Welcome to a new installment of the Safe Withdrawal Series! The last post on the Yield Illusion (Part 29) was definitely a discussion starter! 140 comments and counting! Just as a quick recap, fellow bloggers at Millenial Revolution claim that the solution to Sequence Risk is to simply invest in a portfolio with a high dividend yield. Use the dividend income to pay for your retirement budget, sit back and relax until the market recovers (it always does, right?!) and, boo-yah, we’ve solved the whole Sequence Risk issue! Right? Wrong! As I showed in my last post, it’s not that simple. The Yield Shield would have been an unmitigated failure if applied during and after the 2008/9 Great Recession. So, not only did the Yield Shield not solve Sequence Risk. The Yield Shield made it worse! And, as promised, here’s a followup post to deal with some of the open issues, including:
- A more detailed look at the reasons for the Yield Shield Failure over the past 10 years (attribution analysis).
- Past performance is no guarantee for future returns. How confident am I that the Yield Shield will fail again in the future?
- Dividend Yield vs. Value
- Are non-US investors doomed? Probably not!
So, let’s look at the details:
Continue reading “The Yield Illusion Follow-Up (SWR Series Part 30)”