The Case Against Owning All Dividend-Paying Stocks in Retirement
I host various seminars for retirees. At every seminar, one retiree always raises his or her hand and tells me they recently loaded up on dividend-paying mutual funds and preferred stocks. I shake my head and wish them luck.
I understand the logic but disagree. The last few years bear this out. Since 2016, the Vanguard High Dividend Yield ETF () – which owns high-dividend-paying stocks – has severely underperformed the broad market as measured by the Vanguard S&P 500 Index fund () (see Figure 1). Dividend investors in VYM gave up a tremendous amount in overall performance and diversification.
