This “strategy” seems to be all over the blogosphere.e Typical is seeking alpha’s popular “dividends and income section” . Unfortunately, but not surprisingly the financial services industry has fed the bandwagon bring ing out a seemingly endless number of dividend and dividend growth ETFS and actively managed funds. Brokers/Salespeople were happy to feed the frenzy as well without much deep analysis of the pitfalls of such an approach
- Pick a stock and assume that if one bought a stock and owned it for decades the “dividend growth” of reinvesting the income will produce a secure income stream for retirement.
- Make sure when you buy the dividend stock you hold your dividends and wait till that stock is a “bargain” which of course you will know and time extremely well. This means of course that you are not reinvesting the dividend but trading with the dividend . Thus the growth of an investment with dividend reinvestment is not your strategy at all. So those numbers don’t of a long term position with dividends reinvested and doesn’t match the “dividend growth” strategy at all certainly not a DRIP strategy.
- In figuring out what future dividends that will fund the retirement the methodology of calculations is a bit fuzzy to say the least.
- I could do a similar argument for a total return investor: