Hi!I'm new to the Fool environment so I hope I'm not being redundant with my question. I'm getting closer to retiring and I was wondering if, even though the markets have taken a beating, it might be a good time to retire and roll my retirement funds over to an IRA where I could invest in a diversified group of 30-35 of the dividend paying companies listed in the Income Advisor.Doing this would lock in some pretty high dividend yields and also provide future potential growth as stock prices improve with the economy over the next few years. My present retirement funds have not taken a beating so I'm in good shape to make new investments. Thanks! Dan
Hi Dan, Welcome to the board.The basic problem with your question is that no one knows if the market has bottomed or not. It could be the worst is over, but stocks are still quite high by several measures and we know the bad news of recession is probably still ahead. No one knows how low earnings will go, how long it will last, how high unemployment will get etc, etc.If your investments have held value to this point, you have done very well. If you move them too soon, you could still take some losses.People are recommending yield stocks in the belief that dividend yields will support stock prices if the market tanks some more. So that part of your plan is good as long as the dividends of the yield stocks you pick prove to be sustainable.So how about moving cautiously. Could you come up with say 10% of your retirement funds to invest? In an IRA? If you have a 401K from a previous employer or an IRA, that could be a great place for the experiment. You could rollover that 401K at any time. Whereas your current one probably requires that you retire first.I would hold off on retiring and moving all funds to the market until you are sure the market has bottomed. We have a history of bottoming at the end of every quarter when the banks write off still more of their bad loans. Will that continue? Or is that over? I'd be cautious until January.But the bottom line is I don't know either. So be cautious, but make your best guess. And whatever you decide, good luck.
Is "the Income Advisor" a Motley Fool subscription service? Frankly, after the blow ups of their RuleMakers and RuleBreakers portfolios, I'd not touch anything from them that cost money.There is a board: http://boards.fool.com/Messages.asp?mid=27113000&bid=116...I'm all for FREE sites to get initial suggestions, and then doing my own research from there. Such as:http://www.dividend.com/dividend-stocks/best-dividend-stocks...andhttp://www.sensiblestocks.com/index.htmlMaybe next year I'll spend $39 and by his book (from the second link).
Actually, ever since I retired in 2006 I've been slowly shifting money into my "Dividend stock" portfolio.One strategy (suggested by O'Shaughnessey" is to go to the library and look at the current issie of Value Line. Find the list of "Safety Rated #1" stocks, sort it by yield, and buy the 10-20 of the top yielding stocks.Overall, I hold about 40-50 dividend stocks. Well diversified, of course.Some of the CANROYs, oil/gas pipelines, MLP, etc. PVX, ERF, PWE. Some tankers--FRO & NAT.There's some really juicy yields out there right now. But you'd better diversify in case any one company or market-segment blows up.Now that the financial & bank sector blowup has (hopefully) just about run its course, it seems like we know which good ones are going to survive. BAC, JPB, USB, etc. Look at some of their preferreds. See http://quantumonline.com/ Make sure you stick to cumulative preferred's though, IMHO. BAC H & V yield around 8%-9%. USB K is about 8%.I recently bought some BAC-pr-V at 18.81 for a yield of 9.59%. On this one I currently have a gain of 10.3%. Assuming they don't go belly-up, they will eventually pay me $25/share and until then they pay me 9.59%, paid quarterly.I have come to realize that it's best to think of this portfolio as a mini Single Premium Immediate Annuity (run by me!) WHen you invest in an SPIA your money is gone but you get a monthly or quarterly check forever. Virtually all the stocks in this portfolio have gone down, but they are ALL still paying the dividend. Overall it's down 22%----but if you buy a SPIA the value goes down 100%. You never get any of it back, just the periodic checks.So....my NCZ is down 65%. WHen I bought it the yield was 8.8% and now it's 26.1%. But NCZ is still paying me %0.119 per share once a month. I don't think of it as a stock that has gone down horribly. I think of it as a month income stream of $0.119/share.Ditto for O, which pays $0.141/sh monthly. Which, BTW has increased occasionally ever since 1994.
it might be a good time to retire and roll my retirement funds over to an IRA where I could invest in a diversified group of 30-35 of the dividend paying companies From what you say, your retirement has been handled very well. Why fix what is not broken?
Hi All! Thanks for your input! I agree that I shouldn't do too much tinkering with what works but my thought is that when I do retire I'd like to have a better dividend stream of income; better than what is generally provided in the index funds in my "company" plan. I have not been diversified over the past two years, instead opting for a well performing commercial sector real estate fund that has not lost until just recently - about 1%. This has been a safe haven that protected me and it will be part of the portfolio when I retire. However, it doesn't pay dividends and I want to create an income stream that can generally be counted on regardless of stock price fluctuations (of course subject to a company's performance).Anyhow, as I move through these murky waters I appreciate any sage advice that may be offered by others who have already entered the realm of retirement. There is no substitute for experience!Dan
Anyhow, as I move through these murky waters I appreciate any sage advice that may be offered by others who have already entered the realm of retirement. I make a long post in this topic just a few days ago. Click on my name and look at my recent posts.
It takes a while to think like a retiree living on dividends. The income stream is highly important. The portfolio balance is less important.Think of your portfolio as being similar to an annuity except that you leave something to your heirs.Consider investing about 1% to 2% of your portfolio into a Practice Portfolio consisting of two Exchange Traded Funds (similar to index funds) in equal proportions: DVY and PFF.Then focus on the issue most important to retirees: management of the income stream.Have fun.John Walter Russell
Then focus on the issue most important to retirees: management of the income stream.Wrong!!The most important issues to retirees are:1) Where shall we go on our next cruise?2) Should that be a 7 day or a 10 day cruise?Of course, that's *after* you have your rock-solid investment plan in place. Which, unfortunately for you (JWR) means to ignore anything that JWR says.
"when I do retire I'd like to have a better dividend stream of income"With that idea in mind, Dan, it is certainly a good time to get started with some of your funds. You can get some experience and perhaps learn a bit before you are forced to rely on those funds.A laddered maturity bond portfolio is usually considered the safest way to fund your retirement income needs. Fools usually recommend a 5 yr ladder composed of 5 years of living expenses as a minimum (though some choose to go larger).You can factor dividend stocks into this too. Those with a history of increasing their dividends help you keep up with inflation. Yes, low stock prices makes it a good time to get started with higher yields.
Thanks everyone!! Appreciate all the input!If anyone is interested in Russell 2000-based index funds here's a link to some interesting research about the underperformance of these funds. It was originally published in the Financial Analysts Journal.http://news-releases.uiowa.edu/2008/october/102008index_fund...Dan
Hello Dan -Your first need is to correctly distinguish "investment" from "speculation" and from "product/contract". Investment requires an ownership interest, with its risk, and requires a dividend/yield. All the other non-dividend paying equities are "speculations". Get this core fundamental very clear.If you have "investments", you may be able to live off the yield of those investments during your retirement/distribution phase of investing/life. If you speculate, you may be able to sell some of those speculations for higher prices, spend your equity and have a still have a happy life.There is an enormous amount of self-serving and ignorant words being put out everywhere. Mr Russell has things pretty clear. Others like Buffett, Cramer, and Graham are all way off. Bonds, preferreds, mutual funds, closed end funds, annuities, etc. are all products or contracts with very detailed find print. They are also not investments.This is the "dirty laundry" of the entire financial services industry and information that if widely known and accepted would be highly distruptive. ...OK, Having made my soap box speech..there are actually many great equity investments out there. Market pull-backs just make the deals better. And there are MLPs, foreign utilities with high growth prospects, etc. with terrific current yields and even better future prospects. Invest away.
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