No. of Recommendations: 22
I understand your preference for securities that do not pay dividends due to the greater total return. But total return is only part of the picture. There is also the risk in terms of draw downs
Sorry, I can't see that at all.
If you're accumulating wealth in a retirement portfolio, the only thing that matters is the rate of return during the time you were saving for retirement. That's it.*
Draw downs aren't a risk, they're just a thing that happens.
Those who find them emotionally unpleasant and therefore pick poor performers that they THINK will be a smoother ride can almost certainly find a much cheaper way to increase their happiness.
Neither the earnings nor the share price of Berkshire is particularly smooth.
We've all been taught to look past the short term squiggles on this stock, so we have to take that lesson to other securities and portfolios.
What if you needed some income in 2022 to pay for your child's tuition at college or medical expenses?
That's not a retirement portfolio. Separate discussion.
If you have a block of assets that may have an unexpectedly shortened investment time horizon, it has to be allocated appropriately.
Cash, TIPS ladder, whatever.
For withdrawals spread over time, a typical use of a retirement portfolio when the time comes, price volatility doesn't matter.
Some small sales will be done at good valuations, some at poor valuations, but on average you'll get the average...which is all you could reasonably expect anyway.
Jim
* we'll take it as read that the securities you choose aren't doing illegal or odious stuff, dividends or not.
