Reading "Get Rich with dividends" and let me say...

[target2019]

I will say what the others are too diplomatic to say: "Living off dividends" is an antiquated notion held mostly by naive investors. It may have been suitable to Dickens characters, but probably not to you.

There are better ways to go about what you want to accomplish. Read and learn.[/QUOTE]

any suggested reading material?

Gordon,
What have you read so far? I'm curious.

 

[unclemick]

The Little Book of Common Sense Investing - John C. Bogle

The Intelligent Investor - Benjimin Graham

Handbook of Dividend Achievers - one of the latest versions from Amazon et al

Of course back in the day I kept track of the top ten stocks owned by -pssst Wellesley, Wellington and sometimes Dodge and Cox.

heh heh heh - BUT truth told since 2006 my lead sled dog has been Vanguard's Target Retirement 2015. ER jan 93 at age 50 - now a few weeks from age 77.

 

[lordjust]

https://www.bogleheads.org/readbooks.htm

I'd suggest picking 4-5 books off that list that interest you, and reading them slowly and carefully, thinking about everything that is said. Then decide what you want your portfolio to look like, and bounce your ideas off people here or at the Bogleheads forum .

My choices may be different from yours. But anyway, my portfolio consists of 30% Wellesley (VWIAX), and the other 70% of is mainly several very broad index funds (VTSAX, VBTLX, VFWAX). I also have SS, a mini-pension, and a paid off home, so by choice I spend less than my dividends.

W2R,
Do you worry about the fact that someone else is managing the balance/investments? I am currently going into VBIAX because I am not in a vanguard account. I am not so much worried they will have a bad pick but I do get concerned that (as others here have stated) you may have capital gains you weren't expecting? Perhaps it just comes with the territory ?? Just looking for thoughts because I think this is a common "problem".

 

[Markola]

Nope. Not even that complicated. The problem with selecting for dividends is that you are rejecting the majority of the market, including companies that will generate better returns than the dividend payers. They might be growth companies, small companies, value companies, ... There's no way to know. So the winning total return strategy is to buy the market. Don't "aim" for anything.

What I was thinking, too. To each, their own but, boy, do I take the opposite approach. My portfolio of globally-diversified stock and bond index funds has about 28,000 securities in it, last I checked. I not only want to own the casino, I want to own all the parking spots, surrounding hotels, streets and bridges and the cars the dealers drive to work.

 

[unclemick]

The Little Book of Common Sense Investing - John C. Bogle

The Intelligent Investor - Benjimin Graham

Handbook of Dividend Achievers - one of the latest versions from Amazon et al

Of course back in the day I kept track of the top ten stocks owned by -pssst Wellesley, Wellington and sometimes Dodge and Cox.

heh heh heh - BUT truth told since 2006 my lead sled dog has been Vanguard's Target Retirement 2015. ER jan 93 at age 50 - now a few weeks from age 77.

On second thought skip the Handbook and look at what dividend oriented funds own. I think the handbook got too expensive unless you find a library version.

Heh heh heh -

 

[Chuckanut]

Nope. Not even that complicated. The problem with selecting for dividends is that you are rejecting the majority of the market, including companies that will generate better returns than the dividend payers. They might be growth companies, small companies, value companies, ... There's no way to know. So the winning total return strategy is to buy the market. Don't "aim" for anything.

I highlighted the key words.

IIRC, famed investor John Templeton, once bought 100 shares of every stock he could find that was under $1. He had no way of knowing which stocks would do better or worse, but in the end Sir John made a lot of money as the winner's gains outpaced the losers losses.

 

[OldShooter]

What I was thinking, too. To each, their own but, boy, do I take the opposite approach. My portfolio of globally-diversified stock and bond index funds has about 28,000 securities in it, last I checked. I not only want to own the casino, I want to own all the parking spots, surrounding hotels, streets and bridges and the cars the dealers drive to work.

Yup. Me, too. VTWAX owns basically all the listed stocks in the world, as of this morning VG says its 8,401. On the bond/fixed income side, though, we take a totally different approach and hold about 90% in TIPS.

 

[GGekkoNCo]

Nope. Not even that complicated. The problem with selecting for dividends is that you are rejecting the majority of the market, including companies that will generate better returns than the dividend payers. They might be growth companies, small companies, value companies, ... There's no way to know. So the winning total return strategy is to buy the market. Don't "aim" for anything.

