Strategy Matters When You are Retired or Not

Strategy Matters in Retirement and Before Retirement. Do you have an investment strategy?

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.

YTD Results

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.

Seeking Alpha ETF Ratings are a quick way to compare up to five different ETFs.
VYM clearly beats SPY if you are in retirement and need income. Don’t sell investments in a bear market!

ETF.COM Pictures

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.

Both SPY and VYM have sufficient diversification. SPY does have a weakness as seen on the following images.
VYM is beating SPY this year. However SPY has a better long-term growth story. Is the extra growth worth it?
Always know the top ten investments in any mutual fund or ETF you purchase. Bear markets can be painful.

A Good ETF Tool

One good tool I sometimes use is an ETF comparison web site. Here is a LINK.

Full Disclosure

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.