# what should old folks invest in



## anon125 (Feb 21, 2013)

I have to start a rrif, so next year money will have to come out of taxprotected.
Bloomberg says stocks only go up now cos of buybacks that make the bosses bonuses even bigger. We wont see any growth in my lifetime, just like japan for the last decades.
The essential retirement guide is worth a read. 
The money is for when I am older a dodderier!
So what gives a good return nowadays. 
Balanced portfolio does not make sense now
Thanks all


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## anon125 (Feb 21, 2013)

Oops forgot to click send an email when somebody replies.
Now I have


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## OnlyMyOpinion (Sep 1, 2013)

We've discussed strip bonds, GIC's, and REITs with you in other threads.
Now you are asking, 'what gives a good return these days'.

To help this thread out a bit:

What is your RRSP/RRIF invested in now, and why don't you want to leave it invested as it is now and just make the annual minimum withdrawl from it?

How dependent are you on the income from the RRIF? Is this income you don't really need?


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## pwm (Jan 19, 2012)

Same question: Why do you feel you need to change your investment strategy because your RRSP is changing to a RRIF? I switched mine two years ago and the contents remained the same.


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## anon125 (Feb 21, 2013)

pwm said:


> Same question: Why do you feel you need to change your investment strategy because your RRSP is changing to a RRIF? I switched mine two years ago and the contents remained the same.


I am looking for something better than 2.5% 5yr GICs


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## AltaRed (Jun 8, 2009)

anon125 said:


> I am looking for something better than 2.5% 5yr GICs


So what are you invested in now with your RRSP? Why change it (as already asked by others)? 

Without knowing what your asseet allocation now is, what I would do is slowly get more income focused, e.g. high dividend equity ETFs, REITs, bonds, and GICs. It is important to have some FI in your portfolio in the form of a short term bond ladder or 5 year GIC ladder, just so you don't have to draw on equity capital in years in which it has gone down a bunch, e.g. 10-20%.


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## zylon (Oct 27, 2010)

*tables and chart from http://portfoliodb.theglobeandmail.com/*

I still like balanced funds, although my most recent purchase was a Bond Fund.

A short list from the many bond funds available; sorted by MER%




Fund with lowest MER also has highest 15-year return.




PH&N Total Return Bond Fund handily beat the 5% Fixed Rate Index over 15 years.


image hosting over 5mb


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## james4beach (Nov 15, 2012)

anon125 said:


> I am looking for something better than 2.5% 5yr GICs


GIC rates are some of the highest fixed income, low risk returns out there. We live in a low interest rate environment due to the central bank policies... that means no-risk investments have low returns.



AltaRed said:


> It is important to have some FI in your portfolio in the form of a *short term bond* ladder or *5 year GIC ladder*


Re-iterating this because it's a very important point. Not only is it important to have fixed income, but you need to have some of these _short_ duration things like AltaRed mentions.

You can also of course hold a more general bond fund, like iShares XBB, which had 5.62% annual return since inception in 2000, or the ones that zylon listed. However there's uncertainty about what these bond funds may return going forward... they _do_ have some risk, and they may not have anywhere near those past gains and could actually decline in the short term.

You need some GICs and short term bonds so that you don't have to liquidate other investments that may decline in short term. I believe this is why Buffett's estate will be composed of purely a stock index plus short term bonds.

Best simple answer to all of this is a balanced fund, along with a 5 year GIC ladder.


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## AltaRed (Jun 8, 2009)

Zylon has some great examples of bond funds. I though believe there is risk in longer term bond funds and would more likely pick Mawer balanced funds as the 'goldilocks' scenario. Imagine that, all or most of the portfolio in one Mawer balanced fund.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Imagine that, all or most of the portfolio in one Mawer balanced fund.


Yes I agree it's a good choice overall. I like balanced funds as a one-size-fits-all solution, and Mawer Balanced and TD Monthly Income are the best ones I know.


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## anon125 (Feb 21, 2013)

thanks all. how did your balanced funds etc do in 2015?
do you take into account Bloomberg says stocks only go up now cos of buybacks that make the bosses bonuses even bigger. 
We wont see any growth in my lifetime, just like japan for the last decades.