Index funds with a mix of stocks/etfs > ?

 

[GGekkoNCo]

https://www.bogleheads.org/readbooks.htm

I'd suggest picking 4-5 books off that list that interest you, and reading them slowly and carefully, thinking about everything that is said. Then decide what you want your portfolio to look like, and bounce your ideas off people here or at the Bogleheads forum .

My choices may be different from yours. But anyway, my portfolio consists of 30% Wellesley (VWIAX), and the other 70% of is mainly several very broad index funds (VTSAX, VBTLX, VFWAX). I also have SS, a mini-pension, and a paid off home, so by choice I spend less than my dividends.

I actually read bogleheads 3 fund portfolio and it was pretty interesting... Index's that cover S&P and int'l exposure as well as bond exposure. Index funds wouldn't be ideal for generating income though would they? I thought they were more of a growth strategy...

 

[stevemac]

The problem with selecting for dividends is that you are rejecting the majority of the market, including companies that will generate better returns than the dividend payers. They might be growth companies, small companies, value companies, ... There's no way to know. So the winning total return strategy is to buy the market. Don't "aim" for anything.

What are your thoughts about a mixture, i.e., a "Dividend Aristocrat" ETF combined with, e.g., VTSAX or VIG? The former for cash flow, the latter for growth?

 

[OldShooter]

What are your thoughts about a mixture, i.e., a "Dividend Aristocrat" ETF combined with, e.g., VTSAX or VIG? The former for cash flow, the latter for growth?

I see no benefit. Just buy something like VTSAX and when you need some cash, sell some. Here is a good discussion on that strategy: https://famafrench.dimensional.com/videos/homemade-dividends.asp
French doesn't mention tax efficiency, but there are potential tax efficiencies to this strategy as well, since some of your sales might result in long-term capital gains. (Someone among our more tax-oriented members may have a comment on this too.)

In a tax-sheltered account I would simply reinvest dividends and pay absolutely no attention to to them. (Which is what I do.) In a taxable account, reinvestment gives you many small lots with different cost basis to keep track of for tax reasons. There I would just have the dividends paid out. If the payout exceeded my cash needs I would probably save it up and buy more VTSAX maybe once a year or less, just to have fewer lots to keep track of..

 

[target2019]

What are your thoughts about a mixture, i.e., a "Dividend Aristocrat" ETF combined with, e.g., VTSAX or VIG? The former for cash flow, the latter for growth?

VOO yield 1.89. NOBL yield 2.25. A small difference to give up growth. Compare the total return of these in Portfolio Analyzer.

 

[Onward]

I was going to quote various things and agree with them, but it's easier just to say I would echo everything OldShooter has said in this thread.

 

[SnowballCamper]

SDOG is an "index" option to chase dividends. It picks the top 5 dividend paying stocks in each of the ten sectors of the S&P 500, rebalance each quarter and reconstitute annually (or something like that). Expense ratio is higher than low cost simpler index funds -- 0.4% and performance lags the S&P500 overall. I held it for a while in my IRA and the DW still has some.

 

[lampshade]

What are good dividend stocks? Does this work the same way a 401(k) works. A group of stocks that some company picks for ypu? Do you pick your own stocks?

 

[stevemac]

VOO yield 1.89. NOBL yield 2.25. A small difference to give up growth. Compare the total return of these in Portfolio Analyzer.

I want to make sure I follow that "small difference" means you wouldn't be against splitting the funds if someone wants some near-predictable monthly/quarterly income. Thanks for responding, and what is the reason for highlighting VOO compared to, e.g., VIG/VTSAX? Yes an example or considered a better vehicle?

 

[stevemac]

I see no benefit. Just buy something like VTSAX and when you need some cash, sell some. Here is a good discussion on that strategy: https://famafrench.dimensional.com/videos/homemade-dividends.asp
French doesn't mention tax efficiency, but there are potential tax efficiencies to this strategy as well, since some of your sales might result in long-term capital gains. (Someone among our more tax-oriented members may have a comment on this too.)

In a tax-sheltered account I would simply reinvest dividends and pay absolutely no attention to to them. (Which is what I do.) In a taxable account, reinvestment gives you many small lots with different cost basis to keep track of for tax reasons. There I would just have the dividends paid out. If the payout exceeded my cash needs I would probably save it up and buy more VTSAX maybe once a year or less, just to have fewer lots to keep track of..

