patrick.net

Don't take our word on anything.

Use this calculator ...

https://dqydj.com/stock-return-calculator-dividend-reinvestment-drip/

Basically, put in the symbol for a stock which produce regular dividends and in particular, focus on industries which are stable like tobacco, food stuffs, whiskey, utilities, etc. In other words, no company which is a "Wall St darling" where it's all cap gains or bust.

What this calc will do is re-invest your quarterly dividend checks into buying more shares so as a hypothetical example, if you bought the tobacco firm, RJ Reynolds, now Reynolds America (RAI), in 2002, you can see that starting with $500K, if you compound your earnings, you can have an equity stake worth some $10M+ by 2017. And that's only half your time frame.

So what you'll need to do, with your financial advisor, is to determine which companies may be cutting their dividend yields, instead of either maintaining or raising them, on a bi-annual basis and divest yourself from those particular equities. So come up with your happy dozen or two list of companies, and only invest in them with the automated dividend reinvestment (DRIP) in place.

And I'd stay away from later, putting your earnings into an annuity because in effect, if you follow a DRIP program correctly, during retirement, you can just live off your dividend checks. There's no need for an insurance firm as a middle man for an income stream.

Aphroman says

Thanks for this. 20/1 in 15 years of RAI is not half bad

DRIP also keeps you content with your holdings that aren’t going up in share price relative to others. You’re planning on buying more, so it’s good to be buying on the cheap. It pays dividends to DRIP

It's even better than that, when the overall market tanked, ala 2008, stocks like Reynolds were cutting 10-12% annual dividend checks, as their ticker prices were also beaten down along with the rest of the Dow Jones. In other words, just because the markets panicked, doesn't mean that ppl will stop smoking, boozing, pay their electric bills, or buying food.

And thus, if you use the same formula, between 1/4/2007 and 1/4/2012, $10K in RAI turns into $17K during that downturn plus correction period. That's the magic of compounding interest during a down market.

Also, if you were entering retirement and the markets' nose dived, you'll be able to live on those dividend yields and just let the general indexes recover in time, w/o having to lose sleep. In other words, don't buy a rip off annuity. It doesn't take long to do research on a couple dozen dividend stocks.

Since I'd liquidated 90% of my equity in the hedge fund, my days of active trading are over, even though for the most part, my job was in sales and in supporting the working enterprise, IT plus prop traders.

That 10% is my 'last' true cap gains play.

And thus, I want to live the rentier lifestyle where I just compound dividend checks, while using my consulting fees to pay my day-to-day bills and any excess taxes, where the stuff isn't parked in a tax-deferred vehicle.

cmdrdataleak says

If you had ½ million USD to invest, with a goal toward realizing maximum returns with maximum probability inside a thirty year timespan, how would you lay your chips?

Bunker in an isolated area, canned food, water filtration, fuel and of course ammo. (Watching Doomsday Preppers right now.)

I just can't buy rjr, but sure wish I had invested in something as profitable back in 2002.

HowdyThere says

cmdrdataleak says

If you had ½ million USD to invest, with a goal toward realizing maximum returns with maximum probability inside a thirty year timespan, how would you lay your chips?

Bunker in an isolated area, canned food, water filtration, fuel and of course ammo. (Watching Doomsday Preppers right now.)

I'd just buy ammo, which can be used to ...persuade others to give you their food, water, and shelter during a doomsday event. One 200 square foot storage facility full of ammo would be worth a small fortune.

Patrick says

I just can't buy rjr, but sure wish I had invested in something as profitable back in 2002.

More important is to not fall for the solo cap gains play, which is why so many long term investors lose out, esp when the markets tank and they get no dividends from their "halved" portfolios.

If a company can't give regular dividends, then the chances are, they are not long term investments, just intermediate term capital gain plays.

At the bottom in 2009, Reynolds was giving 10-12% dividends for the year. I did zero work for that; the stock took a 30% haircut along with the rest of the Dow Jones. I only didn't sell my shares which allowed me to buy even more shares, automatically, w/o any additional work.

If the same thing were to play out in let's say 2035, during retirement, where one's portfolio goes from $3M to let's say $1.5M, but then, one's holdings give you a 10% paycheck, that's $150K/yr just for owning those stocks. And thus, no need to sell anything to pay one's bills.

Rin says

More important is to not fall for the solo cap gains play, which is why so many long term investors lose out, esp when the markets tank and they get no dividends from their "halved" portfolios.

So you like bitcoin? Lol, i kid i kid

Put it all in CURO

If you're really looking at a 30 year timespan, and don't want to put a ton of work into the decision, go for one of the Vanguard index funds. Low overhead, on the order of 0.1% annually, and then you just watch the daily news about the whole stock market to know how you're doing.

The stock market has historically been the best bet over the long term, even if you include the Great Depression.

