Retired in their early 30's and now travelling the world

If you live off all your divs, how do you survive a market correction?

 

Check what happens if dividends during a market crash. There is a graph on here somewhere that shows the drop in dividends is pretty minor, generally, to the drop in value.

Think of it this way, a drop in the value of a company's shares doesn't effect the amount of profit they are making - generally.

 

Yep. Agree with Terry. If there's a crash, then imo that's the best time for buying shares. In normal circumstances, I wouldn't really think about borrowing for shares, but if they crash, I'd use borrowed money to buy. Why? Because the dividends don't change so much, but the yields tend to be stronger.

Note: I've only really been in shares for a year, and they've returned really strongly in that time. Day to day you mightn't see them do that much, but over time you see the gains. I haven't used borrowed funds to buy, not just yet.

 

Thanks, that makes sense. However, using 25% tax rate, it will equte to a total investment of only less than 1mil after 10 years (not including any growth or dividend from the investment).

 

He's got some valid points, but some of his arguments are flawed IMO.

Just because you're renting doesn't mean you don't mow the lawn... I would have thought it would be in his interests to have a nicely maintained lawn for the kids to play on.

If the pipe leaks, he's still gotta be there when the plumber comes to fix it.

And the biggest overlooked fact is that debt recycling can be used (at least in Australia, maybe not in the USA), so you can have a PPOR and eat your cake by investing in shares too!

 

Totally agree on the debt recycling concept. One can buy a PPOR as well as diversify into shares too. I know many PCers (especially the ones who had read Thornhill and LIC/ETF threads) are doing this including me.

 

I know a couple who are doing similar. They live in a caravan with two kids that are home schooled. This couple aren't living off savings, but rather picking up work when they need it. Lovely people and the kids are well adjusted as they are involved in a lot of activities with other home schooled kids ... but ...

The kids are still young. Not sure I'd want to be stuck in a small, non-private caravan with two teens (one boy one girl). They have an annexe, but it's usually stuffed full of their accumulated stuff - bikes, clean/dirty laundry, toys and just general flotsam that emerges from the van - and they have to use the public showers/toilets.

Not my idea of fun ... but if it works for them.

Suspect they may have also been living at home with mum and dad whilst saving for those 10 years ...

 

I think it’s important to include growth and dividend from investment...