The following quote is from the “the Oracle of Manitoba", Randy McDuff. What do people think about this approach?
“Here’s how I planned my retirement: I built a portfolio of securities that paid modest dividends. I didn't put more than 2% of my portfolio in any one security. I didn't put more than 10% of my account in any one industry. The companies selected had to pay dividends that were less than 35 percent of their after tax income to qualify. I kept buying these stocks until the dividend income earned from that account matched my pretax employment income.
Then, I could afford to retire. I would never want to be in a position where I would have to sell stocks in a bear market. I could go on a one-year holiday and not have to watch my portfolio. With enough stocks and periodic dividend increases that exceed inflation (over time) I probably won’t ever run out of income.
So here’s “my” magic number. If you need to match $120,000 of pretax employment income and you can find a portfolio that will pay you 2 percent dividends, then you’ll need $6 million. If you can build a portfolio that pays you closer to 3 percent then you’ll need $4 million. In short, bank on a 2 percent to a 3 percent dividend yield, and figure out what you’ll need to invest to match that income. Then, you can retire in style!”
“Here’s how I planned my retirement: I built a portfolio of securities that paid modest dividends. I didn't put more than 2% of my portfolio in any one security. I didn't put more than 10% of my account in any one industry. The companies selected had to pay dividends that were less than 35 percent of their after tax income to qualify. I kept buying these stocks until the dividend income earned from that account matched my pretax employment income.
Then, I could afford to retire. I would never want to be in a position where I would have to sell stocks in a bear market. I could go on a one-year holiday and not have to watch my portfolio. With enough stocks and periodic dividend increases that exceed inflation (over time) I probably won’t ever run out of income.
So here’s “my” magic number. If you need to match $120,000 of pretax employment income and you can find a portfolio that will pay you 2 percent dividends, then you’ll need $6 million. If you can build a portfolio that pays you closer to 3 percent then you’ll need $4 million. In short, bank on a 2 percent to a 3 percent dividend yield, and figure out what you’ll need to invest to match that income. Then, you can retire in style!”
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