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## wendi1 (Oct 2, 2013)

anon, if reading a single article makes you want to change your investment strategy, you are better off getting your mitts off your money and leaving the decisions in the hands of someone else.

Have you considered buying an annuity with your RRIF?


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## Jaberwock (Aug 22, 2012)

Do not rely on the fifteen year performance of a bond fund to indicate future performance.

Fifteen years ago, bond returns were much higher than they are now. We have just gone through a long period of falling interest rates during which bond prices have risen. If rates rise, longer term bond prices will fall and bond funds will struggle to break even. For the fixed income portion of your portfolio, you may be better off with GICs. However, you should not be invested totally in fixed income. You are guaranteeing yourself a zero return after accounting for inflation. Adding some REITs and blue chip dividend paying stocks will improve your returns without adding very much risk. 

If you are totally risk averse, you might consider buying an annuity (they can be very tax efficient). But remember that inflation will erode its value over time, so you will need to save in the early years to maintain equal, inflation adjusted, income. A TFSA would work very well as a savings vehicle in that case.

By the way, starting a RRIF does not take you out of the tax protected regime. RRIFs are not taxed until withdrawal (same as RRSPs).

I don't know your personal situation, whether you are well off or just surviving on your present income. Are you married? Do you have kids that you want to leave an inheritance? Do you have any pension outside of CPP or OAS?

My RRIF is invested 100% in dividend stocks and REIT's. I take out the dividends and leave the capital intact, except for an amount that I withdraw to top up our TFSAs every year. I firmly believe that this approach will minimize any risk of running out of money before I die.


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## anon125 (Feb 21, 2013)

I note that nobody wants to say how their investments did in 2015!
I read far more than a couple of articles. the ones I pointed out are they ones about reality that few people wish to face.
yes I have considered an annuity.
it is in cash right now while I decide.
the global investment situation has greatly changed in the last few years. the book I mentioned is one of the clearest on that point.
the money coming out of the RRIF is for our future when we are doddier than now. I am aware that in a rrif it is tax protected.
thanks all.


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## zylon (Oct 27, 2010)

*^^*

The information is publicly available with a simple google search.


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## AltaRed (Jun 8, 2009)

It does not matter what anyone's investment portfolio performance did in 2015. They will be all over the map depending on how people were invested in terms of asset allocation and geographical distribution. Even then, one year performance numbers are meaningless. If you want to talk about 5 or 10 year annual averages that is another matter.

I do agree that future global GDP growth is likely to be slower than historically but that is an assumption that the growth in services will not accelerate to overcome slowdown in demand in goods. It will also depend on whether there will be increasing barriers to trade. To hear Trump say it, he would rip up trade agreements and that will have a very significant negative effect on global GDP growth. Time will tell.

IMO, a balanced global fund such as MAW104 is one's best shot at getting things, on average, just right. It is a solid and reasonable marker for global market performance.

http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05MRR&region=can&culture=en-CA

5, 10 and 15 yr performance net of fees is 10.33%, 7.47% and 7.56% respectively. Note that the 10 and 15 year performances include the effects of the 2008-2009 crisis, so it is representative of both up and down markets. Going forward, I would expect performance in the range of 5-6% (knocking off 1-2 points for bonds and 1 point on equity), or vice versa depending on how/when interest rate increases come our way in the next 10 years. I am resigned to believing interest rates will stay low for a very long time (relative to recent history).

And to your other question, note that 2015 performance for that fund specifically was 10.54%.

Why not commit your RRIF to MAW104?


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## james4beach (Nov 15, 2012)

anon125 said:


> I note that nobody wants to say how their investments did in 2015!


I will share  I'm not a retiree, but I prepared a good portfolio for my parents and they've been in this since 2007. The allocations are: 32% XIC, 26% cash/XSB, 18% BRK.B, 13% CEF.A, 11% XSP

2014: +11%
2015: -0.1%
2016 to date: +5.0%

This is not a balanced portfolio though.


