Charleswsmith1,
I think your plan is good with a few caveats. Fidelity, Charles Schwab and Vanguard are all sound brokerages and probably the best choices outside of TSP. I like your idea of picking a low cost high quality dividend index fund.
Make sure the expense on the fund does not eat too much of the dividend yield when comparing funds. I noticed presently these types of funds are yielding just over 3% compared to the S&P 500 funds that is yielding just over 2%. For a retiree with a large nest egg, 1% is a bigger deal than for most but yield appreciation matters too.
Now the caveats. I noticed today that Verizon is selling for the same price it did in March 1998. It is a good company, but that does not make it a good investment at any price. Valuations and timing do matter in the long run. Verizon lost 60% from the top in 2000 and 40% from the top in 2007. Blue chips do cycle in price like all the other stocks, just typically not as much.
The ups and downs may not matter to you since you are buying their dividend income stream. But there are times you are paying a high price for a low future income stream – near market tops. Now is one of those times and investors should wait to buy a larger future income stream at a much lower price in the next few years. There is a reason the TSP annuity is low today and it too will be higher in the future.
I do not think earnings make for a good long term measure of valuations since corporate earnings undergo a significant cycle and are easily manipulated in the short term. This is what creates bull and bear markets. Remember the sentiment and headlines are most bullish at market tops, and bearish at market bottoms.
A simple look at historic dividend payouts will tell you today they are at the lower end of the spectrum. Buy them when they are back to their average or above average levels even if you have to wait years. The difference in your long term income will matter more than finding the best performing fund today.
BTW, I like TSP's options (except the currently low annuity) for retirement and you do not have the risk of your brokerage going belly up or stumbling in a crisis and locking you into your positions. There is nothing wrong with having two retirement accounts.
Cheers
Posted by: michaelhbond@yahoo.com
| Reply via web post | • | Reply to sender | • | Reply to group | • | Start a New Topic | • | Messages in this topic (20) |
Belum ada komentar untuk "[TSP_Strategy] Re: How Ready Are You to Retire?"
Post a Comment