Your Retirement Nest Egg

[Havok1]

Hey y'all. Been some time since I've been on or even posted. This thread caught my attention! It's been over 30 years since I practiced or had my series 6, 7 and 63 licenses to sell stocks, bonds, mutual funds, etc., but all the talk on dividends, one must understand what a dividend is...PROFIT.

Companies decide to either pay a dividend (usually a pre-determined percentage of profit) or not (reinvesting the profit back into the company). How much to pay out as a dividend is generally determined by the companies Board of Directors. Some companies pay the same amount each month, quarter or annually while others pay a percentage, whereby the dividend amount varies.

As investors, one may buy investment vehicles based on dividend payout and do one of two things: take the dividend as income or reinvest it back into said investment vehicle thereby buying more shares.

I don't claim to be a bright man, but this seems pretty straight forward.

Y'all can beat me up now

Companies can also take that same profit and repurchase shares instead of paying a dividend, which is more common now for a few reasons, one being tax efficiency. Not sure when you left the industry, but this has led dividends as the largest method of returning profit since 1997.

 

[ZX9RCAM]

Won't one end up having to pay the same taxes either way, dividends or reinvested?

 

[oldag]

N

Feel free to throw out a fund ticker and I’ll run it. If youre actually beating the market on a consistent basis, I, and the vast majority of the financial world who can not consistently beat the market would all love to know how.

No fund. Individual equities. And yes, the portfolio has done very well. Buy XOM when it is in the tank. Then hold.

 

[ZX9RCAM]

N

No fund. Individual equities. And yes, the portfolio has done very well. Buy XOM when it is in the tank. Then hold.

My largest holding.

 

[Eastexasrick]

My largest holding.

Overlay XOM from 2000 to now, real-world vs guru. *+2000%

 

[Havok1]

N

No fund. Individual equities. And yes, the portfolio has done very well. Buy XOM when it is in the tank. Then hold.

I ran this one several different ways. I only took screenshots of the first 3 since the others I was not able to graph together. The first, showing $10000 lump summed into both. The second with $1000 invested monthly, and the 3rd with 4% withdrawn annually.

I also looked at setting the start date back to 1985, and lump summing into XOM in 1985 would have beat the market, but a DCA in the 80s would have underperformed then, as well as 1992 when VTSAX was created.

Although I do think XOM is a good stock, we can see here how difficult it is to outperform the market. There are only small time periods where an investor would have been better off buying/retiring with money in XOM vs an index fund.

We can also look at AT&T as a very recent example of the risks of dividend focused stock picking. Not that I’m suggesting you hold AT&T though.

 

[SA_Steve]

Gold is a great idea! Well not so much, I bought some 4 months ago, and it is down 5% along with my two favorite big dividend stocks.

Fortunately the 5% short term bond rates are being good to me, all year so far.

 

[oldag]

I ran this one several different ways. I only took screenshots of the first 3 since the others I was not able to graph together. The first, showing $10000 lump summed into both. The second with $1000 invested monthly, and the 3rd with 4% withdrawn annually

Buy XOM in 2020 at under $40. Plus a great dividend. You will do well.

I passed on AT&T.

 

[Sam Colt]

Dividends affect the value of a stock. The market defines the price of a stock. Those can, and often do, move independently.

 

[ZX9RCAM]

Buy XOM in 2020 at under $40. Plus a great dividend. You will do well.

I passed on AT&T.

A little late for that.....

 

[Havok1]

Buy XOM in 2020 at under $40. Plus a great dividend. You will do well.

I passed on AT&T.

And sell when? And with what tax consequences? XOM has mostly underperformed the market, so why would I gamble on market timing when I can just stick with market performance and do better?

Did you buy all of your XOM in 2020?

 

[ZX9RCAM]

And sell when? And with what tax consequences? XOM has mostly underperformed the market, so why would I gamble on market timing when I can just stick with market performance and do better?

Did you buy all of your XOM in 2020?