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## james4beach (Nov 15, 2012)

AltaRed said:


> IMO, a balanced global fund such as MAW104 is one's best shot at getting things, on average, just right. It is a solid and reasonable marker for global market performance. ... 5, 10 and 15 yr performance net of fees is 10.33%, 7.47% and 7.56% respectively. Note that the 10 and 15 year performances include the effects of the 2008-2009 crisis


Yes it's good that the time range includes the 2008 bear market, since those aren't very rare.

TD Monthly Income (another balanced fund)'s performance for 5, 10 and 15 years is: 5.45%, 5.22%, *8.09%* -- pretty amazing 15 year performance, but this is not as globally diversified as MAW104


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## OnlyMyOpinion (Sep 1, 2013)

Anon125, about a year ago you started a thread titled "sell my strip bonds". At that time you mentioned that your adviser said you should sell your strip bonds that were in your RRSP.

So my question is, do you still have an adviser, and what are they suggesting you do?

We know very little about your overall situation so it is difficult to make an informed suggestion. All we can do is answer your fairly narrow question(s). You seem to feel that you need/want a higher return in your RRIF but also seem to believe that the markets will not or cannot deliver it.

We don't know if your adviser is good or not, but we do know that everyone's financial decision making ability declines as we age. So it becomes an increasingly good idea to have a second opinion when we are considering changes (particularly large changes) to our investments.

--------------------------------------------------------------------------------------------------------------------------------------

This is something that I have only recently been reading about and it is interesting that while our financial cognition declines, we typically don't recognize it and we remain confident of our decision making ability. I'm probably 10 yrs younger than you but I have made a note to review our RRIF plans with my son when the time gets closer. Here are a couple of interesting articles on the subject:

_...Households aged 60 years and older control more than half of the wealth in the United States. Since fewer employers provide pensions than ever before, more people are dependent entirely on their retirement savings...
“This was originally one of the most surprising and alarming findings from the study,” Finke said. “As we get older, our ability to answer basic financial questions that include knowledge, and the ability to apply that knowledge, gets worse. But we have no idea this is happening. It’s very similar to the research on driving skills. Since it happens so gradually, we’re not aware our abilities are getting worse over time.”_
_*Old Age and Decline in Financial Literacy*_: http://today.ttu.edu/posts/2016/03/financial-literacy

_The findings confirm that declining cognition ... is associated with a significant decline in financial literacy. The study also finds that large declines in cognition and financial literacy have little effect on an elderly individual’s confidence in their financial knowledge, and essentially no effect on their confidence in managing their finances. Individuals with declining cognition are more likely to get help with their finances. But the study finds that over half of all elderly individuals with significant declines in cognition get no help outside of a spouse. Given the increasing dependence of retirees on ... savings, cognitive decline will likely have an increasingly significant adverse effect on the well-being of the elderly._
_*How Does Aging Affect Financial Decisin Making*_: http://crr.bc.edu/wp-content/uploads/2015/01/IB_15-1-508.pdf


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## zylon (Oct 27, 2010)

*Bond Funds : charts from theglobeandmail.com*

In case anyone holding a bond fund is getting nervous about rising rates sooner or later; one thing I'll be keeping an eye on is the *30-month moving average.* 
The average has been good support for price in the past; if price falls below the 30-month average, it will be a time to rethink the wisdom of holding on.






images hosting


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## anon125 (Feb 21, 2013)

remember that interest rates will never rise! yes I know that sound odd.
major changes happened some years ago. first in Japan and now the west and china.
growth wont happen- can't happen.
the reasons for growth and high interest rates have all gone.
read fred vettese book at least chapter 6.
the essential retirement guide. for a starter of this new understanding.
high paying jobs are being replace with low pay jobs etc. etc

as always the past does not necessarily forecast the future as many mutual funds say - surely ETFs are better now?
also according to Bloomberg the main or only reason that shares have increased is company buybacks which just mean the CEO gets more pay. no more is put into investment.

thank for everyone's ideas 
I took a while to reply cos of that password chaos


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## james4beach (Nov 15, 2012)

The reason for asset allocation, and sticking to allocations, is that you never know how assets will do.

