Well, October is halfway done, and we are ¾ of the way through the y ear. If you’ve been reading my story, you know that this is an inherited IRA from my father, that I set up as a sort of “experiment” for an old-time dividend paying account, which would generate regular income – something a person could use once they retire.
I’ve had some ups & downs with it, and it has generated roughly 4% in dividends annually – but it hasn’t grown very much. Thus, in this era of growth fund investing and low interest rates, it hasn’t been able to generate the sort of returns necessary for someone to live off of in a long-term retirement. Still, its an interesting experiment, and good to know.
I started it back in 2016, and the fund was setup with 50% bonds, 25% dividend stocks and 25% REITs. After 2-1/2 years, I decided to divest from bonds, because with the low interest rates, they were only paying about 2% in dividends and dragging down the performance of the whole fund. Since then, its been a roughly 50/50 split.
In 2020, I started a “dog of the dow” investment strategy, where you purchase the 10 stocks with the highest yield on the Dow (i.e. their price vs. the dividend they are paying is lower). Its an old time strategy, and I’m not sure how its going to pay off long term. 2020 was a bad year for dividend stocks, but they’ve bounced back.
Now for the 3rd quarter, we generated roughly similar dividends to what was generated in 2nd quarter. The value of the fund on July 1 was $138K, and for October 1 it was $134.5K, so the account didn’t really grow (actually shrunk about 2.5%) while generating an annual 3.7% dividend rate. As I’ve stated before, this doesn’t appear to be a valid way to generate retirement income for the long haul. Whether this is due to low interest rates, poor performance from income stocks, or just generic poor performance from the “Dogs of the Dow” strategy, it still results in subpar performance vs. the needs for retirement.
|Vanguard Stretch IRA|
|HR||Healthcare Realty Trust||$14,890.00||4.06%||$151.25|
|KO||Coca Cola Company||$5,247.00||3.20%||$42.00|
|MRK||Merck & Company||$3,755.50||3.46%||$32.50|
|O||Realty Income Corp||$12,972.00||4.35%||$141.20|
|SVC||Service Properties TR||$6,726.00||0.36%||$6.00|
|UMH||UMH Properties Inc||$25,190.00||3.32%||$209.00|
The majority of our retirement money is tied into a normal mutual fund allocation, so this experiment hasn’t really set me back in my quest for financial independence. I’m thinking of winding this down at the end of 2021 or 2022 as I close in on my
Mr. 39 Months