Where do I begin? You are investing in 'equities', be it for dividends or capital gains. There is a relationship between risk and return, so if you find a high-dividend paying stock, there is a reason for it, and that stock is likely to be riskier. Diversification works and there is research to back this up; it's not just something promoted by CFPs. You are assuming the future is going to look like the past. That's a huge assumption to base your retirement on. I have a strong feeling the next 10 years, return-wise, may not resemble the past 10. If we head into an extended economic downturn, some companies will be forced to cut their dividends. Also, there may come a time where you may need the prinicpal that you've invested in your dividend paying stocks. Dividend stocks are great if you don't need the principal as you may be forced to take it out after the market has tanked, if you have unexpected cash flow requirements, as many seniors do. I have learned to expect the unexpected and plan for the worst case scenario. I have not always been like this; in fact, in my earlier years, was quite an aggressive investor, but there is a season for all things, and for us, our retired life is about security. I do think it's reasonable for dividend-paying stocks to be part of a well balanced portfolio.
Sure, equities are the riskiest class, there is indeed a risk spectrum, plenty of academic stuff on all that, nothing new. I steered away from safe, needing much more growth than anything but equities could bring. Yet I own many companies that are hardly risky. When is the last time a utility went out of business? It's unlikely that companies that have survived over a hundred years will suddenly vaporize in the next correction. I get it, for many it looks like I play with fire. For all my time as a div investor, I have been warned and I ignore those warnings as my div income grows higher every year. Sitting on the stable end of the risky class doesn't bother me, I've been there a long time and have yet to lose any money in the market. I made rules for myself and they hold. One rule I would suggest for everyone is to not invest borrowed money. People jumped out of windows at Great Depression when margins were called.
People in ETFs are more at risk than I am, they have no control over what is in that portfolio nor the buys and redemptions of others that force the fund managers' hands. They also make moves to make the quarter look good. That isn't necessarily good for the investors of the fund but it does help marketing. Stay tuned for the fall tax-loss harvesting that fund mgrs do.
My risk is company out of business, nothing to do with stock price, yet that is what most risk discussions center on. Companies don't go broke overnight, it's not that hard to see that things aren't going well over many quarters. Most risk that is bandied about has little to do with business ops yet it is the earnings that matter, not stock price. Which blue chips went out of business in the Great Recession? Stock prices went down, but that didn't wipe out any solid companies. There were some dividend cuts or freezes, which a person living off of all their divs may or may not notice. My plan does not involve having to live off of All my dividends, one of those sneaky safety nets I have built for myself. Having to depend on every nickel of div income is riskier than even I will go, best to work and invest for another year. I can control what I own, but I cannot control what the companies do. I monitor earnings and enjoy annual reports. If I miss a big red flag, well, that can happen, I do not expect perfection from myself. I don't need to be right with every company, I only need to be mostly right, if that. Pareto Principle.
I do not assume the past 10 years are like the next 10 and I do agree they will not at all be the same! what a run up we've had! My strategy was hatched over 25 years ago, researched a few years before that, this is where I landed as best fit for me, a young person struggling, looking for how best to avoid becoming old and poor because young and poor was zero fun and I figured it would be worse than that when old. I base my retirement on factual data, much of it money coming into my accounts all this time. I make no assumptions about the future, I simply choose companies that I have high conviction will outlive me. I don't play the buy low/sell high game, I buy and stay. I don't care about "returns", I'm in it for income, which shows up with high, low or no returns. Recessions bring stock prices down which gains more div shares @ reinvest. I'm good to go in any market conditions. Sure, who doesn't love big green Gain numbers? I dig the triple digit greens, they sure are pretty. But for me they are simply "fun numbers", here today, gone tomorrow, nothing but volatile vapor.
"Forced to sell" doesn't happen, people make choices. When and if I elect to sell, having decades of odd lots puts me in good shape to cash in shs bought 40 years previous at much lower prices and pair them with newer shs to net out on tax obligation or show a loss if I want. What's to worry? I have a lot of companies, there is pretty much zero likelihood of "forced sell" of every share of all of them, immediately, and if I want to sell, I have a lot of choices of companies and then the lots within them, representing decades of price movement.
House + cash round it out; one big ole illiquid place to live cheap that I could sell, and cash, the most liquid asset there is, not much risk to it, except lack of growth and inflation erosion. Then fixed income SS. Savings is for unexpected expenses, those don't just happen to seniors! Life happens, I'll roll with it. At the end of the day, it's only my butt I need to float and I can own the outcome of my decisions like I have with everything else.
We all find our security in different ways, and it is very important to sleep well at night, not stressing over portfolios! I get that my strategy gives others the willies but I am very comfortable with it, I've lived with it peacefully from my mid 20s. Eventually some of my companies will be sending me annually more than I invested in them and that makes me super secure. Bonds won't ever do that, unlikely to happen with any fund.
Used to be, people didn't have to think about investing, they got pensions and SS and if they had squirrelled something away in the passbook savings account and paid off the mortgage, all the better. These days, almost everyone has to be an investor, even if they have a pension, as there is no promise of money tomorrow that is guaranteed to materialize.
Good luck to us all!