Sure, the world could end, but then your investments wouldn't be your biggest problem anyway.

Patrick says

If you're really looking at a 30 year timespan, and don't want to put a ton of work into the decision, go for one of the Vanguard index funds. Low overhead, on the order of 0.1% annually, and then you just watch the daily news about the whole stock market to know how you're doing.

The stock market has historically been the best bet over the long term, even if you include the Great Depression.

Sure, the world could end, but then your investments wouldn't be your biggest problem anyway.

This option is the best and don't have to guess all the time. After 30 years, at 4% to 8% growth rate, you could get $1.62 to $5 million.

At 4% M$ 0.5(1.04)^30 = M$ 1.62
At 5% M$ 0.5(1.05)^30 = M$ 2.16
At 6% M$ 0.5(1.06)^30 = M$ 2.87
At 7% M$ 0.5(1.07)^30 = M$ 3.80
At 8% M$ 0.5(1.08)^30 = M$ 5.03

How to invest.

If the goal was capital appreciation, I would make stock investments using mutual funds. The essence of investing is mutual funds.

You could buy 5 stock mutual funds: 1. large growth style 2. large value style 3. small or mid sized growth style 4. small cap value style 5. international growth

You could buy also the funds and also buy a Vanguard Variable Annuity invested in Capital Growth portfolio (identical to mutual fund). The reason for Variable annuity is you won't get a 1099, it's similar to a private IRA with no contribution limit (it's not exactly like an IRA)

I would only consider mutual funds from 1. Vanguard 2. T. Rowe Price 3. Fidelity 4. Primecap Odyssey

The growth of the investment may cause large 1099 depending on the type of stock fund you picked 1-5 above.

If you wanted to avoid being taxed as your investment grows, you can substitute Vanguard Tax Managed Capital Appreciation for the 1-5 stock funds.

If you are a conservative investor and want to capture maybe less return but sleep more soundly, consider a balanced mutual fund (e.g. Vanguard Wellington). This is a fund you can buy and hold forever, but it is less tax efficient than a growth fund since it contains bonds and stocks (bond income=1099=tax liability).

clambo says

capital appreciation

Look, I'm only passionate about men being able to see hoes legally in America.

Aside from that, I don't want to rain on anyone's parade but if cap gains is your goal ... you need to be an active trader. And that involves a lot of self-study and being able to work with the dynamics of the market, on a continual basis.

Realize, there will be up (bullish periods) and down (bearish periods) in the markets and thus, it's better to have a dividend based portfolio than a cap gains only one, during your key investment years.

Here's a sample site, www.suredividend.com/dividend-kings, which tracks dividend only equities which either maintain or regularly increases dividends, over time.

Talk to a good financial advisor and work with him, using this strategy in mind.

Rin says

clambo says

capital appreciation

Look, I'm only passionate about men being able to see hoes legally in America.

Aside from that, I don't want to rain on anyone's parade but if cap gains is your goal ... you need to be an active trader. And that involves a lot of self-study and being able to work with the dynamics of the market, on a continual basis.

Realize, there will be up (bullish periods) and down (bearish periods) in the markets and thus, it's better to have a dividend based portfolio than a cap gains only one, during your key investment years.

Here's a sample site, www.suredividend.com/dividend-kings, which tracks dividend only equities which either maintain or regularly increases dividends, over time.

Talk to a good financial advisor and work with him, using this strategy in mind.

I agree with this. I became an active trader almost a decade ago, starting out with occasional purchases but now this is at least a half-time job. Also if you risk for appreciation (like in biotech) be prepared to make many mistakes and start out with a don't-lose-all-your-bankroll strategy, aiming at creating "freerolls" (accumulate and hold shares mostly from day-trading gains) via daytrading. Your net-worth will vary wildly and you can never use those funds to pay bills. In that respect the dividend strategy is much safer and probably on average more successful. And most important far less time consuming. If you are the type who obsesses over hefty losses or constantly calculates how much money they left on the table by selling security xyz too early active investing/trading is not suitable. If you like to invest aggressively small-cap biotechs are great (but risky) plays.

Rin says

Use this calculator ...
https://dqydj.com/stock-return-calculator-dividend-reinvestment-drip/

Some alternatives:
This thing is nice and shiny w/ lots of features, and seems to be actively developed.
https://www.portfoliovisualizer.com/backtest-portfolio

I also use this one. I like some of its unique features, like the date slider + the trailing total gains, which makes playing around with data/dates, to see how well it performed during a certain time period, really fast and convenient.
http://rehfeld.us/returns/

cmdrdataleak says

(Watching Doomsday Preppers right now.)

haha I like that show. Most of the people on it are kinda crazy imo, but I always really looked forward to next episode.

Hookers and blow.

Massive life profit.

Surprised you got this one wrong Rin.