I thought it was worth pursuing the diversion where a few of us started to discuss the benefits or otherwise of an income-investor perhaps preferring to use a (chiefly..) single-strategy income-investment approach through a lifetime of investment, compared to a potential investor who might wish to concentrate on capital growth via a 'total-return' approach in their earlier investment-years, before perhaps then switching to a more income-focussed approach when income was 'actually required' later in life.
I wanted to respond to a reply I had later on from 77ss, so I'll start this topic at my original post, and reply to that post later on -
Alaric wrote:jackdaww wrote:
surely total of accumulated wealth is the ONLY benchmark? regardless of building or spending.
Don't risk saying that on the HYP Practical Board. Some contributors consider the amount of dividend the only benchmark, even going to the extent of buying just before a stock goes ex dividend.
Understandable perhaps if income to spend is a requirement but pointless if all they do with the income is reinvest it.
Well I don't think it's 'pointless' at all, but to understand why I think that you've got to first appreciate that there are two separate investment-related issues here, and your focus on 'total return' is just one aspect of that....
The other aspect is 'investment-process', and how simple, repeatable, and palatable a particular 'investment-process' might be over any other 'investment-process'.
So someone who might perhaps advocate splitting investment approaches, and hence investment-processes, into a more 'capital/total-return' oriented approach during those years where 'income' in and of itself isn't necessarily required, and then moving towards a more 'pure' income-oriented approach in the years when income itself becomes much more important to someone who desires regular use of it from their investments is really advocating the use of two completely different investment-strategies for different periods of time.
And it's this specific issue that perhaps means that some investors perhaps don't want to take that approach, even if there's a long-term performance 'levy' to pay on not taking it...
By taking a single 'income-oriented' approach to our investments, even during those years where income isn't necessarily required, such as during our working years, we are able to reinvest that unused dividend-income in exactly the same way as we do any additional investment capital that we accumulate via excess wage-related income, and I think being able to take that single investment approach for a lifetime of investment has a great deal of merit if you're the type of investor who would prefer not to have to worry about 'learning' or 'enacting' a completely different, capital-growth based approach as well.
The additional benefits, to me at least, of taking a more 'reinvesting income' approach to my investments, even whilst still working, are that it both enables me to track and largely predict the amount of income and income-growth that my single-strategy approach is creating, and hence how that might be tracked in future, which helps me to manage my long-term career and any potential retirement plans, and it also provides me with a single 'income-switch', which sits right at the very heart of my single-strategy approach, and which is currently switched to the side that says 're-invest income'.
If and when the time comes when I want to take, rather than re-invest that income, all I have to do is throw that switch from 're-invest income' to the side that says 'pay out income', and the whole of my investment strategy will stay exactly the same except for the fact that I'll then be taking, rather then re-investing that portfolio income from that time.
So whilst you might think that it's 'pointless' to take investment-income and then re-invest it, I think that view removes any credit that might be taken on the 'process' side of things, and the longer I go on investing, the more I find myself thinking that the 'process' side of things is, to me at least, of equal importance if not more so than a comparable 'total return' figure might be if I were to take a more 'multi-strategy' approach to things....