Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-15-2016, 12:29 PM   #41
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 3,697
That's great!
One of the most common sentiments on this forum is some variation of "Whatever works best for you".

My comment was more of an observation of my particular situation than a challenge to anyone's strategy.
__________________

__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-15-2016, 12:44 PM   #42
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,168
I think we're both happy that we aren't having to sell at this time! But even if I were, I'd be selling bond funds right now. I don't hold bond funds in my taxable account, so I'd actually be selling stock funds, and then exchanging bonds for stocks in my IRA (careful not to trigger a wash sale which would not be recovered in an IRA), so the net sale would be of bonds.

My comment was to correct your misconception or misrepresentation that total return people reinvest everything and our only recourse is to sell assets to get money to live on. Some may do that, but from another recent thread I know many do not. There are many valid and sound reasons for having a dividend strategy to generate your income, but thinking that you otherwise have to reinvest and subsequently sell is not one of them.
__________________

__________________
RunningBum is offline   Reply With Quote
Old 01-15-2016, 12:50 PM   #43
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 3,697
Quote:
Originally Posted by RunningBum View Post
My comment was to correct your misconception or misrepresentation that total return people reinvest everything and our only recourse is to sell assets to get money to live on. Some may do that, but from another recent thread I know many do not. There are many valid and sound reasons for having a dividend strategy to generate your income, but thinking that you otherwise have to reinvest and subsequently sell is not one of them.
Well then, I stand corrected!
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 01-15-2016, 12:50 PM   #44
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,829
I love that so many of us have different individual approaches to the distribution phase. There is more than one way to skin a cat, as the saying goes. It's fascinating reading, and every time I read a thread like this I check and think about my own strategies which is a good exercise, too.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 01-15-2016, 12:59 PM   #45
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 3,697
Quote:
Originally Posted by W2R View Post
I love that so many of us have different individual approaches to the distribution phase. There is more than one way to skin a cat, as the saying goes. It's fascinating reading, and every time I read a thread like this I check and think about my own strategies which is a good exercise, too.
Right! I came from a "whatever you do, never ever touch the principle" family so I already have a certain predisposition.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 01-15-2016, 01:25 PM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,168
Quote:
Originally Posted by W2R View Post
I love that so many of us have different individual approaches to the distribution phase. There is more than one way to skin a cat, as the saying goes. It's fascinating reading, and every time I read a thread like this I check and think about my own strategies which is a good exercise, too.
I agree! I read and consider most posts here on any number of financial strategies. Most of the time I decide my own strategy still holds, but I have changed or softened my stance on a few things. Often I post my own position, not to declare mine as the correct one for everyone, but to see if others can find flaws that make me consider changing.
__________________
RunningBum is offline   Reply With Quote
Old 01-15-2016, 02:19 PM   #47
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,032
Nowadays our portfolio is mainly composed of a handful of Vanguard index funds (so some might say that we follow a total return strategy), but all the dividends get paid to a money market fund and that's what our budget is based on (so personally I consider myself an income investor).

Technically, there is a bit of selling going on. We cannot readily access the income generated by our IRAs and 401Ks yet, so we have to do some selling in our taxable account as we reinvest the dividends in our tax-deferred accounts. So if our 401K/IRAs generate say $10K per year in income, we use it to buy $10K worth of new securities in our 401K/IRAs and we sell $10K worth of similar securities in our taxable account. So overall it's a neutral operation, except for transaction fees (really low) and taxes (which are minimal - most of the proceed is return of principal, and we can use TLH to offset the small gains). That's how we access the income generated in our tax-deferred accounts without paying penalties.
__________________
FIREd is online now   Reply With Quote
Old 01-15-2016, 02:26 PM   #48
Full time employment: Posting here.
ESRwannabe's Avatar
 
Join Date: Mar 2010
Posts: 629
An income strategy definitely works better for me. I started out as a Bogglehead and didn't like it.

For one I have a much easier time investing in specific companies as opposed to financial instruments. With a company I can listen into the quarterly data and form an actual opinion about the company. With a broad based index, I just have to put my faith in it that the US is not like Japan or some other country where broad indexes have done poorly for decades.

Secondly building up income gives me a goal to focus on that I can see progress in. With total returns you are going through such dramatic capital gains and losses it feels far too random and out of ones control.

Third I think that the entire point of investing in a company is to share in the profits via dividends. Without dividends you might as well invest in baseball cards, stamps, art, etc. because your return is dependent on what other people will pay you for it.

Fourth I think paying dividends is one of the few things that can be done to keep company management on the ball and not wasting shareholder money. I am not a fan of share buybacks as they seem to encourage exactly the opposite discipline (i.e. lots of buybacks when they are not needed and none when they are).
__________________
ESRwannabe is offline   Reply With Quote
Old 01-15-2016, 04:04 PM   #49
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
dividends do not have much to do with profits, dividends are a return of investor capital that is decided by the board .

dividends can be paid and have been paid even when company's lose money .

in fact many pay dividends right up until they are gone .
__________________
mathjak107 is offline   Reply With Quote
Old 01-15-2016, 04:12 PM   #50
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,418
Dividends are primarily a distribution to owners of the cash generated by a business, after paying debt and funding investments.

