5% Withdrawal Rate Portfolio

[Running_Man]

Interesting Question, the stock market has done nothing but go up since this portfolio was started and interest rates down, so 5% withdraswal I would not suggest with this portfolio today at this time. As DNP is probably about 20% too high I would say 4% is the best this portfolio would do, if I was starting now I would wait a year or two and in that time I expect DNP will come back to the range where 5% would be effective again.

Although if established I would hold on to it as the portfolio shows no real signs of failing and will do ok in a market decline or an inflationary surge.

I will state that if one had waited then March 2020 would have provided an excellent opportunity to establish the 5% portfolio. As I pointed out at 12.60 DNP was about 20% too high and the fall under 10 would have been the point to once again set this up. The March portfolio would have had 350 more shares of DNP at 2K less in cost for the portfolio when it was established, so it would have been an ideal time. Sorry I missed pointing that out. So far I believe the portfolio will show it held up well through the market decline and in the coming years I expect the higher inflation will provide it's test for the portfolio. As of today, I see no reason that anything would have invalidated this as a strategy or a specific concern in the coming 10 years, I fully expect the portfolio to be able to handle what is thrown at it for the next 10 years, but that's just an internet opinion from me, warning see my sig.

RM

 

[Gremlin]

This has been fun to follow. Thanks for taking the time to post these results.

 

[Koolau]

This has been fun to follow. Thanks for taking the time to post these results.

Perhaps not "useful" to those of us who are sticking to our own plan, but entertaining as all get out! Thanks Running Man. You give us something more fun to watch for than Covid19 reports! Keep up the good work since YMMV.

 

[zekeboz]

@Running_Man Thanks for posting the update. I have enjoyed this thread.

 

[Running_Man]

2nd Quarter 2020 Update - Can it go the social distance?

For the real RunningMan portfolio I proposed as a 5% withdrawal portfolio with someone of very minor savings ($36,375.90):

Payments Began March 15, 2015 $150.00/mo
Current Distribution:-- 06/30/2020 $165.00/mo updated and rounded up 1.6%
Total Distributions:———————$9,203.00

Portfolio Value @ 6/30/20: $39,983.
DNP : $28,832.00 --- 2,650 Shares
SDOG: $5,452.50 ----- 150 Shares
RVT : $ 5,266.80 ------- 420 Shares
MMKT : $432.61

Distributions received in 2nd Qtr:$683.70 Payments made $495.00

---------------------------------------------------------------------
Wellington Portfolio for Comparison @ 6/31/2020: $39,336.67

VWLEX $38,016.67 920.05 Shares
MMKT: $1,320.00

Distributions reinvested since last report: $235.90 +5.70 Shares @ 41.40


The Runningman portfolio is now ahead of the Wellington Portfolio as of June 30 in the early stages of the recovery. The running Man Portfolio increased 14.4% in the Quarter while the Wellington portfolio recovered 10.1%

 

[Running_Man]

3rd Quarter 2020 Update - Unmasking for the surge...

For the real RunningMan portfolio I proposed as a 5% withdrawal portfolio with someone of very minor savings ($36,375.90):

Payments Began March 15, 2015 $150.00/mo
Current Distribution:-- 06/30/2020 $165.00/mo updated and rounded up 1.6%
Total Distributions:———————$9,698.00

Portfolio Value @ 9/30/20: $38,202.81.
DNP : $26,606 --- 2,650 Shares
SDOG: $5,671.50 ----- 150 Shares
RVT : $ 5,308.80 ------- 420 Shares
MMKT : $616.51

Distributions received in 3rd Qtr:$678.90 Payments made $495.00

---------------------------------------------------------------------
Wellington Portfolio for Comparison @ 6/31/2020: $39,336.67

VWLEX $40,271.73 924.72 Shares
MMKT: $825.00

Distributions reinvested since last report: $235.90 +4.67 Shares @ 43.44


The Runningman portfolio is now well behind of the impressive Wellington Portfolio as of September 30. DNP was the main drag on the portfolio
__________________
ERD 50 says I should post this as a warning in believing anything I would post. I allocated one percent of my portfolio to calls for 2020 and then sold all my stocks on March 5, 2020. Returned back in on June 3, 2020.

https://www.early-retirement.org/fo...ark-on-a-historic-bull-market-run-101268.html

 

[Running_Man]

4th Quarter 2020 Update - A new year...

