I’ve spent the last 2 decades working to do the same albeit more towards dividend stocks. I think the key with those is a variety and looking for reasonable dividend rates. I hold some ATT but more of others which pay far less. In a conversation with a friend a few weeks who was high on ATT, I explained that 7% divended rates are not normal and usually a sign the dividend is at risk, the stock price is at risk or both. While cutting it in half would not make someone who bought it for a 7% return happy, cut it in half and it is then in the range of reasonable. Hopefully that would be used to pay down some of the debt burden that has held the stock price back. I invest for total return and from that view would be fine seeing it cut in half and growth restored.[/quote]
Good point. I’m not abandoning the dividend strategy even with ATT cutting dividends. But what I am also concerned about is over-estimating the safety of dividends in general at a company over the next 30+years….If the business performs badly, the company’s stock end up tanking and dividends get cut. Doubly whammy… So for me, wrong decision would be not to to invest at all. But I do think investing in stocks with a dividend is still some measurable risk that I need to take.
Real estate isn’t fullproof either. There’s two ways for it to underperform too. House price falls or rent prices fall. But I don’t think there’s quite as big a correlation between house prices falling and rent prices falling as there is when a company performs badly and both the stock price tanks and the dividend gets cut…Rentals, obviously have other issues…Vacancy rates and repairs other variable costs. So it too isn’t a guarantee…
But that’s the point for me. Nothing is a guarantee, hence I want to spread the risk…To reduce the risk of a total collapse of all passive income and being forced back to returning to work to earn a living when I’m old and can’t/don’t want to…
I guess it’s also possible for the stock market to tank, house prices to tank, dividends get cut to 0, and rent prices tank all at the same time…That’s what I called the doomsday scenario…I don’t plan for the doomsday scenario, because imho, if doomsday happens, everyone is unversially and equally screwed more or less the same way… And relatively speaking, I’m still ok, because at least I’m free and clear on at least 1 property where i can live. So there’s no point for me to plan for a doomsday scenario.