While there is no requirement that a company have a profit or positive cash flow, these things are usually seen as indicators of a healthy business (and sustainable dividend).
__________________
MichaelB is offline   Reply With Quote
Old 01-15-2016, 04:18 PM   #51
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
a history of a rising dividend is a good show of health . no company's with financial issues raise dividends over and over . but the bluest of blue chips have sustained their dividends right to the grave .
__________________
mathjak107 is offline   Reply With Quote
Old 01-15-2016, 04:26 PM   #52
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 6,321
Quote:
Originally Posted by mathjak107 View Post
a history of a rising dividend is a good show of health . no company's with financial issues raise dividends over and over . but the bluest of blue chips have sustained their dividends right to the grave .
Due Diligence is always required to make sure the company's earnings support the dividends. I think we will all agree with that.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is online now   Reply With Quote
Old 01-15-2016, 04:42 PM   #53
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by marko View Post
If as a total return investor, one's only option is to sell equities (which had had the dividends reinvested) to refill the bucket, this would not be a good time to do so.
Why is one's only option to sell equities. Because they are 100% stocks? Or some really high number like 85%?

Otherwise, the fixed income would handle the withdrawals, even with dividends reinvested. Most folks here are 50/50 +/-10 in equities, fixed income. If equities drop, withdrawal comes out of fixed income.

Yes, I'm glad I took my distributions in cash as it simplifies things, but it doesn't negate the above.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 01-15-2016, 04:53 PM   #54
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by RunningBum View Post
My comment was to correct your misconception or misrepresentation that total return people reinvest everything . . .
If anyone actually does that they should really consider changing strategies, unless all of their assets are in tax advantaged accounts.

Otherwise they're doing this. . .

1) Paying taxes on the fund / stock distribution
2) Paying taxes on the gains incurred when selling to pay for 100% of your living expenses.

When they could be doing this . . .

1) Pay taxes on distributions
2) Spend distributions
3) Pay taxes only on the gains incured to fund the spending not covered by the distributions you spent
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 01-15-2016, 04:56 PM   #55
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,369
Quote:
Originally Posted by Chuckanut View Post
Due Diligence is always required to make sure the company's earnings support the dividends. I think we will all agree with that.

That is right where I am focused on, as that is all I am concerned with as preferred stocks are useless without dividends. Mathjack is correct the dividends can be passed out without earnings to support it. And Mr. Market is always biting at the heels of companies passing out dividends without the financial wherewithal to continue them. One of our favorite stocks of discussion, KMI just recently proved this.


Sent from my iPad using Tapatalk
__________________
Mulligan is offline   Reply With Quote
Old 01-15-2016, 05:03 PM   #56
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by ERD50 View Post
A distinction without a difference. Money is fungible.

If one approach was clearly superior in all ways, money would flow into it, driving up the price until it was no longer superior.

-ERD50

+1

There's no evidence high dividend paying stocks, or stocks paying any dividend at all, perform better than any other stock on average. So all else being equal, it's total returns that matter. It doesn't matter how those returns arrive, either through dividends or capital gains, just so long as they arrive.

One area that matters a great deal, though, is whether the income constraint imposes more discipline on the retiree. It's easy for a total return investor to say "Hell, I can pull 4% real out of my portfolio forever" and hope for the best. If you have to generate your spending needs from dividends and interest you may come to the conclusion that you can't spend 4% because it's hard to get that kind of income from most stock / bond portfolios in this market.

On the other hand, trying to generate 4% income could cause some folks to build risky, high income, death machine portfolios (like that guy several years back who was going to live off High Yield Bond fund distributions or folks who loaded up on the juicy yields of the big banks pre-2008.) In that case, you'd be better off going the total return route with a more traditional asset allocation.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 01-15-2016, 06:02 PM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
I use a Total Return strategy.

I took my December distributions and paid my property taxes, my child's college tuition for Spring 2016, all my credit card bills, and my car payment (0% interest rate). That left enough money for Roth IRA contributions which were invested today and two days ago. I won't have any bills until the end of February.

My bond funds are up 1% in the past 2 weeks.

So all is well with the world.
__________________
LOL! is offline   Reply With Quote
Old 01-15-2016, 06:42 PM   #58
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 1,433
Quote:
Originally Posted by audreyh1 View Post
Why is one's only option to sell equities. Because they are 100% stocks? Or some really high number like 85%?

Otherwise, the fixed income would handle the withdrawals, even with dividends reinvested. Most folks here are 50/50 +/-10 in equities, fixed income. If equities drop, withdrawal comes out of fixed income.

Yes, I'm glad I took my distributions in cash as it simplifies things, but it doesn't negate the above.
Exactly. All I want to do is pay the bills. I'll leave the rest to hopefully grow.
__________________
Retired in 2016. Living off dividends / interest and a mini pension. Freedom.
foxfirev5 is offline   Reply With Quote
Old 01-15-2016, 07:10 PM   #59
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 3,697
Quote:
Originally Posted by audreyh1 View Post
Why is one's only option to sell equities. Because they are 100% stocks? Or some really high number like 85%?
.
As RunningBum pointed out, I was under the mistaken idea that a Total Return investor was reinvesting all dividends and had to sell equities to get cash.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 01-15-2016, 08:38 PM   #60
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by marko View Post
As RunningBum pointed out, I was under the mistaken idea that a Total Return investor was reinvesting all dividends and had to sell equities to get cash.
Because they were 100% stocks? What if they were 50% bonds? Wouldn't they just sell some from their bond funds if they needed cash for withdrawals or rebalance the portfolio?
__________________

__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Total Return - Capital Appreciation & Dividend/Income Midpack FIRE and Money 32 08-28-2013 10:19 PM
what is your nestegg's YTD return? pb4uski FIRE and Money 131 07-13-2012 06:48 PM
Poll:Income/dividend vs total return portfolio bigla FIRE and Money 16 05-20-2012 10:04 AM
Total Bond Mkt Index vs PIMCO Total Return Inst/Stable Value Dude FIRE and Money 7 04-03-2008 01:11 AM

 

 
All times are GMT -6. The time now is 10:25 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.