Here is my Passive Dividends for Week #11 of 2023.
I primarily own stocks that are traded on the US stock market.
Dividends are passive.
Dividends are paid either quarterly or monthly.
Dividends act like a build-in hedge. Why? If you set reinvestment of dividends, it will purchase more stock of the underlying when the dividends are paid out. Buying stock quarterly using the dividend takes advantage of "Dollar-Cost-Averaging," aka "DCA." It will purchase more stock as the price drop and less as the stock rises. This concept helps you take advantage of the market when the STOCK MARKET is down.
Q: Should you chase Dividend Yield?
A: No. Total Return is more critical. During the accumulation phase, you should not chase dividend yield. Total return is always more important. This is true when you are younger (under 50) and NOT retired yet. During retirement, you sacrifice total return for INCOME from investments. This is when you are willing to trade some opportunity for the "stable" income that a dividend can provide.
Q: Can you live off Dividends in retirement?
A: The short answers depends on your portfolio/net worth. If you want to live off your assets without selling anything, then you need to use the "safe withdrawal rule of 4%". If you can generate 4%, then in theory, the answer is yes.
For example,
If you need 20K a year, $20,000 x 25 or $500,000 in Asset!
The multiplier of 25X is the same as 4% withdrawal from the asset.
Q: When does 4% withdrawal does not work?
A: 4% Withdrawal works, but most people fail at the accumulation phase. If you only saved $100,000 by the age of 65, 4% of $100K is only $4,000 a year. If you withdrawal $20,000 from your $100,000 nestegg, you reduce your asset my 20% and not by 4%!! This is why most people blame the "4%" rule, but in reality the investor failed to accumulate the assets during their lifetime.
Solving Chaos,
Let do this one dollar at a time!