The end of the bond bubble was called many years ago, possibly as far back as 2007 when global debt levels were sky high. Well guess what ... treasury bonds have performed incredibly well since 2007. They've attained prices (and low yields) that nobody ever guessed.

In Europe, there are negative interest rates. My guess is still that Canadian treasury yields will approach zero, and I think our short end of the curve will go to negative yield, same as US and Europe. Global growth is grinding to a halt and yields will go negative.

But why speculate on this? Just stick to your asset allocation. You do the same for stocks after all. Just maintain the target levels of exposure, rebalance once a year (maybe even less), and do this long-term. None of us can predict interest rates or the stock market


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## My Own Advisor (Sep 24, 2012)

Jaberwock said:


> My RRIF is invested 100% in dividend stocks and REIT's. I take out the dividends and leave the capital intact, except for an amount that I withdraw to top up our TFSAs every year. I firmly believe that this approach will minimize any risk of running out of money before I die.


Exactly my approach as I get older.


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## canew90 (Jul 13, 2016)

What should old folks invest in?

It's a good question but if one asking by the time one turns 71, than it's not realistic to worry about investments, but rather how much money does the person(s) need to meet their expenses. Do they have work pensions, other sources of income, have they accumulated a reasonable amount of savings, do they need to draw from their saving to meet expenses?

Knowing the above one can determine where or what one might invest in.


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## My Own Advisor (Sep 24, 2012)

What should old folks invest in?

Depends how much money you have, and how much you need, to cover expenses.

If you're 70, need $40k per year, and have millions, and a pension - you can invest in GICs (or whatever you want) to meet your needs because you don't need growth or income, you can draw down your capital as you please.

If you're 70, need $40k per year, and have $100k, and no pension but do have government programs to rely on - you need to think about growth and some safety.

Personally, _I think as you get older_, you need to focus on income from your portfolio and not the capital. You need to think this way because a) old folks only have so many good years left to enjoy income and b) you need income to live from; you can't depend on capital gains to get you through.

Just my take of course.


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## canew90 (Jul 13, 2016)

My Own Advisor said:


> What should old folks invest in?
> 
> Depends how much money you have, and how much you need, to cover expenses.
> 
> ...


We do think alike, but I believe all investors should be focusing on "Income", even during their accumulation phase. Then by the time one is ready to retire they will know what their income from their investments will be. Invested wisely the income will be a growing amount rather than fixed.


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## gibor365 (Apr 1, 2011)

james4beach said:


> I will share  I'm not a retiree, but I prepared a good portfolio for my parents and they've been in this since 2007. The allocations are: 32% XIC, 26% cash/XSB, 18% BRK.B, 13% CEF.A, 11% XSP
> 
> 2014: +11%
> 2015: -0.1%
> ...


Will share too 
2012 8.2%
2013 15.3%
2014 12.9%
2015 4.5%
so far 2016 10%
Current allocation: FI 8.7%, US$ 40.3%, CDN 47.5%, Rest of the World 3.5% (US$ portion significantly increased because CAD$ was going down the tube).
Core holdings: Canadian banks, Telecoms, Utilities, US$ dividends aristocrats, and low cost index ETFs


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## anon125 (Feb 21, 2013)

another thing to consider - old folks don't have the time left to recoup a 30% loss in the stock market!
thanks everyone


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## birdman (Feb 12, 2013)

anon125 said:


> another thing to consider - old folks don't have the time left to recoup a 30% loss in the stock market!
> thanks everyone


And my stock returns:
2012 12% 
2013 15.5%
2014 22%
2015 -2%
2016 12% (ytd)

equities are 100% Canadian with about 50% in banks, 25% utilities, and 25% sundry. No ETF's but may go there. 70 yrs old and 24% in market, 50% in GIC's, and 25% in sundry (loans, MIC's, gold). Have small co pension as well.


