Saturday, January 28, 2012
A friend posted this on Facebook and I thought it was a very useful quote. As a matter of personal philosophy I believe that investors have a much better chance of portfolio success once they figured out what makes them tick, what is really important to them.
We all know people like whom the Dalai Lama is referring to or maybe we have been that person or maybe we still are that person. Often in this context I have quoted our friend Bill from here in Walker (Bill is not my neighbor with the backhoe, that is someone else) in saying that you can figure it out now, or you can figure it out later but you'll be much happier if you can figure it out now.
One simple example of this might be figuring out that instead of an $8000 (net) monthly lifestyle happiness and fulfillment can be had for $4000-$5000 per month instead. There is nothing that says an $8000 income (just an example) must result in an $8000 lifestyle.
This can lead to a readjustment of how much risk needs to be taken in the portfolio while still accumulating and then in retirement. Using the 4% withdrawal rule as a benchmark a $1 million portfolio should be able to generate $40,000 but if a $1 million portfolio only needs to generate $30,000 then perhaps fewer chances need to be taken. Contrast the $30,000 to $50,000 coming out of a $1 million portfolio which probably means having to take more chances with the portfolio. If possible I'd rather take fewer chances (obvious statement).
On an unrelated note I found a curiously titled post at Seeking Alpha; How I Morphed Into A Dividend Zealot. It captures how one investor started out seeking capital gains. He then went on to describe his transformation--his word. To read the congratulatory comments I think the idea of a religious type of devotion stands up--I believe it is correct that I am the one who coined the term dividend zealot. My own preference is to avoid that sort of devotion.