but that the prices and the PEs shot up much faster than the dividend were growing. Even when the market collapsed for 3 years in 2000-2002 most dividends continued to be paid and even grew for many companies. If you had bought the S&P 500 when it was at 6% yield you could have lived on the 6% without ever selling a single share, the dividend would have gone up every year to keep up with inflation.

"I recommend that you (hankjoy) look at earnings yield based on the previous ten years of earnings (whenever possible). Dividends come out of earnings and looking at earnings yield (averaged) protects you from encountering surprise cuts in dividends. In addition, looking at ten years of earnings reduces the bad effects of many kinds of accounting gimmicks."

Good point. Here is a short cut in screening for which candidates to do serious due diligence on. If a company has paid a high dividend and raised it every year for 10 or more years (sounds like Mergent's dividend Achievers) it is very likely a good candidate because; sales and profits can be massaged (just look at Enron et. al.) but a dividend has to be paid in cash, the check has to clear the bank. A company might be able to borrow money, sell assets, issue more stock to make the dividend in the short run but over several years a high dividend that continues to increase is a real-can't be faked kind of thing. A clear signal that earning are real and growing. But this is only the beginning not the end of due diligence.

"For unclemick: one big advantage to holding individual stocks is that you have control of the prices at which you buy and sell. If you look at the 52-week high and low prices of individual stocks, this ratio is typically between 1.5 and 2 and for many it is 3 or higher. That is not because a stock's price goes up-up-up or down-down-down. It is normal volatility and prices go both up and down. Provided that you are willing to let an opportunity to get away from you and provided that you are able to wait for your own price, you can assure yourself of getting a better than the median price"

AND A BETTER THAN MEDIAN YIELD WITHOUT ADDED RISK.

" Your ability to do this with an index fund is much less."

Absolutely true. Great post, Hank Joy

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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 03:19 PM   #56
 
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Re: Strategy for a (substantially) higher withdraw

Okay, this is just me talking. Forget the DJIA, P/E
ratios, long term trends, performance projections,
dividend history, etc etc. Rely ONLY on yourself.
Anticipating/expecting particular behavior from others
is a sucker bet. History is only marginally helpful.
Take Iraq. Ten years ago, no one could have predicted
the current mess. The financial markets are the same,
i.e. chaos................

John Galt
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 03:41 PM   #57
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Re: Strategy for a (substantially) higher withdraw

Bob_Smith
"Hankjoy, if what you are suggesting is workable, there would be stock mutual funds yielding 8% consistently, and we'd all be spending 8% of our assets instead of 3% or 4%. "
Just because no one is doing it does not mean it cannot be done, we sent a man to the moon when no one had done it and many said we would fail.

"I wish it were possible, but there is no free lunch. Too many brilliant minds are analyzing every advantage imaginable, so it's very difficult to beat the market over a long period of time like 30 or 40 years."

Then how come Warren Buffett did it. It is possible but most want to follow the herd instead of following a plan that makes sense, but requires the emotional discipline to stick to it when everyone is crying the sky is falling.

"What you are describing is stock picking, and in that game there must be a loser for every winner."

Hey everybody listen up here.
NAIC (the investment club organization) says there are 3 ways to profit from growth investing;
1. Earning growth
2. Pe ratio expansion
3. Dividends
Bob-Smith you are right using method 2. If I buy a stock from you at a PE of 30 (when you only paid a PE of 20) because I am hoping to finding a greater fool than me to pay me a PE of 40 then somebody is gonna bet left holding the bag when the bubble implodes. This is called the greater fool theory of investing. We just saw that in 2000-2002.
But if buy a stock from you for twice what you paid 5 years ago because the earnings have doubled, everyone wins, there are no losers. That is number 1 above happening. A wise investor considers number 2 above to avoid paying too high a price or selling at too low a price.
Most of us don't even consider #3. Dividends are too slow, too boring, they are not a get rich quick vehicle so we ignore them. We would rather buy a growth stock growing earnings 15% a year with little or no dividend than one paying an 8-10% yield and growing earnings at 5-7% a year. But if we reinvest the dividend the combination will give us the same NAV value but with much narrower swings in price and much less downside risk. The dividends will grow to keep up with inflation and we never sell shares when the market is down to make part of our withdrawal because the dividend provides or exceeds our withdrawal requirements.

