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There is no silver bullet for generating retirement income; However, financial advisers suggest that dividend investors should consider diversifying their holdings and sources of income.
"Rather than thinking" I can only spend dividends that come to me from high dividend bearers ", say" I need $ 100,000 a year, and no matter whether it comes from dividends, payments from Interest or capital appreciation, "said Blair H. duQuesnay, CFP at Ritholtz Wealth Management.
This is a step that may require retirees to become familiar with the idea of selling some of their holdings, either to rebalance and dilute their concentration in dividend-yielding stocks, or to generate cash flow.
Brandt, for example, is asking retired customers to keep a supply of cash for their needs in the short term and to resist the downturn in the market. They remain heavily invested in the market to maintain growth through equities and to keep up with inflation.
"As the money runs out, if stocks are up, you rebalance there," he said.
If you plan to invest in dividend-generating companies, financial advisors advise you to think about the following:
Know your appetite for risk: Do not let dividends distract you from the fact that you still hold stocks and are subject to market risk. "What is the volatility of the market with which you are comfortable?" asked Boudreaux. "Can you lose 10 to 15% of the value in two weeks and still feel good?"
Diversify your strategy: Beware of concentration risks, both in terms of your investments and your sources of income. "Some clients have pensions, others have rental income and social security," duQuesnay said. "The portfolio bridges the gap."
Understand your flexibility: If you hold these shares, make sure you have enough cash to cope with corporate dividend reductions.
"The more flexibility you have, the more resilient you will be," said Boudreaux.
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