High Yield Dividend Funds
Diary of an Dividend Income Investor
To create consistent and reliable income in retirement
To reduce sequence of return risk
To broaden my investment knowledge and exposure beyond growth stocks
The traditional approach to retirement is to draw down a percentage of your savings each year. Shifting investments out of higher risk equities and into “safer” asset classes such as government backed bonds is also typically recommended.
While this approach to funding retirements is still the norm there are other options that exist to retail investors and financial advisors that is starting to catch on in popularity. Most investors are familiar with dividends paid out by companies they are familiar with such as Pepsi and Home Depot. However, there are now hundreds of funds that offer opportunities to collect yields which can be significantly higher than those of these large institutions. Of course with higher yields comes greater risk so it is important to understand those risks prior to making any investment.
I chose to invest in high yield dividend investments prior to retirement while I am making a salary to gain the knowledge required now to generate consistent income rather than attempting to learn this skill when I will have to rely on this income. If I am going to make mistakes it is best to do them now when I can afford to do so.
I also aim to reduce sequencing of return risks in the event of an extended economic downturn that negatively impacts my investments in my 401k largely invested in funds tied to the S&P 500, NASDAQ, and Russell 2000. High yield dividend investing should buffer me from this risk and allow me to sleep better at night by not worrying about what the stock market is doing.
I also love learning and expanding my investment knowledge. There are many types of high yield dividend investment opportunities. I believe in diversifying across a variety of classes of investments to further limits my risk. Dividend yields vary significantly across high yield dividend funds as does the risk. My goal is an annual dividend yield of 11-12% in my overall portfolio with yields ranging anywhere from 4% up to 25% or more on on each instrument.
If you would like to see my portfolio of high dividend yield investments click here.