Nervous Investor desiring dividend income

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Jay Dee
Posts: 3
Joined: Fri Feb 16, 2018 11:14 am

Nervous Investor desiring dividend income

Post by Jay Dee » Thu Nov 08, 2018 8:56 am

So do to good fortune not of my doing (which leads me to a lack of self confidence), I'm fairly well to do on the asset side but have a low income. As they say you only need to get "rich" once therefore I'm more interested in capital preservation vs. accumulation. I'm of the opinion that there's not a ton of value investments out there at the normal P/E's so I'm in need of advice on where to research some good options?

My thought would be a basket of companies that grow modestly such as 4, 5 or 6% (outpacing inflation by a smidgen up to twice inflationary rate but not necessarily trying to outdo Mr. Market) but pay dividends in the 3-4 (or in lala land) 5% range. That's probably where I'd sleep better.

It appears to me that there are either growth companies that don't pay much dividend or ATT that pays 6% but probably won't grow (consistently). It's hard not to sit in treasuries now that they are in the 3% zone but for the fact that inflation will basically erode the principal. Although I'd rather have that problem vs a crash eating up a chunk over the course of a month or year.

PFInterest
Posts: 2588
Joined: Sun Jan 08, 2017 12:25 pm

Re: Nervous Investor desiring dividend income

Post by PFInterest » Thu Nov 08, 2018 9:00 am

you should strive to own all the market, not cherry pick.
you have to learn about total return, and what dividends are.
read the wiki, read this site, there are sticky threads to peruse.

Nowizard
Posts: 1593
Joined: Tue Oct 23, 2007 5:33 pm

Re: Nervous Investor desiring dividend income

Post by Nowizard » Thu Nov 08, 2018 9:05 am

Good advice from earlier poster, but if you go in the direction you suggest, investigate funds that focus on dividends rather than individual stocks.

Tim

RickBoglehead
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Joined: Wed Feb 14, 2018 9:10 am

Re: Nervous Investor desiring dividend income

Post by RickBoglehead » Thu Nov 08, 2018 9:16 am

Have you read the Wiki which discusses, among other things, the three fund portfolio? https://www.bogleheads.org/wiki/Three-fund_portfolio

Don't try to pick stocks.

sjt
Posts: 117
Joined: Fri May 26, 2017 3:03 pm

Re: Nervous Investor desiring dividend income

Post by sjt » Thu Nov 08, 2018 9:23 am

Don't get hung up on dividend paying stocks - If a stock pays no dividend but grows 8%, is it better or worse than a stock that pays 3% dividend and grows 5%? Either way you have made 8% - don't be fooled by the smoke and mirrors.

As others have said, read the Wiki here and own broad index funds. You mention good fortune not of your doing - sounds like a windfall of sorts - don't be in a rush, develop a plan that you can live with through the market ups and downs, execute that plan.

https://www.bogleheads.org/wiki/Managing_a_windfall
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

wolf359
Posts: 1424
Joined: Sun Mar 15, 2015 8:47 am

Re: Nervous Investor desiring dividend income

Post by wolf359 » Thu Nov 08, 2018 9:41 am

Jay Dee wrote:
Thu Nov 08, 2018 8:56 am
So do to good fortune not of my doing (which leads me to a lack of self confidence), I'm fairly well to do on the asset side but have a low income. As they say you only need to get "rich" once therefore I'm more interested in capital preservation vs. accumulation. I'm of the opinion that there's not a ton of value investments out there at the normal P/E's so I'm in need of advice on where to research some good options?

My thought would be a basket of companies that grow modestly such as 4, 5 or 6% (outpacing inflation by a smidgen up to twice inflationary rate but not necessarily trying to outdo Mr. Market) but pay dividends in the 3-4 (or in lala land) 5% range. That's probably where I'd sleep better.

It appears to me that there are either growth companies that don't pay much dividend or ATT that pays 6% but probably won't grow (consistently). It's hard not to sit in treasuries now that they are in the 3% zone but for the fact that inflation will basically erode the principal. Although I'd rather have that problem vs a crash eating up a chunk over the course of a month or year.
Hello Jay Dee! Welcome to Bogleheads!

I see that you have only about 3 posts as I write this, and the nature of your question sounds like you're pretty new.

I suggest you start here: https://www.bogleheads.org/wiki/Getting_started I also suggest you read the book "If You Can" by William Bernstein. It's available for free here: https://www.etf.com/docs/IfYouCan.pdf but you can buy it as well from Amazon.

1) Keep your expenses low. If you have a low income, you probably have low expenses. Keep them low. The lower the expenses you have to meet, the less your portfolio has to do. That by itself will allow you survive any extended market downturn, because you don't need the majority of your assets to live.

2) Get a second opinion. If you have a new pot of money, and you want to check your strategy for how you're going to manage it, post your portfolio for review. Use this format: viewtopic.php?f=1&t=6212

3) Write an investment policy statement (IPS). This is simpler than it sounds. It is a statement that summarizes your investment strategy, and what you will do under different market conditions. You write it when you're calm and rational, and have researched your various options. When bad times hit and you're panicky, you have a guide written by someone you trust (you) that will lead you out of it.

4) Keep an emergency fund. This is one of those boring recommendations that are often ignored. It's about giving yourself breathing room for unexpected expenses that come up. The combination of a solid emergency fund and a well-written IPS gives me a lot of confidence.

The argument about "Total Market Return" approach vs. "Dividend Growth" approach is one you're already encountering it. I'd suggest sidestepping it for now. The most critical choice at first is determining how much volatility you can stand, and getting the proper mix between stocks and bonds. (Total Market vs Dividends is an argument about WHICH type of stocks you should concentrate on.) Post your portfolio and describe your situation and you'll get plenty of specific suggestions and discussion.

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KlingKlang
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Joined: Wed Oct 16, 2013 3:26 pm

Re: Nervous Investor desiring dividend income

Post by KlingKlang » Thu Nov 08, 2018 10:42 am

Just in case you decide to ignore all the good advice that you received above, one of the best resources for selecting individual dividend paying stocks is the US Dividend Champions spreadsheet at:
http://www.dripinvesting.org/Tools/Tools.asp

MotoTrojan
Posts: 2472
Joined: Wed Feb 01, 2017 8:39 pm

Re: Nervous Investor desiring dividend income

Post by MotoTrojan » Thu Nov 08, 2018 10:47 am

Research before buying any individual stocks. Take a close look at GE; yikes, enjoy that 1c dividend.

In short, dividends aren’t magic money. I’d suggest a fund-of-finds such as a Lifestrategy or Target retirement product. If you want more tax-efficiency then build your own 3-fund to fine tune bond type or location (if you have tax-advantages accounts).

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