How Long Will it take to RETIRE on SHARES

The genesis of dividend investing is that it was really the safest and most reasonable way for a punter to invest in the stock market historically, back when the market was largely populated by individual investors. There were no index funds and mutual funds were a stitch up, so folks collected a portfolio of dividend payers, bottomed drawered them, and collected the dividend cheques.

 

Totally agree, I hold 15% mid / small with a value focus particularly in the case of QVE. MIR somewhat similar but Mgr not as high quality as IML.

With the chase for yield unfortunately there's a lot of investors who are in for a nasty shock. That is investors with a low risk tolerance who would normally hold a large allocation to bonds, term desposits and cash have been venturing into dividend stocks / corporate bonds / hybrids as a substitute. This has driven up valuations of dividend stocks changing their normal character on average from value to overvalued growth. When the inevitable market correction comes these weal hands are likely to panic and sell at the worst time resulting in permanent wealth destruction.

 

He he. I like the sound of stalwart. Sounds better than wart.

I had a big discussion with my wife (excited she was not) yesterday about our investing portfolio and simplification going forward. Fortunately she also has a high level of proven risk tolerance. We agreed that under no circumstances including a Great Depression scenario will equities be sold. But we also agreed that Gov't guaranteed cash / term deposits (as direct bond proxy) will also be substantially increased over time to make our overall portfolio even more bulletproof. Being debt free, which we are, is also critically important.

 

Being debt free, more dividends coming in than you can spend, an increasing cash buffer and a wife that brews beer, retirement sounds shocking @austing

Every day is a Sunday...........

 

He he. But if a Great Depression ever happens in our lifetime I still want more dividends coming in than we can spend. We might have a high risk tolerance to withstand market crashes etc but somewhat contradictory we are also quite conservative.

The home brew in particular I'm sure will be even more appreciated in a Great Depression type scenario.

 

What about the old school LICs? They've been around for a long time. Did people not know about them?

 

I'm talking about US market here, going back to 1900 or earlier.

But, let's think about Oz ;

Oz old school LICs are at peak of their market penetration ( thanks smsf) and are still a tiny proportion of our index, put the big 3 together and what would market cap be, 10-15b? That is less than 1% of the ASX cap. So yeah, certainly they were less well known than they are today. Let's also remember there was no ASX....just a collection of state based exchanges, and let's not underestimate survivorship bias here! And Whitefield claims it's been around since 1920 or some nonsense! Doing what? Give me a break...like it's got anything to do with what it is now.

Sorry rambling. I don't think that Australians have typically been stock investors the way "mom and pop" individuals have in the states....historically our index was extremely resource heavy (like 70%+) with nowhere near the earnings and dividends stability seen in the US markets.....so, yes much less attractive for the individual.

 

There is some discussion here Dividend Misunderstandings & Only Spend Return - Bogleheads.org that may lead to people thinking more about the distinction between dividends and capital. Some may find this interesting / useful and lead to further investigation....the other side of the coin.

 

Yes, and I wish LICs were still less well known. Due to increased popularity (is it my fault) It's harder to extract value out of them nowadays through NTA opportunities compared to in the past.

So perhaps expect closer to index like returns and maybe some increased periods of underperformance at times.

Dividend reliability is important to many retirees but they should not lose sight of the importance of total returns. Quite frankly there is some absolute rubbish being listed using trading strategies such as dividend stripping etc, LICs and ETFs. Over the long term investors may find most of their income from this crap is a return of capital with total return being terrible. Dividend growth is great as long as capital increases with it.

I'm still a big fan of LICs but I'm becoming more of the mind that they are for those who take an interest and know what their doing. And I need to keep reminding myself that my wife (who might have to run the portfolio someday) has no interest in these things. For those not that way inclined perhaps plain cap weighted index funds / ETFs might be a better fit. As for longevity and survivorship Vanguard like the older Large LICs (AFI, ARG, MLT) is likely to a very safe option.

No advice.

 

@austing what makes you think you're going first?

Oh, never mind

 

It was the GFC that made me a buy-hold dividend investor; I just saw dividend streams getting cheaper and cheaper to buy. It was like the post-Christmas sales at DJs. It was important not to let the wife open the Vanguard fund statements at the time though; way too many "-" signs in front of numbers.

 

And now it's at 46087!? definitely not a place for short term players who don't know or understand it though. Once I have enough equity in my property, that's where I'm headed, especially seeing that my own family did well in it

 

He was before I knew of this and SS forums existence. But I'm very interested to know: Where is Keith? Does he still post?

 

How long did this take if you don't mind sharing?

I feel like each one of the successful or enroute-successfuls should all write about their experiences then we should turn it into a glorious book and call it the book of inspiration!

 

And this is very similar to my aspirations.. And yes it even includes a job I love

 

During the next bear market I just hope @austing sticks around this forum and continues to remind us all to stay the course. A lot of investors have commenced their journey on either LIC and/or index ETF investing for reliable growing stream of passive income for their retirements. But they haven't experienced a downturn scenario yet. It would require lot of reassurance from experienced people who have gone through tough times before to newbie investors to not panic and sell down at the worst possible time.

Cheers,
Oracle.

 

I'm going into hiding as most here will probably have a price on my head come the next market crash.

 

If after all the wonderful things @austing has shared on this forum, if people still want him to hold their hand during a downturn, they are in big trouble.

It is almost inevitable that the forum will lose people gung-ho about shares today when the inevitable happens. And when the market is tanking, there are very different forces that act on people rather than what is just espoused on these forums. The spouse starts getting spooked and starts muttering things like "I have sacrificed *so much* for you for all these years and you tell me 6 figures have disappeared over just 30 days?? That is our lifetime savings we are taking about. How are we going to continue sending the kids to our cherished school? You are playing with all of our futures, our children's future here. I hope you know what you are doing; otherwise you are ruining our lives one market day after another".

And then people convince themselves that the shares are doomed. Just look at TLS now. How many have confidence that it will ever bounce back. Everybody is an expert now on how the EBITA will take a hit and TLS will *have* to cut dividends; some say 2020, some say next month and off we go. If we think the same kind of thinking will not permeate to discussions about the LICs one day, good luck. It will happen and then a similar level of pessimistic thinking will be everywhere. There will be one or two prolific posters on these very forums who will be telling everybody that the warning signs were there for a long time. They will write lengthy and well articulated posts about why these are the times of austerity/low growth and how the days of dividend growth is well and truly gone. ABS stats will be presented, youtube clips from Switzer and Roger Montgomery will be linked.

By the way, none of this is a reflection on @austing. I have told him both privately and publicly how grateful I am for his contribution.

 

It will be either you or Peter Thornhill...not sure who will command a higher price

Cheers,
Oracle.

 

People are better off now reading the history of financial markets and preparing themselves for the inevitable. Invest expecting a 60%+ drawdown and position your portfolio in line with your risk tolerance. Expect black swans.

Knowing how bad it has been in the past is extremely helpful preparation, rather than relying on someone to hold your hand. @austing will be too busy buying.