Living off Capital vs Living off Dividends

Not by your choice from what I understand.

 

139,998 then.

 

A few themes posted providing food for thought. Is there an underlying aspect with some approaches of not being overly concerned about how it's done as long as it does the job? It is a feeling I have gleaned from reading the various responses and more than likely reflects my attitude although I have been contemplating my situation with a number of points which have been raised.

Anyways airport taxi time soon.

Ciao.

 

I’d forgotten this thread had been turned into a poll. Must say I’m surprised that so far around 75% have chosen “Living off Dividends” vs around 11% for “Living off (consuming) Capital”. Then again perhaps I confused the hell out of most so that seemed the easiest option to select.

Alternatively it was all part of my cunning plan:



Mawhawhawhahahahaha ...

 

Not necessarily but like a number of LICs they’re not necessarily something one can blindly DCA into.

Trouble is perhaps when MFF’s fortunes change for the worst, if the dividend stays low and without the large marketing machine like the other Magellan the discount can widen substantially. Other than mostly the well known older style LICs some thought is needed if choosing to invest in these other LICs.

 

Same here. Thanks to the brilliant posts from @dunno in particular I’ve at least been able to make the mental shift from being almost totally dividend driven to now being much more open to investing in and selling if required (say for rebalancing between SMSF and personal names) lower dividend / non-existent at times distribution paying listed funds that I wouldn’t have previously.

For example I’ve always disliked “hedged” Global index funds because of the horrible distribution history. Yes I know the missed distribution ends up in capital but it’s not how us dividend investors have been wired. As much as I continue to try to resist the thought of adding this ETF to our portfolio I know given my opportunistic / contrarian nature that should the AUD continue lower along with other criterea I simply won’t be able to resist adding it to our Global exposure but as part of overall AUD allocation.

@dunno please persevere with me, I’m so very grateful for your help in my continuing evolution as an investor. The older we are and the longer we’ve been wedded to a given approach the more stubborn we can be in being open to change. Getting there bit by bit.

 

Considering dividends are funded from capital, I would say that’s 100% for living off capital.
(If dividends don’t come from shareholders capital where do they come from? the tooth fairy?)

More relevant question(s) would be:

Do you intend to sell your shares (property) and spend the money before you die?

Not forgetting, generally income also has a growth component and growth an income component. What feature do you preference when purchasing?

Do you buy shares (property) primarily for income (rent) or growth (capital gains) or diversify and target both?

I don't know how I can help you with this one. I can imagine scenario's at a nadir in sentiment where a company retaining its cash and you having to sell to generate the income would leave you worse off. But so what – that is a minority of the time. All data I have ever looked at suggests diversify and invest what you can when you can and take what you need when you need is superior to insuring against having to draw down occasionally in bad times. I happily re-invest my dividend income as soon as possible and draw what I need when I need. Yes there is normally enough cash slopping around that it doesn’t actually require a sale, but if there's not I sell, its no harder than placing a buy order.

Actually the focus on negative instead of the whole picture way of thinking that you describe reminds me of the thought process of not taking a drive because you might crash, not taking a walk because you might fall, not falling in love because you might get hurt. 99.99% of the time the whole picture makes the risk worthwhile. If it turns out that I’m unlucky enough to finish in the 0.01% - Its only money.

 

Fair point. If there was a big enough discount (with consideration of the large embedded capital gain) I might be tempted, maybe...

 

Seems obvious to me, I vote the Tooth Fairy.

 

Well given the right circumstances the embedded CG can disappear quickly enough likely coinciding with a widening of the discount then perhaps that’s the time to add it to the watch list. It’s basically been how I’ve approach accumulation of PMC over the years.

 

Just wondering with the --5 vote(s) --13.9% that live off other income ,what do you re-invest the div's ,or just reinvest within the reinvestment plans..
As much of what we hear comes from many unverified sources ,I was watching a well know investment guru talk about spending down -or sell down mode early this morning ..

 

That’s just @dunno voting 5 times. The rumour is he paid the moderators to fudge the figures so as to avoid too much embarrassment. We all know “Living off Dividends” is the only sensible choice.

 

Yesterday, DTL,RHC & TGR between them dropped close to a quarter mIl into the bank account, today being the 1st of the month I transfer a bit of that to the keeping wife and life happy account.

On that basis I’m gunna go vote living off dividends so I can be on the winning team. 27 to 5, we’re floggin em!


Edit.

Dammit, couldn’t do it. I can’t think any other way – I own businesses, I live off capital.

Back to 26 to 6 and I’m a loser.

 

My reading of the managers report is they would have no issues liquidating a large % of the portfolio under the right circumstances. That should do the trick.

 

What, in dividends:

 

dunno--I'm glad you keep posting ,with that amount going into the accounts ,and I thought the CBA cheque that came in last week was big compared to that it like thinking as Sydney is one of the few major global city that were founded as a convict settlement anything possible in Australia if you try..

 

That’s it, I’m selling all our ETFs / LICs and setting up a SMA with @dunno.

 

Sorry


I have a very strict client alignment policy that requires a until death, do us part marriage contract. The wife informs me It would be poor form to take on a new client, besides you’re not my type and you might baulk at the performance bonus.

 

Bugger.

But what if I change my vote to “Living off Capital”?

 

The poll is too limited.

I voted for “other income” because our income is a combination of super draw downs (mostly from shares), fixed interest and dividends.

There should be an “all of above” option.