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« Weighing the Week Ahead: Earnings Season | Main | Profiting from Forward Earnings Estimates »

October 12, 2010



Glad to see you writing about total return Jeff. I'm sure it's uncomfortable for many to stay with equities in these uncertain times, especially those approaching or in retirement. Though I'm perhaps 10 years away from retiring, I feel it's important to get this right now and stick with it.

Vanguard posted a good article on the subject here:


I retired two years ago at age 55. Watching your assets dribble away month after month, with no chance of adding contributions to make up for losses or withdrawals, is scary, and I can sympathize with people looking to preserve principle.
After reading numerous books and papers on retirement investing, and changing my mind a couple of times, the total return approach seems like the best method. I have made almost no changes in my portfolio structure, but I have increased my cash allocation somewhat.
To the list of mistakes I would add investing in insurance/principle protected products. When you mention dividend stocks I assume you mean preferreds; so another issue I'll suggest is selecting common stocks based only on yield.
And please comment on annuitizing some or a majority of your wealth in retirement. Many of the papers on retirement (especially from the Pension Research Council and similar organizations) "solve" a lot of the tricky issues (life span, returns) by annuitization.

John the Cheap

I'm definitely interested in this series! I'm not retired yet but probably will be within a few years (if no disasters).

Prior to 2008 I had about 20% of my IRA in REITs, not for current income because I am still employed, but definitely for the yield. Out of a portfolio of about 15 REITs only one was an MREIT, so I completely failed to anticipate that the housing bust would affect them so badly. Got whacked substantially before I got out.

The total return concept has always been part of my thinking though, albeit implicitly, because I've approached retirement income planning from the "safe withdrawal rate" point of view (Trinity study and its offspring). Inherent in this is the possibility of spending down capital rather than relying solely on yield.


Thank-you for the series, Jeff. I'm retired and will happily share my thoughts with you. That only seems fair.

If you're so inclined, spend a little background time lurking on the Morningstar discussion boards. Not surprisingly, there's a vocal group that encourages total return investing, and an equally vocal group that espouses investing for income. Christine Benz, one of the M* columnists, wrote an article on the topic in the last couple of months, based on the views of contributors to those forums.

I'm looking forward to the rest of your series.

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