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:
- 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.
- Buying growth stocks and transitioning to income once you reach a level of capital you’re happy with.
- Buying growth stocks to start with and then gradually transitioning to income assets as you get closer to retirement (like vanguard lifestrategy for example).
- 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?