Preservation Of Your Income Stream is what's important (for pre or retirees), not preservation of your value!

Going to cash destroys your income stream........

It does....

It just does.........

This has nothing to do with 'macho'........

Understanding the importance of the 'income stream', and 'growth of the income stream' as one's main goal (in retirement), is simply a learned survival skill......................

t

IMO, you go to cash if you need to withdraw, and spend, it.  Otherwise, you hold, and harvest the income stream.  If you think the income stream, and the value, will go to zero, you're assuming all companies that you hold go bankrupt.

Taylor, You wrote: "Going to cash destroys your income stream." But would you agree that staying in some vulnerable funds can destroy your capital rather quickly? Unofficial numbers through Oct. 10 for three funds from Morningstar and Yahoo! Finance:

ADVDX -48.08% year to date, yields 22.73%
LSBRX -26.07% ytd, yields 8.21%
VWEHX -19.96% ytd, yields 8.63%

 

<If you think the income stream, and the value, will go to zero, you're assuming all companies that you hold go bankrupt.>

Anything is possible right now. Since I don't need or taken income from investments yet, it's more important to ME that I preserve capital so I can fight another day.

Today my wife was  on line in the grocery store & a retired guy told several people he was wiped out by this crash. Sad.

<Otherwise, you hold, and harvest the income stream.>

We'll see who holds what by the end of October. Companies will need to cut divy's in order to raise capital imo so I'll be an observer for awhile.

Dick 

boy... I'd say that both are right in their own way.  The standard "taught" method is you stay the course not matter what.  It assumes that one can not predict how or when it the market goes up or down.  OK.. I find short term timing and accuracy is difficult.  But we had plenty of warnings of this event.   RBS announced it this summer.  We saw unbelievable banking problems, FNM/FRE.  So that should trigger one to pare holdings.  I don't mean bail, but take some profits.  If you wait for it tank 30 or 40% it may be too late to really benefit.  I guess the real question is how long will it take for  the recovery to take hold.  Until the credit markets start to thaw I'd expect the market to be very volatile.  Maybe cash will make you sleep better.  The key is to dabble in and see what happens.  If it goes down... maybe hold until it recovers.  Don't put so much that it kills your sleep.

On of the problems this time is that many bonds and bond funds have been volatile too.  This is a credit crunch.  When it thaws these may rebound unless they crash due to people exiting the funds.

Buy and hold is easy.  Timing every event is quite unrealistic.  But shifting your weightings a bit is quite doable.  You'll miss time some shifts, but you're never completely out.

 You've got to go through enough of these so you don't get that pit in your stomach.  Make the decisions based on observations, not fear.  Try it will very small amounts so the loss is not a killer... Increase it as you learn.

 
People like Bill Gross and others have been warning use for quite a while.  I don't think they knew exactly when it was going to hit.  But the saw the cliff in the distance.  Listen to opinions, look at the evidence, an make your own decision what is the best path for you.  Both are right and both are wrong.  They are both methods that people use successfully.  Bailing for fear usually creates quite a loss.

pax

 jb

 

Well..... I took my chances and added GE with > 6% dividends and RDS.A with >6.5% dividends this week.  I will wait out for a recovery collecting these dividends.  I don't know what holds in the coming weeks but I will continue to look for opportunities to increase my income stream.

Justin

 Closer said: 

" Would you agree that staying in some vulnerable funds can destroy your capital rather quickly?"  

That's an easy one. Yes!

=====================

Relating to jb:

If the goal of your portfolio (in retirement) is to grow an income payout without you having to sell off (consume and destroy) parts of it to eat, you can surely be less concerned about it's value at any given point in time. Now of course we all want to buy low, get as many shares as possible, and receive as much income per share as we can.

Barring that perfect scenario, having a portfolio that grows a payout over time despite the present value of the underlying assets providing that growing income stream, is the second best scenario.. 

Pre or retiring with a portfolio designed primarily to grow appreciation (to be harvested for consumption) is the...................... very last ,least desirable alternative..

==============

Let me be clear:

Constructing a 'Dr Paul' (etc.) Indexed (coFFeehouSE) 4+3 Monte CARlo portfolio designed to create a forever income stream in retirement is the very last, least desirable alternative to solve this problem.... 

t

DickPanther:

 

... Companies will need to cut divy's in order to raise capital.....

Dick 

And this is the biggest problem all income investors face since some of the funds already lower their payouts.

DODBX   -9.4%

IMSIX      -14.3%

VWINX    - 4.7%

VWELX     -11.3%

ADVDX kept its previous payouts for how long?

CAIBX + 19%

TIBIX    +32%

If companies will eliminate dividends or drastically cut them in order to raise capital then a beautiful concept of harvesting the income stream will go to a basket and investor won’t have income or his lost capital.

Nobody in this panic situation can assure that it won’t happen. If happen we lost a lot of capital by holding our funds or stocks by trusting that this concept will carry us by stormy market which was so strongly presented on this forum by many published links to support this concept for shining or raining days. It can proof that this concept it is not so beautiful how it sounds. And this would be very unpleasant even for many investors considering this concept as more secure than Total Return.

Time will tell with this shocking experience.

Regards

J.

And if we were lucky/astute enough to get out before the worst of the crash, I think we will have lots of time to consider which safely-yielding divvy stocks we will choose on the other side of the bottom.  Income-stream is important, but coming out of this particular crash, it's going to be just as important to dividend-paying companies to keep their cash to build back their equity to restore their credit-worthiness.  I don't believe we can reliably count on past dividend history - we're going to have to do due-diligence all over again!

<Bubby: I don't believe we can reliably count on past dividend history - we're going to have to do due-diligence all over again!>

You are so right. Most everything has changed & we need to be more careful / astute as to where we look for future income streams.

Dick 

And Taylor is going to have to learn a new "survival skill" when the income-stream from his hold-at-all-costs portfolio starts declining instead of growing.