Thanks for your comments. 

DVY... let's see, it has a yield a little over 5%, is near it's 52 week low... but it's high exposure to financials suggests to me it hasn't fully felt the pain of the credit meltdown.  I would expect the dividend to be cut and the per share price to go down more.   Also, I note it's rated 1 star by Morningstar.  

I think I'll wait on that one and see what happens. 

Hi, Kathie

I'm sure you know the risks of accepting advice on here.  However, you seem to be someone with a good head on your shoulders (your view on DVY, which I share, is a good example IMO ;-) and you feel (justifiably) you have a relatively a good plan and are merely looking for a second opinion.

It sounds to me, given the limited information I have, that you are in pretty good shape.  Perhaps I can share what we did.  I retired five years ago.  Like you I have an inflation-indexed pension.  It provides somewhat less than half of our annual income, with the rest coming from investments (when we both start drawing Social Security in a few years, the total from inflation indexed income will be close to 2/3).  BTW, I am assuming your inflation adjusted pension is either with the US or a state government rather than a private company which, regardless of how safe it might appear now, might not be over the long run.

Like you, I have been relatively equity heavy.  I have overweighted small and mid cap over large cap, value over growth, and international over US only.  That worked like gangbusters from 2000 to through 2007, though admittedly not so well so far this year. I plan to stick with these slight biases.

For over a decade, I have put 10% of our portfolio into gold or precious metals funds, and 10% into the longest term US Treasuries I could come up with.  The simplest way to do this now would probably be with the GDX and TLT ETF's respectively.  Vanguard Precious Metals (VGPMX) - if they ever reopen it and which I own - and Vanguard US Treasury Long Term (VUSTX), which I also own, would be acceptable alterntives.  Those have worked out for us better over the last decade than they are likely to going forward, admittedly, but I figure that those will continue to give us small positions in asset classes that will react with relatively high volatility to conditions unfavorable to stocks - either a high inflation or deflation/depression environment.  That allows us to be heavier into equities than we might be otherwise, and thus give us a better long-term rate of return while still dampening volatility.  Just something to consider.

As far as individual stocks go, I am mostly avoiding those now.  I prefer funds or ETF's because I would feel uncomfortable with individual stocks in my permanent portfolio - too much homework needed.  Again that is just my personal preference.

Finally, I recommend you determine whether you desire to have a "variable" portfolio or not.  You already have a "permanent" portfolio.   That is your overall investment portfolio, designed to supplement your income from your pension.  This should be something you invest based on a very long term outlook using asset allocation.  A variable portfolio, OTOH, if should you choose to have one, is where you would pick individual stocks hoping for a large gain, or bet on when you think financials might start to recover, or take a big position in a particular emerging country fund, or anything else where you are trying to "outguess" the markets.  Many investors get those two confused IMO.  I have a very small variable portfolio (which is currently about 80% in gold shares and 20% in cash - and considering those financials with the cash BTW); however, this is only a small portion of our net worth and is funded entirely with money we could do without if I screw up and lose a big chunk of it (unlikely, I hope, but certainly not beyond the realm of possibility ;-)

These are just ideas.  As I said, you seem to be on the right track.  Regards.

MWL

MWL, Thank you so much for your comments.  I appreciate hearing what you've done with your investments.

Indeed, I do know the risks of taking the advice of strangers (or near strangers).  You are right, that I  feel pretty confident of my strategy, and am asking whether I've missed something I should be thinking about or whether others have different points of view I should consider.  I'm not asking anyone to choose stocks or mutual funds for me, but I will research any suggestions made.

You are right, my inflation adjusted pension is from the federal government.  I was under the old retirement system, so did not pay into SS during my federal employment.  I am currently self-employed and am now paying into SS.  I will qualify for a small amount of SS (my SS is reduced because of my government pension) perhaps only enough to pay my medicare premiums plus a bit extra, so I'm not even figuring that into my calculations.