Great advice; thanks.

 

[target2019]

I want to make sure I follow that "small difference" means you wouldn't be against splitting the funds if someone wants some near-predictable monthly/quarterly income. Thanks for responding, and what is the reason for highlighting VOO compared to, e.g., VIG/VTSAX? Yes an example or considered a better vehicle?

NOBL picks from the S&P 500 only, not the Total US Market.

The only ETF focusing exclusively on the S&P 500 Dividend Aristocrats—high-quality companies that have not just paid dividends but grown them for at least 25 consecutive years, with most doing so for 40 years or more.

The difference you refer to is so small, it makes no sense to give up the growth of S&P 500. Did you backtest at all?

 

[stevemac]

NOBL picks from the S&P 500 only, not the Total US Market.
The difference you refer to is so small, it makes no sense to give up the growth of S&P 500. Did you backtest at all?

No backtest (and haven't invested in any Aristocrat funds yet; I was just curious). As for NOBL being only the S&P 500, does anyone see an advantage to diversifying funds between NOBL, e.g., and the total US market (I believe that's VTSAX/VIG?)?

 

[target2019]

Holding both is not diversification.

 

[stevemac]

Holding both is not diversification.

I realize that (I used the term informally), but the point I was pursuing was simply whether there is a benefit to having both funds, since an earlier comment highlighted that they have different makeups. I suspect there's an easy way to test historically -- I just don't know where that site (those sites) are...yet. A key factor is, as I mentioned, small differences don't have a significant effect on my investing, but others might find the information helpful.

Thanks.

 

[GGekkoNCo]

Gordon,
What have you read so far? I'm curious.

I have read the bogleheads 3 fund portfolio and of course this dividend book. I have also read some others like buy high sell higher and that kind of thing. Pretty basic retirement stuff but i'm trying to develop the strategy I want to go with /aim for with the current income I have... I already have a 401k with my employer but it seems pretty mediocre...

 

[GGekkoNCo]

The Little Book of Common Sense Investing - John C. Bogle

The Intelligent Investor - Benjimin Graham

Handbook of Dividend Achievers - one of the latest versions from Amazon et al

Of course back in the day I kept track of the top ten stocks owned by -pssst Wellesley, Wellington and sometimes Dodge and Cox.

heh heh heh - BUT truth told since 2006 my lead sled dog has been Vanguard's Target Retirement 2015. ER jan 93 at age 50 - now a few weeks from age 77.

bought this book awhile ago and haven't gotten around to it...pretty thick book... value investing seems dead though...

 

[OldShooter]

... does anyone see an advantage to diversifying funds between NOBL, e.g., and the total US market (I believe that's VTSAX/VIG?)?

The research would say that we want to hold the whole market, all sizes of companies and all sectors. In contrast the S&P is just a sector fund of large cap companies. The "quilt chart" ( https://www.callan.com/periodic-table/) illustrates how sectors wax and wane unpredictably. There are also some who believe that the S&P is overpriced due to all the naive money coming into the market seeking "index funds." That said, the S&P is about 80% of the US market cap. If you run a Portfolio Visualizer comparison between a total market and an S&P portfolio there is not a lot of difference. Personally, I buy the whole market. Others make the opposite choice. Make your decision, wait ten years, and you may know whether you were right or wrong.

bought this book awhile ago and haven't gotten around to it...pretty thick book... value investing seems dead though...

Yes. I would not recommend Graham at all as a starter but definitely not any edition but the current one with Jason Zweig's commentary. In general though, I also agree that value investing mostly died as the market moved towards randomness. In Graham's day (and at the beginning of his disciple, Buffet's day) the market was inefficient. Information flowed slowly and was not equitably distributed. The winner in an inefficient market is the person with the most information, like those guys. But now information dissemination is near-instant and it much more equitable, though not perfect. The amateur still doesn't know everything that the pros know and the amateur doesn't get the information as quickly. For reading I would suggest Charles Ellis' "Winning the Loser's Game." He makes the "increasing randomness" observation and explains the reasons. It's also about 350 pages shorter than Graham. Be sure to get the latest edition of Ellis.

 

[target2019]

Lol. How many investing books does a younger person need to read?
Put your money into a low cost broad market investment, and get back to life and find a life partner!