Living off Capital vs Living off Dividends

Discussion in 'Share Investing Strategies, Theories & Education' started by Nodrog, 29th Sep, 2019.

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Which method do you use to fund your retirement?

  1. Live off (i.e., consume) capital

    21 vote(s)
    18.6%
  2. Live off dividends

    71 vote(s)
    62.8%
  3. Live off other income

    21 vote(s)
    18.6%
  1. Marg4000

    Marg4000 Well-Known Member

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    This is probably the reality for most people. We intend to live off income while we can. If things go pear shaped, we will draw down on capital.

    I acknowledge we have been lucky in that, for the first 5-6 years of our retirement, our super has returned over 9%, well in excess of our more-than-sufficient mandated 4% then 5% withdrawals, allowing us to reinvest income from other investments. Negative returns in the early years of retirement would lead to a very different outcome.
     
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  2. PKFFW

    PKFFW Well-Known Member

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    I just wanted to say what an exceptional post that was.
     
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  3. Froxy

    Froxy Well-Known Member

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    Separate thread for @dunno s stock picking newsletter!
     
  4. Nodrog

    Nodrog Well-Known Member

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    Paid subscribers only.
     
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  5. RogTheBear

    RogTheBear Well-Known Member

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    I intend accumulating a sufficient capital base to live off "dividends", but I'm not retired, so the question as to what I'll actually do when I get there is still somewhat moot. But I'm also in a DB super account with pension option which it would be madness not to take up, and that will provide close to 40% of my current budgeted future income - so I'm not wholly invested in the concept, so to speak.

    I just have to get the other 60% I need from the remaining 75%, by actual value, of the combined super/savings portfolio - which cuts me some slack not generally available to people who aren't lucky enough have a DB super account - for which I'm immensely grateful.
     
  6. oracle

    oracle Well-Known Member

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    Well done!

    And here everyone is being worried about not being sufficiently diversified unless they owned every publicly traded security on the face of the Earth :eek:

    All three companies are in totally different industries.

    Buffett has in the past said if you owned 3 of the best enterprises in a growing town you are well diversified.

    I don’t want to derail the thread but I don’t lose sleep over not owning Europe, Africa, Asia, South America.

    Cheers
    Oracle
     
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  7. geoffw

    geoffw Moderator Staff Member

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    That surprised me based on some things you've said in the past, but I see that you sold out of VAE, which have you emerging markets exposure, a few months ago.
     
  8. Redwing

    Redwing Well-Known Member

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    [​IMG]

    I enjoyed reading the comments section :D
     
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  9. Nodrog

    Nodrog Well-Known Member

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    But unless it’s changed wide global diversification is where @dunno is headed:

    8052033D-E948-4DC5-8984-8A93DEFC4726.png
     
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  10. oracle

    oracle Well-Known Member

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    Correct. I am now not concerned about not owning Asia. Simplified portfolio is more important.

    Cheers
    Oracle
     
  11. oracle

    oracle Well-Known Member

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    A small portion of his 25% direct share investment is throwing off quarter of million in dividends every six months.

    He has more options and reasons to diversify to protect his assets.

    There are a lot of people hoping to be able to generate enough dividends equivalent to average Australian wage after 40 years of working.

    What would you advise them? Diversify knowing full well you will always end up having some basket economy in there dragging down your returns. Anyone following diversification advise and invested in MSCI World ex Australia would end up with 4.4% over last 20 years.See the other post I made showing performance figures from Vanguard.

    That type of returns don’t excite me no matter how good the benefits of diversification are.

    Cheers
    Oracle
     
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  12. balwoges

    balwoges Well-Known Member

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    I'm a 'babe in the woods' as far as shares go, however, even I managed to make just over 10% on my Australian shares including credits last financial year ... :D
     
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  13. Nodrog

    Nodrog Well-Known Member

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    Sorry it wasn’t meant to suggest I had an opinion. I was simply posting it incase some didn’t know of @dunno ‘s total portfolio view.

    I’m personally not all that thrilled about investing overseas full stop. To me it’s really mostly a risk management thing that I’ve been convinced (or perhaps brainwashed) into believing is the wise thing to do:confused:.
     
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  14. Redwing

    Redwing Well-Known Member

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    Investing overseas (US has had a good run) over the last decade $10k invested

    upload_2019-10-1_15-0-29.png
    upload_2019-10-1_15-0-53.png
     
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  15. Redwing

    Redwing Well-Known Member

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    STW.AX Spdr 200 Fund over the same period

    upload_2019-10-1_15-2-9.png
     
  16. oracle

    oracle Well-Known Member

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  17. dunno

    dunno Well-Known Member

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    Hi @oracle

    I’m not at 25% yet but that is where I am heading. Still a decade + to get there. Currently at approx. 70% Australian direct.

    We really should have a thread on diversification, interesting subject. Maybe we can split off this already split thread.

    For me, I want my passive to be as broad as possible and my active to be as focused as I can stand.

    I made my money by being concentrated and focused. But everything I’m doing now is towards diversifying and lowering the risk mainly as protection against myself.

    Even the maximum position size (dotted line on the chart) of the active direct component is being reduced.

    upload_2019-10-1_17-4-59.png


    The three stocks mentioned just happened to pay yesterday. One of them is my largest holding and bumping against the current max position size of 14% of portfolio.

    Concentrated to make money – diversified to protect money.

    I’m no Buffett, I can’t stay in the concentrated camp all my life. Enough become enough and I realised for me it was time to take the foot of the gas and start converting to passive.
     
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  18. Nodrog

    Nodrog Well-Known Member

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    This thread you created sometime ago would likely be suitable I think?

    Asset Allocation
     
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  19. Nodrog

    Nodrog Well-Known Member

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    @dunno with the passive portfolio is new investment also done a specific day of the month? That is, strict DCA policy.
     
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  20. Redwing

    Redwing Well-Known Member

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    If you were a Japanese investor re-balancing dispassionately between your local market a world market and fixed interest per your chosen asset allocation you would have been taking some gains of the table in their massive run up. It has never made sense to me for an investor to have all their investments in only one country

    If you had invested post GFC their local market looks like this

    upload_2019-10-1_15-25-45.png

    This was an interesting read also

    The Myth of Japan’s Failure

    The Myth of Japan's 'Lost Decades'