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## OnlyMyOpinion (Sep 1, 2013)

anon125 said:


> another thing to consider - old folks don't have the time left to recoup a 30% loss in the stock market!
> thanks everyone


I assume you are a ~71 year 'old folk' based on your comment about needing to start a RRIF. Not sure of your health or outlook for longevity but you could easily be around for another 10, 15 or 20 years or more. I'd consider that enough 'time left' to keep some portion of your portfolio in equities (individual, etf, mf, etc.) to stay ahead of inflation. Another portion in crappy GIC's or similar (you did have strip bonds) would provide a cash wedge to preclude needing to sell your equity portion in a down market, given that your RRIF will have annual minimum withdrawl amounts.
You never did say how dependent you are on this RRIF income to meet your retirement expenses. A high dependency might cause you be more comfortable with a higher FI component, but having no equities at all could bite you.


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## canew90 (Jul 13, 2016)

anon125 said:


> another thing to consider - old folks don't have the time left to recoup a 30% loss in the stock market!
> thanks everyone


That's provided they need to draw down capital to meet expenses. If they have a stream of income which more than meets their needs than the value of their investments going up or down will not effect that income stream.


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## AltaRed (Jun 8, 2009)

canew90 said:


> That's provided they need to draw down capital to meet expenses. If they have a stream of income which more than meets their needs than the value of their investments going up or down will not effect that income stream.


True, but few people have the resources to simply rely on the income stream and hence that info is not helpful. The vast majority have to draw down capital. Hence all the discussion about having a balanced portfolio to avoid (minimize) drawing down equity during a dive in the markets.


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## agent99 (Sep 11, 2013)

canew90 said:


> That's provided they need to draw down capital to meet expenses. If they have a stream of income which more than meets their needs than the value of their investments going up or down will not effect that income stream.


Even if they have sufficient cash flow to cover living expenses, they may have to draw down capital just to pay the taxes on their RRIF withdrawals. The reduction in the minimum withdrawal rate has however helped. Every situation is different, so no 'one size fits all' for retirees.


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## zylon (Oct 27, 2010)

*PH&N Bond D - PHN110*

Not clear to me what this means, but I'm sure management is trying to reassure investors.

Snip from 2016 year-end management overview:

"While the pull-back in returns in the
fourth quarter was extensive, the Fund still
managed a modest positive return for the year,
and is now in a better position via a higher yield to
provide a higher level of income going forward.
*Ultimately, higher yields will benefit the Fund and
its investors over the long term.*"
http://funds.rbcgam.com/pdf/fund-pages/quarterly/rbf1110_e.pdf

The 30-month moving average is still holding as support.
- chart from Globe-and-Mail portfolio:










- the Morningstar view:
http://quote.morningstar.ca/QuickTa...rf.aspx?t=0P0000706X&region=CAN&culture=en-CA


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## Brin68 (Aug 25, 2016)

I have moved a lot of my portfolio to preferred shares . I am retired and invest 100% in fixed income. There are some relatively safe preferred share options that provide a dividend much higher than the present gic rates. One example is CGI.PR.D. It has a retraction date of June 15 2022. The yield to maturity is approx. 3.4% and the DBRS rating is Pfd-1L which I believe makes it the highest rated preferred share in Canada. I only look at specific preferred shares and do not buy the ETFs which can have more volatility in some cases.


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## james4beach (Nov 15, 2012)

canew90 said:


> If they have a stream of income which more than meets their needs than the value of their investments going up or down will not effect that income stream.


The real question is -- what is the total amount of cash you will have to have to draw out of the portfolio? This level of withdrawals makes a big difference.

I've posted some details here about my thoughts on the math. If you're withdrawing about 2.5% or less (initial amount *plus annual inflation adjustment*) then you can keep all the money in stocks and live off the dividends or sales. I say, just put it in XIU and live off the dividends forever and pay zero tax.

However as you approach 3% or higher, it would be reckless to keep the money 100% in stocks. Instead, you need a diversified portfolio like a balanced fund that has less volatility. Otherwise, sequence of return risk will threaten to deplete the portfolio.

Many people in these forums seem to be under the impression that if your 4% withdrawal comes in the form of dividends, then it's sustainable forever. This is true if you are NOT inflation adjusting the withdrawals, but if you mean 4% of initial value + inflation adjustment, then the research in this area is very clear ... you need a diversified portfolio like 50/50 or 60/40.