Your point about a permanent portfolio vs. a variable portfolio is well-taken.   I consider myself to have a permanent portfolio, some of which is invested in individual stocks, with a bias toward dividend paying stocks.  I do have a taxable portfolio of individual stocks that I "play" with more, but that is not money I need for living expenses.  If I hit the jackpot, I'll take an around the world trip in first class ;-).  

I call my variable portfolio my bingo portfolio and use it for speculation but I have many individual stocks in our core potfolio.  B/c of the COLA'ed pensions and SS I have gone the dividend stocks in in our core or permanent portfolio to replace fixed income to a great extent.  Consequently we have an 80/20 portfolio in retirement with dividend stocks and blue chips replacing much of the fixed income compenents and providing for income needs.  The core is still made up of mutual funds, mostly large cap value with a growth component and the bond part is heavy on emerging market and junk with some TIPS and old GICs in cash LSBRX.

When you go this route, with decreased fixed income components, you lose the dampening effect of the fixed income portfolio and experience increased volatility.  If you have adequate assets and a cast iron stomach for volatility it is a viable way to go but the stomach factor does change when you do retire and you're totally dependent on your portfolio and it's income and that's the most significant factor you need to determine.

Roberta 

Thank you Roberta for your comments.  It sounds like you are I think similarly about using dividend-paying stocks for income.  

Your comments about volatility are well-taken.  I've been able to hang in through ups and downs in the market so far without even the impulse to cut and run.  But it's true that in retirement I may feel differently.

 Interestingly, I ran two scenerios through Financial Engines.  One, I in put in my current portfolio, in the other I moved 20-25% of my current portfolio into fixed income investments.  The likelihood that I would meet my financial goal didn't change, but the range of results narrowed considerably.

Well? All I can tell you is what I did..

And I would guess, it all depends on How you've done during the Last Bear market Yrs and is that good enough for you or not? If not? Best make some moves ..

1. Starting 5 yrs prior, I moved about 80% of my $ into Balanced Funds( 90% was about 15% More than I figured I needed for my Retirement planning ) & a Reit & Bond fund.

CGMRX, FPACX,LSBRX,OAKBX,PRWCX,PRPFX & alittle of WMRIX.

2. That had previous  records of Doing well in a Dwn Market and did as well as Comparable 60/40 Index Port in a Bull Market

3. The Other 10% stayed and has been used to "PlayWith" and try my Luck at doing better than those Balanced Funds

4. I don't have any other Individual Sectors , like Int'l or global .. sold them in 07'. They have a history of being to volatile ( See 00-early 03' ) and had a good run.  If you must?  I would only put in those and other volatile funds that isn't needed in retirement..( however there are some Global Funds that have held up so far )

The Balanced Funds saved My Butt during 2000-2002... and have continued doing a more than good eough  job for me.  Now Wether they will continue to do so? is anyone's guess, but I have to stay with the person who brought me to the current Dance and just hope for the best..

If I had stayed in My Index Funds/Port? I'd lost quite a bit, since I got the Tech Fever and would have gone more into those.. and would have had to delay my Retirement Plans by 2-3 yrs..or longer.. So, those Bal. funds took that "opportunity" to use that $ , out of my Greedy hands...LOL

As for stocks? Sure, I have Berk B, WalGreens, Walmart, Bud-Wise-R and a few others.. And Still do, but not in a major way.. ( darn it )

The other 10% had gone thru some roller coaster rides, but in the past 5+ yrs is doing very well, since I stayed with the Likes of CGMFX,FAIRX,FLVCX funds and some of their stocks they buy/sell..and it now equals to about 25% of my total $.

I also went around ( and still do) to go see Mgmnt. Firms and get their "Free Reviews and Opinions to open an account and gotten some ideas from them..Just none have been able to beat what I got going for me..and tried to convience me to go back into their Index Fund Ports...with Marginal performance..espeically after their fees.

