The following quote is from an Investopedia article about a wise
Retirement Income Strategy
“Still, there are always those that don’t get the word. Far too many individual investors, especially retirees or those that need regular distributions to support their lifestyle, are still mired in grandfather’s investment policy. Given a choice between an investment with a 4% dividend and a 2% expected growth or an 8% expected return but no dividend, many would opt for the dividend investment, and they might argue against all the available evidence that their portfolio is “safer.” It is demonstrably not so.”
While this article is very good and makes some very valid points, there is something tragically wrong with this paragraph. Can you spot the flaws? There is an assumption made flies in the face of reality. The percentages given to illustrate their logic fail to take into consideration some pertinent data about dividend-growth investing. Do you see the assumption and the potential flaw with the assumption?
By the way, my grandfather was a dear man, a skilled carpenter, a hard worker, a good step-father for my dad and a loving and devoted husband. He had no investments, but he invested his carpentry skills in my aunt’s pet store in Waukegan Illinois.
Recommendation: Ignore a grandfather’s wisdom and approach to life and what really matters at your own risk. An 8% return is adequate, but you would be wise to shoot for 10% average.
Picture notes: Spring 1940 from left to right: My father, Clyde Winquist, his step-father Berger holding his brother Berger Jr, my grandmother, Margaret Winquist and my wonderful Aunt Vera, who owned The Pet Shop in Waukegan Illinois for many years.