What's your retirement strategy? 🔭

I’m sure many of us have made some short-term investing mistakes when we first started. I’ve made some big ones in my first year and I’m now planning much further ahead, taking onboard some of the recommended strategies in this forum.

While there’s lots of threads about portfolio allocation and diversification etc, I couldn’t find much about how an investing strategy might adapt as someone gets closer to retirement. For perspective, I’m currently 26 and hoping to be able to choose to continue working or not after age of 55ish.

The simplest way I can see to generate a passive retirement income is to have income from dividends, which makes the ‘dividend investing’ strategy sound pretty good. As others have said, there’s something about receiving actual cash in your account which feels different to selling holdings to generate the income.

I can also see how missing out on ‘growth’ stocks can hurt portfolio performance long-term. Some of the biggest returns of the last decade have been from companies which have never paid a dividend. People like Fundsmith founder, Terry Smith, also say “Nobody should ever invest for income.”

It would be useful to hear what other people’s opinions are on this and how you’re planning on adapting your portfolio (if at all) as you get older.

The way I see it there’s 4 main options:

  1. A hybrid approach of holding both growth and dividend stocks, e.g. buying an ETF like VWRL over the next 30 years and doing nothing.
  2. Buying growth stocks and transitioning to income once you reach a level of capital you’re happy with.
  3. Buying growth stocks to start with and then gradually transitioning to income assets as you get closer to retirement (like vanguard lifestrategy for example).
  4. Investing specifically in dividend stocks and building the dividend income over time.

I’m currently implementing strategy 2, but would like to hear what others are doing.

Is there a way of working out what the best approach would have been 30 years ago?

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7 equity etf’s will get most people to where they want to be over a 30 year period. (Growing your income is key). The only difference now from 30 years ago could be that Europe & some emerging markets may require a larger allocation than before. Something like 50% Total US / 50% rest of the world.

An approach I believe has been historically proven to have achieved 12.50% yoy since 1926 is an all equity portfolio of about 9 index funds covering the globe.

I’m guessing the strategy involves buying larger when markets are down and less when they are above fair value.

In relation to a portfolio closer to retirement, that is a matter of seeing what is low risk and currently appealing at that moment in time.

I am an absolute firm believer that indexing with slight tilts will get most people where they want to be and save them an incredible amount of time.

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The way I understand it, dividends come out of the share price in the end, or exist as an incentive for investment due to a lack of projected growth.

They make sense to me if you’re approaching retirement, but not when you’re trying to grow your portfolio, so whilst you’re young it is usually stocks with growth potential and accumulating ETFs to lead the way.

I’ve been watching Monevator’s slow and steady portfolio where they spread it across the globe with ETF investments. I think they passed 10 years last year and they concluded that a Global ETF like VWRL ended up beating them anyway, even though they did very well with their money in the end.

So, from all that I’ve seen in terms of research, I concluded that really we should be keeping it simple, not bothering to try and time or beat the market, and just be happy with going with it. So, my approach would be number 1, buying ETFs like VWRL (VWRP in my case) and mixing it with other ETFs to ‘tilt’ to areas I think will offer potential returns in the future; Emerging Markets and World Small Caps for example.

That said, that method is probably not very ‘fun’. It requires a pragmatic person to just do things the dull way, and from what I’ve seen, many people want to see excitement on the stock markets. Myself included in some ways. So, I have allocated 5% of my portfolio to be spent on speculative stock bets and investments. But that is a hard cap, I won’t go over that 5%. I figure it’ll let me feel like I’m doing something fancy, even if I’m not, and I have limits so I don’t get carried away. If it takes off, I win, if it doesn’t, I lose only that 5%.

Other than looking back over various portfolios and statistics? A common theme as I mentioned is people seldom beat the market, and those that do only beat it temporarily. The house always wins in the end, hence the plentiful views on passive investing etc - I won’t say it’s the mainstream view because there is still lots of people that don’t agree with it.

Value and Small cap seem to outdo growth in the long run, can’t remember where I read that, investopedia perhaps? The thing is there’s so many views on what is the ‘best’ approach and many of them outdated for modern eras that it is tricky to say really. Like, it used to be common place for the 60/40 to stand you in good stead, but now nearly everywhere advocates dropping bonds to something like 5-10%. Even Monevator’s conclusions was that lifestyling to bonds wasn’t worth it in the current market and was affecting their long term growth.

If you find out what way is the best, let me know and share the riches. :smiley:

Anyway TL:DR I’m going with option 1, ETF focus like VWRL.

Hopefully we’ll both be stinking rich in the future for retirement. :slight_smile:

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Step 1: Wait for Freetrade to IPO
Step 2: Retire :crossed_fingers::sweat_smile:

In the meantime aggressively trying to build my assets as much as possible across stocks, crypto & some private ventures.

I’m not doing anymore crowdfunding, P2P or looking to buy a house.

Once my overall net worth hits X, I’ll transition to lower risk investments.

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