How does one sell at a profit, and not pay taxes?

 

[SA_Steve]

That was my best deal of the century, bought it in the $30's then sold it when my money doubled ! Did not take long. Sure wish I still had it ! Could have at least put in a stop loss order.

 

[oldag]

How does one sell at a profit, and not pay taxes?

One does not.

 

[ZX9RCAM]

One does not.

Exactly.

He didn't respond to my similar question in post 102.

 

[oldag]

And sell when? And with what tax consequences? XOM has mostly underperformed the market, so why would I gamble on market timing when I can just stick with market performance and do better?

Did you buy all of your XOM in 2020?

Pretty much.

Market timing can be difficult. Anyone who says otherwise... But when the price of oil goes that low and the oil stocks experience such a huge drop, I see no material risk. I have been around long enough to know that oil prices (and oil stocks) have always cycled and always will. Doesn't stay up for ever, doesn't stay down forever.

Have a great day. You have not made your case and obviously will not.

I have been blessed and will be able to retire. Good Lord willing and the creeks don't rise, I will have an inheritance for later generations.

 

[Havok1]

Pretty much.

Market timing can be difficult. Anyone who says otherwise... But when the price of oil goes that low and the oil stocks experience such a huge drop, I see no material risk. I have been around long enough to know that oil prices (and oil stocks) have always cycled and always will. Doesn't stay up for ever, doesn't stay down forever.

Have a great day. You have not made your case and obviously will not.

I have been blessed and will be able to retire. Good Lord willing and the creeks don't rise, I will have an inheritance for later generations.

I’m honestly just trying to learn here. You say market timing is difficult, and that is the most accurate thing you’ve said in this thread. Jack Bogle famously said that he did not know anyone who had successfully timed the market, and he did not even know anyone who knew anyone who had successfully timed the market. The thing about market timing is you have to be right twice. So you have the buy date, but what is the sell date?

You said in an earlier post that I needed to stick to reality, and not theory. I’m trying to do that. To find scenarios where people outperform with XOM requires quite a bit of detachment from reality. It’s possible that people have done it out of pure luck, but that’s about it. In any scenario that I run, eventually the index comes out ahead. For example, XOM is not even close to market performance this year.

You say that I have not made my point, but I think it may just be that you don’t understand how your portfolio compares to the index. The only information in this thread shows your dividend strategy being an underperformer. You have not, and likely can not demonstrate that it is an outperformer, or even equal performer over the long run. But if I am wrong, I’d certainly like to see. I tried to find scenarios where I was wrong, but they just don’t exist. There is a good reason why Warren Buffet recommends people buy and hold an S&P 500 index, and that is because there are very few people who can do better. I can probably safely assume that none of the people who can are posting in this thread.

The topic of this thread is people needing more money to retire, so if we are discussing retirement strategies, I just think if there is a retirement strategy that is more likely to get people to their target number quicker, that would be good information to have. But so far, just saying dividends are better, and trying to reinforce that with an underperforming stock isn’t making a solid case for a dividend focus.

 

[Havok1]

How does one sell at a profit, and not pay taxes?

If you’re in the 0% capital gain tax bracket is one way. Also if you have other losses that can offset the gains, that is another way to wipe them out. You can also hold the stock in a tax advantaged account and will not be taxed when you sell, only when you withdraw.

The point of my question though is that for people who use taxable accounts, then trying to beat the market with individual stocks will result in a capital gain if the stock does well, and tax drag can not be ignored when comparing portfolio strategies. so if a stock such as XOM is already an underperformer over the long term, then having to set aside money when it may be less favorable to pay taxes reduces that short term out performance.

 

[IXLR8]

My dad, who is gone but not forgotten always bought stocks that reinvested the dividends back to buy more stock. It just makes sense to me, if it is not your source of income.

 

[popper]

reinvested the dividends back to buy more stock. you have to watch the stock to make sure the buy sell cost is tracked - or just pay an avg. cost.