Strategy Matters When You are Retired or Not
Beating something is, of course, a relative statement. Always be very skeptical when some fund or advisor says that they can offer market-beating returns. That includes advice given by me. However, there are reasons why I have focused on a dividend growth strategy as my primary means of providing retirement income for the last thirteen years. While my short-term results might shine in the present fear-driven market, there is something to be said for having a more general growth strategy if you don’t need income at the present time.
When I compare my YTD results against the S&P 500, the Dow Jones Industrial Average, and the Nasdaq indices, I beat all three YTD. This is due to the recent flight from technology stocks, especially the big names that are at the top of the cap-weighted indices like the S&P 500 and the tech-heavy NASDAQ.
Our returns currently stand at -9.83%. This is in comparison to -10.49% for the DJIA, -27.42% for the NASDAQ, and -15.36% for the S&P 500. It is not possible to attribute all of the “success” to a single factor. However, I believe there are a couple of key drivers of our results.
Some Pictures to Tell the Story
Sometimes it is easier to see how investments work using pictures. The following five images come from either ETF.COM or from SEEKING ALPHA. I highly recommend both. However, if you only have time for one tool, use SEEKING ALPHA.
In fairness, although I am using VYM as a comparison against a well-respected S&P 500 ETF, VYM is not the only reason our YTD investment results are better. I have significant investments in the financial sector, have increased our energy sector investments, and also like REITs and BDCs for income.
Seeking Alpha Pictures
When comparing investments, understand the reasons one might be more risky than another investment. Risk should be viewed from a long-term perspective. Always remember that volatility is only risk if you need to sell an investment during a bear market or when your investment is worth less than what you paid for it. Also understand that some, but not all, dividend investments can soften the blow of volatility during times of fear in the stock and bond markets.
These three images help explain why I prefer VYM over SPY as a retiree. I am willing to “sacrifice” ten year returns for more immediate income and for dividend growth.
A Good ETF Tool
One good tool I sometimes use is an ETF comparison web site. Here is a LINK.
Cindie and I own 2,325 shares of VYM as a long-term investment. I also have more investments in the financial sector, in REITs and in BDCs. Of course, not all investments are right for your investment portfolio. Always understand what you are buying, but above all, have a strategy and learn from your mistakes.