Gengulphus wrote:Dod101 wrote:As I think you [Lootman] have said, money is fungible and to that extent, it is somewhat artificial to look at dividends as income and growth of the share price as capital accretion. Fundamentally we can spend it either way!
But in practice, one doesn't need to make trading decisions before spending dividends and one does need to make them before spending capital accretion. Especially for those who lack confidence (justifiably or not) in their own ability to make good "what to sell?" decisions, that means that while they are able to spend it either way, spending capital accretion is harder and more worrying in practice.
Probably a topic that deserves its own topic. But I will offer these thoughts:
1) dod quotes me as saying money is fungible, which of course it is. A pound is a pound is a pound. But when I talk about that what I mean more explicitly is that one's needs for cash can be met by any positive cash flows, be they dividends, interest, rent, premia or gains.
2) Your idea, and pyad's idea, that it is ideal that one should live off only the income is of course desirable. But that is like saying that it is better to have more money. If you have a few million then you can clearly live off only the income. In that case you would not need HYP. An index fund would do.
3) Where it gets more interesting is where a person does not have that luxury, and instead retires on the basis that a HYP will give him or her a higher income. In that case maybe a HYP induces that person to retire too soon because of the higher yield. Then when that fails they end up selling off shares anyway.
4) The reality is that someone who cannot yet retire on an "income only" basis might still be able to retire on a drawdown basis.
