Touching The Principal!

[hendi_alex]

For a pure growth portfolio, selling shares does not equate to drawing down the principal. If growth is greater than the value of liquidation each year, then the growth portfolio could also fully fund retirement without drawing down the principal from its initial value at the start of retirement. Personally, I don't really see any difference. Dividends paid out are essentially 'return of capital'. Either way, spending dividends or selling shares moves the portfolio from the accumulation phase to the distribution phase. To me the real problem with the growth portfolio comes when distributions must be taken during a harshly down market. During those times, IMO a dividend portfolio is clearly superior.