For the real RunningMan portfolio I proposed as a 5% withdrawal portfolio with someone of very minor savings ($36,375.90):

Payments Began March 15, 2015 $150.00/mo
Current Distribution:-- 12/31/2020 $165.00/mo
Total Distributions:———————$10,193.00

Portfolio Value @ 12/31/20: $41,447.61.
DNP : $27,152.50 --- 2,650 Shares
SDOG: $6,696 ----- 150 Shares
RVT : $ 6,787.20 ------- 420 Shares
MMKT : $801.91

Distributions received in 4th Qtr:$680.40 Payments made $495.00

---------------------------------------------------------------------
Wellington Portfolio for Comparison @ 12/31/2020: $43,895.66

VWLEX $43,565.66 982.09 Shares
MMKT: $495.00

Distributions reinvested since last report: $2,534.58 +57.37 Shares @ 44.18


It was a continuation of recovery and a good quarter for both portfolio's. In the fourth quarter the RunnngMan portfolio increased $3,244.80 8.49% and the Wellington portfolio increased $2,798.93 6.81%. Distributions have now broken four figures and both portfolio's are gaining over the original value with Wellington having a $2,448 lead.

 

[Running_Man]

Next update will be the Feb month end realignment of the portfolio's at the end of February The Running Man portfolio and the Wellington Portfolio are within $750 dollars of each other. Despite it's relative small portion of the portfolio, RVT from Oct 31 to the end of February benefitted from the small cap stock rally and increased 41% in four months. The portfolio's in February stood at $42,962.51 for the Running Man Portfolio and $43,712.98 for the Wellington Portfolio.

The Wellington portfolio is just about at it's all time of of $43,895 while the Running Man's portfolio high valuation was $47,007 at the end of 2019 and remains well under that level.

As a side note I was not a fan of the decision to absorb Duff & PHelps utility fund into the DNP fund. It appears to me that was a way for owners of the utility fund to take advantage of the NAV of DNP over the holdings at the expense of DNP shareholders.

 

[Koolau]

Hey, it's your "fund"! Do what the "big boys" do and change your holdings.

 

[Running_Man]

OK I will update this in the next few days, but as for DNP I can tell since it is a managed fund":
"The DNP Select Income Fund Inc. (NYSE: DNP) is a diversified, closed-end management investment company that first offered its common stock to the public in January 1987. The Fund's primary investment objectives are current income and long-term growth of income. Capital appreciation is a secondary objective"

Since this fund has advisor fees of about 0.90% annually, one would think this managed fund is just another fee generation that underperforms.

DNP holds 85% utility stocks and 15% bonds with about 4% of MLP''s mixed into the stock components.

Since January 1 2000 DNP has returned 366% to it's shareholders after fees. VTI in that same time period has returned 335%. The market moves in DNP are not in sync with VTI which would reduce the overall volatility of the portfolio.

It was for that reason that I selected DNP as the backbone for this strategy. Now it is true in recent years, as the FED is backstopping index fund investing that VTI has outperformed, but I am expecting in the long run those gains will be offset. In any case DNP gave me the confidence in creating an easy to administer portfolio paying out 5% and being able to increase with inflation the payouts. Next few years will be very exciting times, I thought the market was high when we started.

 

[Time2]

OK I will update this in the next few days, but as for DNP I can tell since it is a managed fund":
"The DNP Select Income Fund Inc. (NYSE: DNP) is a diversified, closed-end management investment company that first offered its common stock to the public in January 1987. The Fund's primary investment objectives are current income and long-term growth of income. Capital appreciation is a secondary objective"

Since this fund has advisor fees of about 0.90% annually, one would think this managed fund is just another fee generation that underperforms.

