Living off Capital vs Living off Dividends

Bias is in the eye of the beholder.

I don’t see any of these articles or links saying you should preference capital over dividends or that dividends are inferior.

All they aim to do is state that income and dividends are two equally important components of total return.

They do attempt to counter the view held by some that dividends are safer. But they don’t argue that capital is superior just that its irrelevant as to the make up of the total return. (apart from tax considerations)

The risk if you do come to believe that either dividends or capital is superior is that you will most likely compromise your diversification chasing what you think is superior and most likely bring down your total return for your efforts.

Interesting that a stance of dividend indifference is taken as an attack on dividends.

I suppose if the argument was structured as capital indifference, growth lovers might perceive it as an attack because of their underlying bias - and we are back to the start - bias is in the eye of the beholder.

 

Just out of interest, dont feel obligated or anything like that but in the following article can you count the amount of negatives or drawbacks of dividends and then count the positives or advantages of dividends.

Dividends are not safer than selling stocks - Passive Investing Australia

It can also be in the pen of the author

But yes, thats just how I feel reading the article and thats cool, everyone is different. I think that I foolishly expected a neutral and measured article from such an overall great wealth of information.

 

Perhaps... there just aren't many genuine advantages of dividends?

 

I can also argue, if the business doesn't pay dividend and it gone on for a decade and through whatever misshaped its price decline 50% then what? I lose all those dividend in those year leading up to it and now I am stuck with stock less than what I paid for and nothing to show for it.

 

Truth is more important than perceived bias.

 

That's true but not the only way to get more into super. @Nodrog has already alluded to it twice in this thread but incase you missed it... there's the excess concessional contributions strategy. Grant Abbot calls it supermax. Great option if you want to load up.your super. Over the CC limit (currently $25k) no income tax concessions but you can still get additional taxed income into super with no significant penalty.

Grant Abbott - Super Max Strategy

 

What does the first sentence have to do with total return approach? Am I missing something?

 

You can control how many shares you sell, you can't control the dividends you receive. You may want to reduce drawdowns in a crash year so that you are not selling at a low. You can of course reinvest dividends you receive though. One may offer favourable tax treatment though, and the former may be easier psychologically.

 

Is it only me or hasn't anyone else looked at the poll and gone "Oh, I see."

If there isn't a problem let's create one. It's the right thing to do I understand.

 

You just drew my attention to the poll & thought 'Oh,I see'. Any way, interesting to see the note count.
So @SatayKing, you're back & didn't get washed away.

 

wouldnt investments in Challenger annuities be a better option?

 

Yeah, it is that. And the thing is when a discussion vergers towards a reduction in drawdown i.e. reduced income, the first issue which should spring to mind for those who live off dividends is necessary expenditure v income to meet essential needs.

Should there be no buffer (why isn't there one?) if expenditure can be reduced then maybe a reduced drawdown is not required or possibly a reduction to the reduction. Balance, bro, balance.

Only went to Mallacoota. My travelling companion became unwell so the trip was cut short. She's still out to it

Some discussion on annuities in this thread.

Income annuities as an alternative to bonds

 

Hopefully she is on the mend @SatayKing, under prepared chicken perhaps?????!!!

 

Sinus infection. Have had it a couple of times myself. Utterly miserable understandably.

PS: As an aside never, ever get on a flight if you do have a sinus infection. When the aircraft depressurises you will most assuredly know about it.

That is all. Now back to thread drift.

 

Hi Fargo, i couldnt find that post with list of companiesyou mentioned quite some time ago. Can you repeatthem here please?

 

I was only having a look at Challenger this week - OMG such terrible returns and such a high price to pay for perceived safety.....unless I am missing something.

 

currently i am on a disability pension as the primary source of income , supplemented by dividend income .

i understood how super funds often work so liquidated the Super in 2010 and put the proceeds into the share market ( so i am my own fund manager .. with the help of some LICs , ETFs , and REITs managers )

the PLAN is to get by on the pension plus SOME of the dividend income ( some is reinvested via DRP or extra buying from div. cash )

BUT depending on future inflation , i MIGHT have to resort to drawing down on the portfolio in the future as well as div. income

but i guess time will tell

 

Yes - The Challenger site states that only lifetime income streams that commence on or after 1 July 2019 the new rules will generally assess

• 60% of the purchase price of the lifetime income stream until age 84, subject to a minimum of 5 years; and
• 30% of the purchase price thereafter.

Nevertheless with a return rate of roughly only 2% this generous asset assessment may be questionable in its worth.