Quote:
Originally Posted by Rain Man
Here's a theory that I'll propose. It seems dumb at first glance and maybe it is, but I don't think so.
I'm approaching retirement. I've got enough cash right now that I don't have to sell any stocks for at least a couple of years. I'd like to get a return on my stocks, but obviously we're in a high risk time right now.
If I buy dividend stocks with a long-term hold perspective, I get a regular payment from them. Maybe 2 or 3 percent on most of the blue-chip stocks. So since I won't have a need to sell stocks for a while, it seems like a good strategy is to buy them regularly on a dollar cost averaging strategy. If the market keeps going down, I don't really care since I'm not selling them. I'll get the dividend and some positive return, and at some point the stock will come back up and I'll be ahead of the game. At the same time I'm not trying to time the market at all.
It seems like this will work other than a scenario where they drop more than the dividend amount and I have to sell them. But my goal is to never sell them. What do you think?
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I think it's a valid strategy.
The knocks on it would be:
Companies cut dividends for cash flow (in recessions)
At 2-3% you won't outpace inflation. Since you're going to live to be 900 that could be a concern for you.
There has
probably been a flight to quality to dividend stocks already as the rest of the stock market is puking blood. If that's the case then it is
probably likely the new investors will bail when higher returns can be achieved in other stocks. So they could decrease while the rest of the stock market recovers.
I'm certainly open to being wrong here, but that's what I'd worry about.
Also keep an eye on what they do to the tax code on any non-tax shelter accounts.