DNP holds 85% utility stocks and 15% bonds with about 4% of MLP''s mixed into the stock components.

Since January 1 2000 DNP has returned 366% to it's shareholders after fees. VTI in that same time period has returned 335%. The market moves in DNP are not in sync with VTI which would reduce the overall volatility of the portfolio.

I'm no expert, but do you think this chart, that from 2000 to now has dropped from 6.5% to almost zero, has any thing to do with the high rate of return for a fund that is very interest rate sensitive?
And where does it go from here.

 

[Running_Man]

I'm no expert, but do you think this chart, that from 2000 to now has dropped from 6.5% to almost zero, has any thing to do with the high rate of return for a fund that is very interest rate sensitive?
And where does it go from here.

Of course, as is the VTI. however the actual level of dividend will not be effected, interest rate hikes actually are more problematic for growth companies than utilities as most utilities get an earned rate of return.

 

[Time2]

Of course, as is the VTI. however the actual level of dividend will not be effected, interest rate hikes actually are more problematic for growth companies than utilities as most utilities get an earned rate of return.

As bonds prices went down the fight for return, drove the higher yielding (compared to bonds) utility stock prices up. That is why DNP got it's high return.
Just me speculating. I honestly only read the last 3 posts. I just wonder in what other economic environment would a utility/bond fund be on par with a total stock market fund.

 

[thepalmersinking]

I own a little DNP. Make it simple and use portfolio visualizer. 5% annual withdrawals actually indicates an almost doubling of your money if started taking the 5% in 1989.

 

[RonBoyd]

I don't own any DNP but what was curious what a "Simply Wall St." report would reveal.

View attachment DNP Select Income Fund (NYSE_DNP) - Share price, News & Analysis - Simply Wall St.pdf

 

[Running_Man]

I don't own any DNP but what was curious what a "Simply Wall St." report would reveal.

View attachment 39220

This report is computer generated and extraordinarily poor analysis of DNP.

Comparing annual returns to average stocks ignoring dividends? Talking about earnings announcements for a stock fund? not worth the time to look at it and if this is an example of analysis one gets from Simply Wall Street, I am wholy unimpressed.

 

[RonBoyd]

This report is computer generated and extraordinarily poor analysis of DNP.

Comparing annual returns to average stocks ignoring dividends? Talking about earnings announcements for a stock fund? not worth the time to look at it and if this is an example of analysis one gets from Simply Wall Street, I am wholy unimpressed.

First off, the reason I posted this was for this very reason... to get an opinion.

Anyway, of course it is computer generated. In what manner do you analyze your investment choices?

It was my fault dividends were not included:

In any event, I appreciate your input.

 

[Running_Man]

First off, the reason I posted this was for this very reason... to get an opinion.

Anyway, of course it is computer generated. In what manner do you analyze your investment choices?

It was my fault dividends were not included: View attachment 39225

In any event, I appreciate your input.

I analyze my investment choices by reading the 10K's of the companies I invest in and listening to conference calls. It is only by listening to the owners of a company and their plans that you can get a sense of the management of the company, in my opinion.

In the case of investing in funds, I typically invest in either the S&P500 or Total Market - when I am looking at putting a major change in the amount of money in my portfolio into the market, the performance is about the same. But I utilize long term performance as a judge, I have been following and utilizing DNP for over 25 years. I used to use it in combination with a bond fund FAX which had a lot of Australian Bonds and had a major activity in mining when I thought the Australian dollar was undervalued back in the day. RVT and ADX as well. I like buying closed end funds especially when they are trading to a large discount to the underlying assets, which DNP is not doing at the present time.

If you are comparing similar entities a computer comparison of key metrics to see how similar companies are performing under the same condition may be telling, but I am as you can see not a fan of a computer bot offering investment advice. I view those as similar to taking all companies that make 20 return on equity with 10 years of increasing dividends and a PE below 20 that have had 5 or more years of successive stock buybacks.

