Dividendwatcher: Great charts and I'm glad your strategy is working out for you, with an increasing income stream! I don't doubt that DGI works. I've seen it in the 2.5 years I've been following the strategy. My doubt is whether it will beat(or at least meet) an index fund. As you've shown above, owning an index fund has returned an average of ~7% over the last 10 years. If my DGI portfolio doesn't match or exceed that, I will have lost money AND potential income.
Lets say I need 40,000 in income to retire(not my actual number but its around there). My goal is to get there as soon as possible to retire early. If I follow a DGI strategy and only get 5% total returns, were as the index fund returns 7%, it will take me longer to get there. Some might argue that the DGI strategy will have a higher income stream, so it will get me to my goal faster. Not true. While in the accumulation phase, ALL that matters is TOTAL RETURN. If my DGI portfolio yields 4% and has grown to 800,000 from its 5% total return, now I have 32,000 in income. For my index fund its grown to 1,000,000 from the higher 7% return... now I go sell my index fund and invest in the SAME companies my DGI portfolio has, therefore achieving the SAME yield. Now I have 40,000 of income. The index fund got me there faster. I just made up my numbers to prove a point, but if you do the math you will see it makes sense. I see all kinds of people in SA that don't comprehend this and argue about the rising income stream, creating greater income in the end.
Now what I am unsure of is WILL DGI beat or at least achieve the same TR as the index. If it does and has less volatility, great! If not, I am leaving returns(and income!) on the table. I've seen lots of people/studies that show that the normal person(or hedgefund manager) does not consistently beat the index.... which worries me.
I'm going to give it 5 years and see what happens. I'm halfway into that, and currently trailing the market.
Lets say I need 40,000 in income to retire(not my actual number but its around there). My goal is to get there as soon as possible to retire early. If I follow a DGI strategy and only get 5% total returns, were as the index fund returns 7%, it will take me longer to get there. Some might argue that the DGI strategy will have a higher income stream, so it will get me to my goal faster. Not true. While in the accumulation phase, ALL that matters is TOTAL RETURN. If my DGI portfolio yields 4% and has grown to 800,000 from its 5% total return, now I have 32,000 in income. For my index fund its grown to 1,000,000 from the higher 7% return... now I go sell my index fund and invest in the SAME companies my DGI portfolio has, therefore achieving the SAME yield. Now I have 40,000 of income. The index fund got me there faster. I just made up my numbers to prove a point, but if you do the math you will see it makes sense. I see all kinds of people in SA that don't comprehend this and argue about the rising income stream, creating greater income in the end.
Now what I am unsure of is WILL DGI beat or at least achieve the same TR as the index. If it does and has less volatility, great! If not, I am leaving returns(and income!) on the table. I've seen lots of people/studies that show that the normal person(or hedgefund manager) does not consistently beat the index.... which worries me.
I'm going to give it 5 years and see what happens. I'm halfway into that, and currently trailing the market.