*If you really want to live off a stock portfolio with dividends*, you can do it if you don't plan to steadily increase withdrawals with inflation. You can also do it if you are willing to just stick with the dividend level even in years that the dividends contract and provide less than you expect. That's sustainable because you're accepting reductions of the withdrawal amount. But then you should ask some serious questions like, what will happen in those years where the income stream contracts -- perhaps dramatically. Can I really survive on that?


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## like_to_retire (Oct 9, 2016)

Brin68 said:


> I have moved a lot of my portfolio to preferred shares . I am retired and invest 100% in fixed income. There are some relatively safe preferred share options that provide a dividend much higher than the present gic rates. One example is CGI.PR.D. It has a retraction date of June 15 2022. The yield to maturity is approx. 3.4% and the DBRS rating is Pfd-1L which I believe makes it the highest rated preferred share in Canada. I only look at specific preferred shares and do not buy the ETFs which can have more volatility in some cases.


Yeah, if you want to stick to 100% fixed, it's a reasonable move to boost your income with preferred shares. There aren't many retractables left unfortunately, and as such, their yield is rather low, but certainly higher than GIC's, so they're a worthwhile addition to juice returns for income investors. The straights have wonderful cash flow, but if absolute capital preservation is a concern, you of course would avoid that route in anticipation of higher interest rates in the future. There are also the new minimum fixed resets to consider as 5 year money compared against GIC's. Most don't boast Pdf-1L, but a tiny portion of these (i.e. TRP.PR.J) wouldn't hurt either.

ltr


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## AltaRed (Jun 8, 2009)

james4beach said:


> *If you really want to live off a stock portfolio with dividends*, you can do it if you don't plan to steadily increase withdrawals with inflation. You can also do it if you are willing to just stick with the dividend level even in years that the dividends contract and provide less than you expect. That's sustainable because you're accepting reductions of the withdrawal amount. But then you should ask some serious questions like, what will happen in those years where the income stream contracts -- perhaps dramatically. Can I really survive on that?


Except a lot of stocks have dividend growth, so that dividend stream will grow somewhat as well. No assurrances of growth equal to or better than CPI inflation, and sometimes a decrease of course in an equity market crisis, bit the overall trend is up.


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## Eder (Feb 16, 2011)

AltaRed...the secret word...dividend growth...makes inflation go away and the living easy. But most would not believe people claiming yield on costs with blue chip companies over 10% and growing 8% faster than inflation. Better to lose money guaranteed.


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## AltaRed (Jun 8, 2009)

Eder said:


> AltaRed...the secret word...dividend growth...makes inflation go away and the living easy. But most would not believe people claiming yield on costs with blue chip companies over 10% and growing 8% faster than inflation. Better to lose money guaranteed.


Yield on cost is meaningless. Never have calculated it, never will calculate it and never will conduct a conversation with anyone about it. 

What really matters is the growth in the overall dividend stream in the recent past and going forward, I will happily discuss that. XIU is not a bad proxy for dividend growth stream for the past 10 or so years. Financials have done well while resources have not while back in the last decade, resources did well in the super commodity cycle. At least some diversification there to avoid biased cheerleading.

http://www.dividendchannel.com/symbol/xiu.ca/ has a pretty neat chart (and table) to show the overall trend...mostly trending up with some hiccup years but essentially a doubling of dividend in 17 years (2000-2016). Not shabby at all.

Added: I hopefully have about 20 years of investing life left in me before I start taking a fork in the road. I certainly can live with a doubling of my current dividend stream over that period of time.


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## Eder (Feb 16, 2011)

Not meaningless, just an illustration of the power of dividend growth...for millennial's buy RY (or BCE,TRP etc) today yielding 4% and forget about it...20 years down the road your dividend has doubled ...far ahead of inflation or a 4% SWR. Worked for me (retired 8 years) and will work for anyone. 
A road to success.


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## AltaRed (Jun 8, 2009)

The answer is different for someone who bought TRP 5 years ago versus 20 years ago. What matters is what the dividend stream itself has done over the period, not the relationship with the cost of the stock at any time in the past. CMF has had this debate multiple times.


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