Looking for a Vanguard Dividend Fund for long term into retirement

[Stillwater007]

Hello! I am looking for a Dividend ETF fund that eventually can be a mutual fund that can provide passive income during retirement. There's so much out there ranging from Growth to Value to things like REITS, etc. I hear even individual stocks are great like J&J or 3M. But individual stocks scare me due to the lack of diversification and risk.

My time horizon is about 7-8 years before retiring. I will be receiving a pension that will cover around 85% of my living expenses, possibly more. I would like to utilize the dividends to supplement my remaining expenses.
I have around 20K in Wellesley; 15k in Wellington; and about 4k in VTSAX.

I do know the 3 funds I have does provide some level of dividends. Is it wise to choose a fund that is specific to dividends (like VIG or VOO?) or does the 3 I already have provide enough in the future?
How much is enough? $300+ a month would be a target.

Thank you in advance for any advice.

 

[24601NoMore]

Wellesley has long been one of my favorite funds (due to very solid long-term track record and overall conservative nature), but be aware that the Duration of it's bond portfolio is 8+. That means a potential 8% drop in the bond portion (~55%) for every 1% increase in rates..

I'm actually overweight Wellesley at this point given that..

Passive income in today's low-rate environment is pretty tough. Check out PIMIX (PIMCO Income Institutional). TTM yield is recently 4.73%. It normally has a $1M min but you can get it for $25K min at VG. Very high ER, though - normally 1.09 but temporarily lowered to 0.5..1, 3, 5 and 10 year averages north of 5% each. Duration CLAIMS to be 1.93, but with all the voodoo and black magic PIMCO uses on it's funds, I candidly don't know if that's realistic or an "effective" duration once you pull out all the swaps, derivatives and other craziness that PIMCO is known for.

That said, it's tough to beat the guys at PIMCO for Fixed Income returns. That's one area that Active management appears to beat passive. I personally stick mostly with Active for my FI holdings for that reason..

ETA - Wellington is only 30% or so bonds, and VTSAX is obviously 0% bonds. For that reason, I wouldn't personally rely on either for income..

 

[PaunchyPirate]

Have you done the dividend math for your existing funds compared to what you might be thinking of moving to? Calculate your dividends for last year from your current holdings. Then figure out how many shares of, say, VIG you could buy if you sold your current holdings. Then look up what VIG paid per share in its 4 distributions from last year. Add that up. That will tell you what your current holdings paid compared to what VIG paid. That’s a pretty good indicator of whether it meets your needs. Of course, what was paid last year is not a guarantee of what will be paid this year. But that is true with your current holdings.

 

[bloom2708]

Go for total return. Sell a few shares if you need more cash.

Don't chase dividends. Best to read up on how dividends work and are taxed and how share prices dip on the ex-dividend date.

 

[Gumby]

ETA - Wellington is only 30% or so bonds, and VTSAX is obviously 0% bonds. For that reason, I wouldn't personally rely on either for income..

Wellington may have 30% bonds, but that doesn't mean you can't get income from it. In 2020, the four quarterly distributions plus the year end distribution (cap gains plus dividends) totaled about 7.7% of the share price at the beginning of the year (which also happened to be very close to the share price at the end of the year. I haven't gone back to scrape the data for years prior, but I have held VWENX for many years and my recollection is that 2020 is about normal in that regard.

 

[zekeboz]

+1 for PIMIX

Here is a chart that helped solidify my investment in the fund.

Results should speak for themselves especially the impact of 08/09. Of course past performance is no indicator of the future... comparing the fund to Wellesley, 50/50 mix of the two and total stock market index.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=2007&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=25000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&benchmark=-1&benchmarkSymbol=VTSMX&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=PIMIX&allocation1_1=100&allocation1_3=50&symbol2=VWENX&allocation2_2=100&allocation2_3=50

 

[Exchme]

Go for total return. Sell a few shares if you need more cash.

Don't chase dividends. Best to read up on how dividends work and are taxed and how share prices dip on the ex-dividend date.

+1

Dividends are just a forced sale of the stock, they bring no value to the investor. Buy a total market fund instead.

 

[PussInBoots]

SCHD

High quality value tilt with nice yield. Underlying index historically outperformed S&P 500. It is very similar to VIG. VIG has growth tilt though.

 

[Stillwater007]

Is Dividends the best supplemental strategy into early retirement?

I've realized there's more to dividends than just invest in a stock and reap the $
$$.
Retiring early with a pension that covers 85% expenses meant that I need to get 15% elsewhere. And passive income seems like a great strategy.

Dividend stocks seemed like a logical way to go. But now I'm finding there's a lot to it!

I have questions now, such as, should I invest in a Dividend ETF or Individual Stocks...or Both?
While I can park an ETF like VIG (Vanguard) or MF in an Roth IRA, it appears I can't do the same for Individual stocks, right?
I would prefer to have the Dividends in an Roth to keep it tax sheltered, but can beggers be choosers?
Also, my time horizon is about 7-8 years until retirement, so what is good for a 7 yr Time Horizon and what is good for an even longer time horizon?

Just looking for advice and an Investment Lesson, if one doesn't mind sharing here.

Thanks in advance.