For My 2 yrs COH/Emergency $, etc...Btwn Mmkt, FFRHX,VBIIX,VBLTX and my most conservative Bal fund> PRPFX. ( Now If we have another Carter administration and get nice High Rates again,I will buy CD's and Treasuries )

And Not Auto reinvesting either.. I pay the taxes, take out what I need and manualy reinvest what's left over in 25% Increments over the following Yr.. to give me something to do and have some fun, gambling..LOL

Do you have a Decent Tax Guy? Like a CPA Firm that has several different types in it? I would suggest to consider it..

And as the guy who jumped off the 40 story building said> " Well, So far, So good"..

Good Luck!

Thanks for your detailed report of what you've done.  I will study your funds and see if any look to be doing better than what I have.  I may be back with questions for you.  

I appreciate your response. 

"I ran two scenerios through Financial Engines.  One, I in put in my current portfolio, in the other I moved 20-25% of my current portfolio into fixed income investments.  The likelihood that I would meet my financial goal didn't change, but the range of results narrowed considerably."

DOING SCENERIOS?

Well, I do alot more than just 2 ( more like a dozen) and I also am able to Ask my Alama M. /  U of W at Madison,Wi.,  Prof. and he gives to his  students for their Analysis/Opinions.( Runs their Endowment and other Financial Courses ) which love Actual Ports to work on...( Ck out Yours? )

Then When I get the One I like the best? I also subtract another 10% from it's APY's/Rtns/Income etc..for my Balanced and Bond Funds ( -20% for Equity Funds & Stocks )   Eg: Bal/Bond Port, past 10 yr apy = 10% -10% = 9%

Why? Margin of error, (Murphy's Law, another 2000-2002 Bear series or wose .)             I never plan on any Funds/Investments to even do what a past 10 yr APY'S have been, for the future and thus forces me to add more to my Conservative investments and thus Less in my Higher Risk/Rtn one's..

Increase more $ needed for ? = Health Care costs..

I add 20% a yr to  My Estimates vs Medicare, Supp Plans, Deductibles, etc..

Figuring Lump sum income to retire...? 

Don't know about everyone else, but My Income needs are the Same vs working Income and With Less Tax Deductions,  & Making More income, which results in my paying More /Not less taxes..

One site I use is Fidelity's  > My Plan Retirement Quick Check calculator in the Retirement/Guidence section.

I also Add another  +10% to my Bottom line I think I will be needing for any given period.

So Far, So Good!

Limoman, I didn't mean to imply that I only run two scenerios!  I just mentioned those two because I was interested in the impact of fixed income investments on my overall outlook.

 I've used a number of different calculators, I like Financial Engines the best.

My income needs will go down in retirement because I will pay off the mortgage just before I retire, but otherwise, I agree with you, I expect to spend the same (or even more on increased travel).

I waited a long time before adding any comments because I did not know if you would be interested, but am going to throw it out for you anyway.

I started off a long time ago buying dividend paying stocks and asigning them to my bills like Southern Co.(SO) to pay my ele. bill each month and then adding others as time went by. Added T and VZ to take care of our phone, sat. and cell phone etc. Now I have been blessed enough so that we do not have to use them for such, but they are their if needed. SO dividend got so large that I started investing the dividends into Progress Energy(PGN) and Duke Energy(DUK) shares through their direct no cost plans. Later PGN and Duke was asigned my utilitesl bills and now PGN has them by itself and so on.

I have started my own raising income paying annuity with SO , DUK and XOM as I have the dividends direct deposited and as they come in I put under the amount the three month direct bank debits to buy more stock at zero cost. The rest of dividends I use as I see fit. Each quarter my dividends are more with the stocks I have bought during the three months since the last dividend. If I get a yearly dividend increase then all the shares are paying more dividends. I get a monthly statement that I save up for a cold winter day to take care of my bookeeping needs with these accounts. Once the dividends add up to a certain point I can raise my monthly bank