Sequence of returns risk ... who does that mean anything to? 🤔

@randomdude I actually didn't realize that either. Somehow we focus far too often on the savings phase, but the withdrawal phase is also coming (hopefully 😉)

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22H

Withdrawal? Cash flow is the key 🔑 for me.

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19H

@Finanzaristokrat Also my plan A. But plan B is withdrawal 😂

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Epi@Epi

16H

@Finanzaristokrat Withdrawal - cash flow - dividend - different names for the same thing.

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13H

@Epi not really. But never mind

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13H

@Finanzaristokrat if you withdraw the same value via sales that you would otherwise receive via dividends, you end up with exactly the same value as someone who receives "dividends". It's not the same, but it's the same.

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12H

@Psychedelic_Sunflower However, by selling, you reduce your future dividend yield.

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12H

@Psychedelic_Sunflower You're forgetting the fees when you sell.

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12H

@Part_Time_Joe In return, my shares increase in value by exactly the same proportion that others receive in dividends. If I don't sell more than the notional dividend yield, I end up with a 1:1 return. Plus what the tax deferral effect brings in, even if it is less than before the reform.

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12H

@Finanzaristokrat With one sale per month, that's €12 per year. I don't know if that's the decisive factor.

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12H

@Psychedelic_Sunflower I agree with you about 3 quarterly payers. But I have 28 shares, for example, and 1 doesn't pay. That's 100 distributions. So €100 less would annoy me.

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Ver todas las 3 respuestas adicionales

12H

@Finanzaristokrat You have to manage that yourself. Even with 28 shares, you can only realize 12 sales or less per year.

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Epi@Epi

23H

Super exciting topic!

Alongside the rate of return and the capital stock, the risk of return succession is the most important factor influencing the safe withdrawal rate. This in turn determines how much I have in old age and how long I have to work until I retire.
If you don't understand the risk of return succession, you may have to work 10-20 years longer 😉.

The risk of return succession and the low withdrawal rate is perhaps the strongest argument against B&H WeltETF. 3%pa is simply too low for the average person's capital.

But there are indeed ways to reduce the risk of a return chaser: smoothing the yield curve, typically through diversification across asset classes. However, as this also leads to a loss of returns, momentum strategies remain. These are particularly needed from the start of the withdrawal phase.

However, the risk of the return series has its counterpart in the savings phase: it is very low at the beginning, so that you have to take more risks at a young age so that you can reduce them significantly later and reach the optimum on average.

It therefore makes a lot of sense to manage your risk of return succession dynamically according to your age and goals!

Most people ignore the succession risk or are too comfortable to deal with it. But, as I said, it can add up to 10-20 years of your life. 😏

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dividend_dynamo_2673@dividend_dynamo_2673

14H

I do not want to start a discussion as to whether a dividend payment constitutes a withdrawal or whether this is mathematically identical to a sale of securities. In any case, no securities are withdrawn, which increases the chance of a substance-preserving recovery of the portfolio after a dip. In my opinion, anyone who has to sell securities in order to make a withdrawal is at a disadvantage. Ideally, the portfolio should end up being so large that dividends, other income plus reserves are sufficient to cover the cost of living for at least a few months. Always pay attention when someone talks about a "withdrawal plan". What exactly is meant. It is usually implied that the sale of shares is necessary because they are too small. Not at all. As my portfolio is large enough, I withdraw from the cash flow in a substance-neutral manner.

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14H

@dividend_dynamo_2673 I would agree with that 100%. However, we are talking about deposit sizes well in excess of millions to really be able to cover your entire living expenses + buffer. This is likely to be achievable for very few people.

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18H

This is one of the reasons why I have quite a high proportion of gold in my portfolio. When the stock market crashes, gold is sold first, which, according to the plan, should be enough to cover my living expenses for about 5 years in old age.

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17H

@Psychedelic_Sunflower Do you have it as a certificate or also physically?

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17H

@Part_Time_Joe I actually have it physically as Maple Leaf coins.

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16H

@Psychedelic_Sunflower I also have a few Krugerrands, but I never actually plan to sell them. It's just a hedge for emergencies ... more of a psychological thing 👍🏼

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12H

@Part_Time_Joe Never say never, but I would only sell them in an emergency. Or if I'm an old bag in retirement and have already squandered everything else 😂

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