Mutual funds for retirement income via dividend

[MN_1021]

Hi all,

Looking for some recommendations on Vanguard dividend mutual funds. I can only invest in MF and not ETF or stocks.

Currently 45 and aspire to retire in 5 to 7 years. Thinking if DW works on my retirement then we'd like to have another 18k-20K in dividend income. I currently have 200K in a brokerage account (apart from Roth/401K etc) and can pump another 50K per year for next ~6 years.

 

[jebmke]

Vanguard Total Stock Market is fully diversified and pays a dividend. I suspect dividends are about to get reduced significantly. The first quarter was down already from last year and that was before the pandemic. Quite a few companies may have to significantly reduce or eliminate their dividends to conserve cash. Many will wait and decide in the 3rd quarter. Boards meeting in June have to decide about Q2 and some will want to wait and see. I've been in those discussions before. By Q3 if cash flow is really a problem, they have not choice.

 

[Ed B]

You should at least look at Wellesley and Wellington if you are limited to mutual funds and you want income. They both have great reputations and they produce dividends quarterly and dividends + capital gains distributions annually in December.

VWIAX
VWENX

 

[OldShooter]

There are some solid arguments to the effect that chasing dividends is a suboptimal strategy. Here is one of the gurus on the subject: https://famafrench.dimensional.com/videos/homemade-dividends.aspx The problem is that by chasing only dividend payers you miss out on appreciation of a lot of other stocks. Depending on your situation, it may also be suboptimal for taxes.

At your age, too, IMO you should be heavily or totally into equities -- contrary to @EdB's post. In fact, with stocks on sale you should probably be buying like crazy right now, whatever you can swing.

 

[coveredbridge]

There are some solid arguments to the effect that chasing dividends is a suboptimal strategy. Here is one of the gurus on the subject: https://famafrench.dimensional.com/videos/homemade-dividends.aspx The problem is that by chasing only dividend payers you miss out on appreciation of a lot of other stocks. Depending on your situation, it may also be suboptimal for taxes.

At your age, too, IMO you should be heavily or totally into equities -- contrary to @EdB's post. In fact, with stocks on sale you should probably be buying like crazy right now, whatever you can swing.

You did note that OP has a 5-7 yr horizon to ER, right?

 

[FANOFJESUS]

I thought about going 100% Wellesley for spending all dividends + capital gains distributions. I don't know if the withdrawal would be to high or not?

 

[Ed B]

There are some solid arguments to the effect that chasing dividends is a suboptimal strategy. .



At your age, too, IMO you should be heavily or totally into equities -- contrary to @EdB's post. In fact, with stocks on sale you should probably be buying like crazy right now, whatever you can swing.

If I were in his shoes in this current environment, with 7 years to go, I would be heavy into equities too but he asked specifically for Vanguard dividend mutual funds. So I felt like my answer was appropriate for his question. Plus, if he chose Wellington he would be fairly heavy in equities anyway although with a heavy large cap/value concentration.

 

[mrfeh]

Hi all,

Looking for some recommendations on Vanguard dividend mutual funds. I can only invest in MF and not ETF or stocks.

Currently 45 and aspire to retire in 5 to 7 years. Thinking if DW works on my retirement then we'd like to have another 18k-20K in dividend income. I currently have 200K in a brokerage account (apart from Roth/401K etc) and can pump another 50K per year for next ~6 years.

https://www.passiveinvestingaustralia.com/dividend-investing-vs-total-return-investing
https://www.bogleheads.org/forum/viewtopic.php?t=276554
https://www.bogleheads.org/forum/viewtopic.php?t=245558

 

[thepalmersinking]

VYM appears to outperform

 

[thepalmersinking]

https://www.passiveinvestingaustralia.com/dividend-investing-vs-total-return-investing

https://www.bogleheads.org/forum/viewtopic.php?t=276554

https://www.bogleheads.org/forum/viewtopic.php?t=245558

Why not ETF’s?

 

[OldShooter]

You did note that OP has a 5-7 yr horizon to ER, right?

Yup. I also noticed that he wants $18-20K in dividend income from a portfolio that aspires to hold $500K. That is 3.6-4% in dividends, not necessarily an easy goal. And I noted that his beginning point for accumulation is now, where history would predict a major market rise during his time horizon. So if history is predictive, equities is where he really should be.

OP, even if you continue to have that dividend goal, you can change your holdings as you get closer to the need -- taking care for the tax aspects of course. For now I would recommend your favorite blend of total US market and 30-50% total international market. Professor French again: https://famafrench.dimensional.com/videos/home-bias.aspx

If I were in his shoes in this current environment, with 7 years to go, I would be heavy into equities too but he asked specifically for Vanguard dividend mutual funds. So I felt like my answer was appropriate for his question. Plus, if he chose Wellington he would be fairly heavy in equities anyway although with a heavy large cap/value concentration.

Agreed, I didn't answer his question directly. One problem all us have from time to time is that we ask questions in a way that precludes getting the best answer. In the OPs case I think focusing on dividends, especially during his anticipated accumulation phase, is suboptimal. So I don't think choosing among dividend funds the right premise. I also don't think that blended funds that you recommended will get him anywhere near his goal.

 

[Bongleur]

Vanguard Total Stock Market is fully diversified and pays a dividend. I suspect dividends are about to get reduced significantly. The first quarter was down already from last year and that was before the pandemic. Quite a few companies may have to significantly reduce or eliminate their dividends to conserve cash. Many will wait and decide in the 3rd quarter. Boards meeting in June have to decide about Q2 and some will want to wait and see. I've been in those discussions before. By Q3 if cash flow is really a problem, they have not choice.

You raise the issue of timing. Buy now at a discount to the recent high, or wait to see if values plummet even more "if" dividends are severely cut due to the pandemic.

 

[Chuckanut]

You raise the issue of timing. Buy now at a discount to the recent high, or wait to see if values plummet even more "if" dividends are severely cut due to the pandemic.

Or start to dollar cost average into the market. A lot of us here have done rather well doing that over a period of years.

 

[OldShooter]

You raise the issue of timing. Buy now at a discount to the recent high, or wait to see if values plummet even more "if" dividends are severely cut due to the pandemic.

Every time we buy or sell we are market timers to some degree. Only well after the transaction do we know whether we guessed right or not on what is basically a random process.

Re waiting, the market's consensus expectations for dividend cuts are already priced into stocks. It's not like no one has noticed this potential. This would argue that buying now is just fine; if the market is too pessimistic you'll look like a genius. If it is too optimistic, then you won't.

The Clint Eastwood question applies: "Do you feel lucky, punk?"