Now truth be told if you have been investing since 1981 it is pretty hard not to have done pretty well no matter what you have invested in, unless your timing is absolutely awful. the difficult thing to do is to have a goal, set a plan and stick to it over a long time and see if your ideas had merit, that was the basis of starting this thread and investment idea after studying the investment ideas of DNP over a very long time.

 

[Running_Man]

For the February revaluation the payout will increase by 1.6% the official inflation rate for 12 months as of Feb 2021 past 12 months rounded to the nearest dollar meaning for the next year the payout increases from 165 to 168.

$807.30 of dividend's excess from the Running Man's portfolio were used to purchase 78 shares of DNP @ 10.35 resulting 2,728 shares with a monthly dividend of 177.32. 45.29 shares of VWELX was sold in the Wellington portfolio to provide the $2,016 for the next year's payout. The Wellington Portfolio after the sale holds 936.80 shares.

 

[Running_Man]

1st Quarter 2021 Update -

For the real RunningMan portfolio I proposed as a 5% withdrawal portfolio with someone of very minor savings ($36,375.90):

Payments Began March 15, 2015 $150.00/mo
Current Distribution:-- 03/31/2020 $168.00/mo
Total Distributions:———————$10,691.00

Portfolio Value @ 03/31/21: $42,473.30
DNP : $26,952.64 --- 2,728 Shares
SDOG: $7,720.50 ----- 150 Shares
RVT : $ 7,606.20 ------- 420 Shares
MMKT : $193.96

Distributions received in 1st Qtr:$697.35 Payments made $498.00

---------------------------------------------------------------------
Wellington Portfolio for Comparison @ 03/31/2021: $44,874.11

VWLEX $43,026.11 942.73 Shares
MMKT: $1,848.00

Distributions reinvested since last report: $267.27 +5.92 Shares @ 45.11

A nice quarter for all involved and Wellington outperformed as DNP underperformed but that was offset by continued strong performance of RVT and SDOG. Current payout is around 4.7% annually and is heading into the 7th year for this portfolio. Will be interesting to see the effect on portfolio if inflation picks up in the coming years as appears likely.

 

[Running_Man]

Reminder for upcoming inflation: maximum payout in 2022 is $184.48 which would be 9.6% inflation. Again the goal was to get a 5% payout and protect against inflation as much as possible so that one could start with a 25% greater payout than the standard 4% rule.


1) Payout will start at $150 per month on March 23rd 2015 and continue for the rest of my life with annual increases each March 23rd of the lessor of the annual change in CPI or 3 percent. Should inflation exceed 3 percent the increase will only exceed 3 percent to the extent prior increases in the payout were less than 3 percent. So that the maximum payout band for the next 10 years per month are, but can be less if inflation is less over that time period:

2015: 150.00
2016: 154.50
2017: 159.14
2018: 163.91
2019: 168.83
2020: 173.89
2021: 179.11
2022: 184.48
2023: 190.02
2024: 195.72

 

[Gremlin]

Thanks for the update. Still following. Will be interesting to see how all this pans out if inflation pressures continue to build, as seems likely.

 

[Running_Man]

Thanks for the update. Still following. Will be interesting to see how all this pans out if inflation pressures continue to build, as seems likely.

Yes today Producer Price Index is up 6.6% on a year over year basis.

 

[RonBoyd]

I analyze my investment choices by reading the 10K's of the companies I invest in and listening to conference calls. It is only by listening to the owners of a company and their plans that you can get a sense of the management of the company, in my opinion.

I guess, what I should have really asked was, how, then, do you find your candidate companies to invest in?

 

[Running_Man]

I subscribe to Value Line Investment company and read each report of each company on the Value Line Investment Survey, there is about 120 a week to review, I review each of 1700 companies, and if the earnings, dividends and past growth look interesting I review the 10K of the company, play back an earnings call to get a sense of the company and put a price on where I would find the company interesting, then have a watch list of the companies and current prices and review each week for potentials.

Value Line offers their own credit rating in 3 different formats for each of the 1700 companies and their credit downgrades and upgrades are far ahead of any credit agency as they are not encumbered by having the people they report on as customers.