DNY59/E+ via Getty Images Some folks give names to their cars or houses. As an unabashed dividend investing nerd, I gave a name to my portfolio: The "Cashflow Compounders Club." Aside from the nice ring of the alliteration, the name identifies and provides a reminder of the goal -- the raison d'être -- of my investment portfolio.
It is to maximize cashflow, both current and future. And the word "cashflow" there is a double entendre. It refers to both cashflow at the company level and cashflow at the shareholder level in the form of dividends or distributions.
The former is a prerequisite to the latter. The most standard form of investing is to pursue maximal total returns, primarily from stock price appreciation. This approach certainly works.
It's tried and true. But it implies that someday, when an investor switches from accumulation to withdrawal, one will have to sell shares to do so. I'm personally averse to this method of funding withdrawals.
In an ideal world, I'd prefer to withdrawal only the dividends thrown off from my portfolio without touching the shares. In a really ideal world, I'd like to withdrawal only a portion of the dividends my portfolio generates. Think of stocks in a portfolio like fruit-bearing trees in an orchard.
Rather than lop off limbs to use for firewood, I'd prefer to leave the trees alone while harvesting most of the fruit (i.e. withdrawing dividends) and using the rest to plant new trees (i.
e. reinvesting dividends). Right now, I'm a relativ.
