A 16-year bear market was what Dick Young faced back in 1965 as he began his brokerage industry journey at Clayton Securities in Boston. It’s hard to imagine a better time then and now to make dividend payers the cornerstone of your stock portfolio. Dick writes:
My chart on the Dow portrays the up again/down again Dow track through the 1960s, ’70s and early ’80s. The Dow ended 1965 at 969 and closed 1981—16 years later—at 875. For what was half a retirement for many Americans, the Dow actually lost 9% of its value. It was a brutal stinker for investors retiring in 1965. How much of an annual draw from capital could you prudently extract from a stock portfolio that would lose capital over 16 years? The correct answer, of course, is zero. That would leave retired investors drawing only the annual dividends. Back then, when a normalized Dow yield was about 4%, such a draw would have offered no adjustment for inflation, of which there was plenty over that period. So absolute prudence was required. And I am even gilding the lily a little here in that small stocks, the type many individual investors favor, fared much worse.