There is no ONE way of building a retirement corpus! Retirement planning is almost like a religion, there are many sects, sub sects, protestants and of course there are the atheists….
Here is one method which has worked very well for a friend. However let me add that he is a brilliant stock picker, has a lot of time, is a brilliant businessman, tremendously gutsy, rich family, CA….and this is what he did.
Starting out sometime in 1980 (he was impressed with Value investing) he has been buying equity shares for good yields. That is the reason why he has (had) shares like VIP, Cable Corporation, Apollo Hospital, Gsfc, Gnfc, Tata Power, Hdfc, Cholamandalam, Sundaram Finance, EiD Parry, Coromandel,……..all these shares at some stage were excellent dividend yield shares.
To give an example he had bought 12000 shares of Tata Power at Rs. 100, still holds about 8000 shares. Sold a few shares in 2007…to buy something else.
He kept reshuffling his portfolio – he threw away shares that did not fit into his criteria of being GOOD DIVIDEND YIELD SHARES based on his cost. He exited Apollo Hospitals because it was not a dividend yield share based on its CURRENT MARKET PRICE. He said ‘I do not care about the market price…as long as the dividends are enough to cover OUR retirement expense’. I think he took a far more sensible portfolio view. I do not wish to get into specifics….but over the past 32 years he has invested ALL HIS DIVIDENDS back into the portfolio.
Frankly he has enough money in that account alone…to retire tomorrow..but I expect him to continue re-investing the dividends for at least another 8-13 years…and THAT will leave him with a HUGE dividend income. He has reinvested the dividends into the shares FROM WHERE HE HAS GOT the dividend. His IRR is a stunning 24 % p.a. – and it is supposed to be a dividend yield portfolio!
Caveat: the fact that this guy is an equity market expert, a CA, comes from a family of business people, has a fantastic broker, ….IF YOU HAVE ALL (Repeat ALL) THEN and ONLY then should you try these things, otherwise you will be hurt badly)……..
REMEMBER MY EXAMPLES ARE ABOUT EXPERTS WITH SO MUCH SURPLUS that they can afford Rs. 10 crore MISTAKES. Such strategies may not work for all of us…….
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