10-27-2016, 08:10 AM
(10-27-2016, 04:58 AM)AustralianDividendInvestor Wrote: The other thing worth considering is where you are in your DGI journey. If you are closer to the end than the start, I'd be more wary of overvaluation than if I was at the start of a 30 year period.
I agree to some extent as younger people can afford a draw down more than someone reliant on their portfolio. I suppose it depends on the retirees situation; if they can live solely off dividends, the relative valuation they pay makes no difference as they aren't worried about capital appreciation, only income. A retiree that relies on capital appreciation for withdrawals is a bit different story.
I'd also point out that buying at a good valuation is still incredibly important when starting out since you are locking in an initial yield that compounds for the rest of your investing life. Buying a utility that normally yields 4% for 3% now when it is overvalued will have a huge impact on your results 30 years down the road. Not only are you overpaying by 33% which cuts down on your capital gains, but you're also compounding at a significantly lower yield over the years as well.