Income investing
July 26, 2016 12:06 PM Subscribe
I'd like to get a handle on investing for long-term, stable income.
Right now all of my stock-related retirement funds are in a small handful of index funds, tracking various US and international indices. I completely buy the idea that passive index funds are, for most people in general and myself in particular, the way to go.
That said, I'd like to look into income / dividend investing for when I retire and begin to rely on my holdings in order to live.
What are the most grounded, realistic, and balanced books / articles / blogs / resources on income / dividend investing (including tax implications) that would help me get started in seeing if this 1) makes sense at all, and if so, 2) start mapping out a strategy that meets my goals?
Right now all of my stock-related retirement funds are in a small handful of index funds, tracking various US and international indices. I completely buy the idea that passive index funds are, for most people in general and myself in particular, the way to go.
That said, I'd like to look into income / dividend investing for when I retire and begin to rely on my holdings in order to live.
What are the most grounded, realistic, and balanced books / articles / blogs / resources on income / dividend investing (including tax implications) that would help me get started in seeing if this 1) makes sense at all, and if so, 2) start mapping out a strategy that meets my goals?
You're gonna want to stick with index funds in retirement too, just different ones: those focused on blue-chip dividend payers and also on bonds.
posted by kindall at 12:35 PM on July 26, 2016
posted by kindall at 12:35 PM on July 26, 2016
It is a fallacy to think of income investing as meaning dividends. Your income from investing is a combination of dividends plus capital appreciation, known as total return. For retirement spending you collect dividends and sell shares to provide the income you need. All of your income does not need to come from dividends alone.
The fallacy is to think that you should never touch your principal. You should not change your investment strategy to concentrate on dividends. You should invest exactly as before, remembering that your income is really total return -- dividends plus capital gains.
As you approach retirement and reduce your appetite for risk, you may shift some of your stock holding to bonds to reduce risk. But you do not need to shift stock holdings toward more dividend producing stocks. Keep your same old total stock market index funds.
posted by JackFlash at 1:54 PM on July 26, 2016 [6 favorites]
The fallacy is to think that you should never touch your principal. You should not change your investment strategy to concentrate on dividends. You should invest exactly as before, remembering that your income is really total return -- dividends plus capital gains.
As you approach retirement and reduce your appetite for risk, you may shift some of your stock holding to bonds to reduce risk. But you do not need to shift stock holdings toward more dividend producing stocks. Keep your same old total stock market index funds.
posted by JackFlash at 1:54 PM on July 26, 2016 [6 favorites]
Seconding JackFlash - in many cases, there is little differences between selling stock and getting dividends, especially if it's in the context of tax advantaged retirement accounts.
posted by Candleman at 6:18 PM on July 26, 2016
posted by Candleman at 6:18 PM on July 26, 2016
Think total return investing, not dividend focused investing. Total return investing keeps your portfolio diversified instead of concentrated on high dividend stocks.
I second checking out the Bogleheads site
posted by LoveHam at 6:43 PM on July 26, 2016
I second checking out the Bogleheads site
posted by LoveHam at 6:43 PM on July 26, 2016
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posted by xingcat at 12:18 PM on July 26, 2016 [1 favorite]