New Posts
Updated April 13, 2006.
Dividend-Based Design Example
This was my first attempt at dividend-based design. It was a success.
This approach delivers 4.0% (plus inflation) far into the future. The downside risk is a 4-year reduction of 5%, which would be a withdrawal rate of 3.8% (plus inflation), followed by 4.0% or more (plus inflation).
I have followed the example with a Dividend-Based Design Outline. We are up to 4.8% (plus inflation), safely and perpetually, starting from today's market.
For a quick read, see the Dividend Sound Bite.
Dividend-Based Design Example
Dividend-Based Design Outline
Dividend Sound Bite
Lessons from the Dow Jones Utilities
Historical Perspective: Dividends and Earnings
We have had great success with our dividend-based strategies.
Central to any dividend-based strategy is assessing the quality of dividends. Critical to assessing the quality of dividends is assessing the quality of earnings.
I have extracted some words from The Intelligent Investor by Benjamin Graham. I have included another article based on his thoughts as well.
Historical Perspective: Dividends and Earnings
Historical Perspective
The Story Behind the Numbers
Too often, I see numbers in isolation. Too often, someone identifies 4.0% as The Number without any explanation whatsoever. There needs to be more.
The original 4.0% was never The Number. It was only an illusion.
We have now pushed Safe Withdrawal Rates much higher.
The Story Behind the Numbers
Individuals Pick Winners
The myth about not being able to identify superior mutual fund managers ahead of time is only a myth. Individuals do it all the time.
Somebody has to get above average returns. Why not us?
Individuals Pick Winners
Risky Alternatives
We have developed several intermediate-term timing strategies recently. Retirees invest in TIPS at 2% (real) interest up to a decade waiting for valuations to improve.
But what about alternatives? What if we hold stocks and 2% TIPS for the first decade?
Risky Alternatives
Edited: Risky Alternatives
More About Risky Alternatives
Dollar Cost Averaging Today
Not many subjects are more relevant to investors than dollar cost averaging. It is a time-tested, successful strategy.
But what about today? Will today's investor stick with it? Maybe not.
Rob Bennett was right in his latest Letter to the Editor. You have to make it through years 10 and 15 to reach 30. There is reason for concern.
Dollar Cost Averaging Today
DCA Today: The Point of Frustration
Year 10 Choices
I contrast today’s actions, starting from today’s valuations, to those of the not-too-distant future, when valuations will be much more favorable.
Year 10 Choices
Year 10 Choices: Edited
Diminishing Returns
Here are a few thoughts about portfolio safety and diminishing returns.
Diminishing Returns
Mean Reversion Theory
I have seen many arguments against the notion of Mean Reversion. Most of them fail because words are used too loosely, without definitions. Others fail because they use definitions that are overly restrictive.
Central to the notion of Mean Reversion is the existence of a constraint. Prices cannot rise and fall entirely independent of earnings.
Mean Reversion Theory
Building Blocks
I have posted a lot of articles with lots of numbers. Those numbers are meant to help, to provide assistance, to supply insights. They tell you can do. The let you know what to look for. They do not tell you what you must do.
Lots of details are not found in numbers. Lots of details are unique to your own situation. This article helps you bring everything together.
Building Blocks
Building Blocks: Edited
Extracting Information
I go into the details when I calculate numbers. This is never enough. I search for insights that will stand even if everything else fails.
The discussion at the end of Building Blocks supplies an example of what I am trying to achieve.
Extracting Information
Building Blocks
Building Blocks: Edited
What Do I Really Think About Dividends?
Dividends raise today’s Safe Withdrawal Rate to 5.4% (plus inflation) of the portfolio’s initial balance.
Dividends extend the portfolio lifetime indefinitely, well beyond 40 or 50 years.
What Do I Really Think About Dividends?
Allocate 25%
How much should you allocate to hobby stocks?
My answer: 25% of your stocks.
Allocate 25%
Allocate 25%: Addendum
Adopting a New Approach
You may have found one of my approaches compelling. In my latest, you start with an all-TIPS portfolio. Later, you buy high dividend stocks from high quality companies, but only at reasonable prices.
Here is how you go about adopting one of my approaches.
Adopting a New Approach
What If There Is A Bubble?
Our TIPS/Dividends strategy looks great, starting today. But what if you had selected a dividend-based strategy back in 1995, before the bubble? You might have had to be out of the market for 20 years.
The answer: You would have done exceedingly well. Around 1995, you could have bought TIPS with a 4% (real) interest rate.
What about today? With today’s interest rates? What will happen if you have to wait 20 years before buying stocks?
The answer: You will be sitting pretty.
What If There Is A Bubble?
Volatility and Your Timeframe
I almost glossed over something important when I wrote an addendum to Allocate 25%. It reveals a critical flaw in investment research.
Volatility and Your Timeframe
Earlier New Posts
These are earlier pages of New Posts.
New Posts (original)
New Posts (Sept-Oct 2005)
New Posts (Nov 2005-Jan 2006)