What are your thoughts? Hank Joy
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 03:59 PM   #58
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Re: Strategy for a (substantially) higher withdraw

John Galt: (You missed my post above at #45.)
"Anticipating/expecting particular behavior from others
is a sucker bet. *History is only marginally helpful.
Take Iraq. *Ten years ago, no one could have predicted
the current mess. *The financial markets are the same,
i.e. chaos................"
Good point, very few things are guaranteed including your bond interest payments, but what is guaranteed is that inflation will erode both the buying power of bond interest payments and the value of the principle when the bond matures. TIPs provide protection here but at a very low interest rate.
However, things that have consistently happened over a long period of time are more likely to continue than things that have varied over a long period of time. ALD and FRT have both paid their dividends for over 160 quarters (more than 40 years without fail), they are more likely to continue than something that has only recently started paying dividends or something that has missed or reduced their dividend.
Which wouldyou rather have? hank Joy
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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 04:22 PM   #59
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Re: Strategy for a (substantially) higher withdraw

unclemick (I don't know how to put aquote in those nice enclosed boxes like you guys do, sorry)
"To repeat - my 20% hobby has not overwhelmed my balanced index in the last ten years."
I believe your hobby has been an outlet for the male hormones wanted us to mess with the ER portfolio and that is a good thing.

"1. My hobby is more in the middle - dividend plus dividend growth, not Trusts, MLP's, conv/ord. preferred, etc. I tend toward utilities, oils, REITs, banks and drugs when cheap enough."

The trusts and MLP I buy include dividend growth.



"Hank - This area is under discussed on this forum but I hesitate as to how to frame the discussion/analysis. I view it as a spectrum from high yield bonds - preferreds, MLP's, REITs, utilities and plain old div/div growth stocks."

Bonds do not grow their payouts nor their NAV if held to maturity. Prefferreds don't grow payouts either but have some asset growth potential if converted. However MLPs, Trusts, REITs, utilities,and dividend/dividend growth investments are all part of what I call "Single Best Investments",(after the book by Lowell Miller that got me started thinking about all this).

"Also what you take out and what you reinvest to keep up with inflation is another area. Right now I'm in DRIPS - reinesting div."

Most of these investments grow their dividends because earnings are growing and that makes their price rise over time so even if you don't reinvest dividends the income and NAV will grow faster than inflation. The few that don't grow that way you could reinvest a percentage of the dividend to keep up with inflation.

What are your thought on this? Hank Joy

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Re: Strategy for a (substantially) higher withdraw
Old 05-21-2004, 04:59 PM   #60
Dryer sheet wannabe
 
Join Date: May 2004
Posts: 20
Re: Strategy for a (substantially) higher withdraw

*****

"I believe that that hints at an inner confidence in your ideas that is liklely the product of a lot of prior research and analysis."

I could be wrong or missing something very key here but not because I have not carefully researched and thouroughly thought out this thesis. That is why I seek constructive criticism here to find out if there is some risk not accounted for in this investment model.

"I have doubts about the target numbers you have put forward, as you know. But if the community analyzes your questions properly, over the coming months and years we will figure out who is right re the numbers or whether the reality is somewhere between your current expectations of what is possible and mine."

This analysis is what I am looking for.

If a diversified group of companies with;

1. solid finances
2. has sustained a high yield for decades with
3. consistent moderate earnings growth to fuel dividend growth and
4. consistently raises the dividend while keeping the payout ratio consistent and
5. is not eating it's seed corn but retains and invest enough earnings to continue to grow the business and
6. we can live off of the dividend alone without ever being forced to sell shares in a down market to pay our bills,
7. then why would it be risky to withdraw only the dividend to live on?

"You are questioning key components of the "Stocks for the Long Run" paradigm, just as I am."

But in that book "Stocks for the Long Run" the author says something very profound about dividends and the role they play in being the driving force in the long run total return of stock investing. It is only a few paragraphs long and most people who claim to follow that book have missed that part. You can find it by looking up dividends in the index.


"The Executive Summary version of the message communicated above is--Thanks, guy"

IMHO I have much to learn from you all here at this board and perhaps something to contribute to the discussion. Thanks for your patience, Hank Joy
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