Many retirees focusing on passive income emphasize dividends rather than the overall capital appreciation of their portfolios. While relying on dividends helps avoid dipping into principal, neglecting potential capital gains can lead to suboptimal long-term returns. A financial advisor recently highlighted this issue on Reddit, noting that many self-directed investors often chase higher yield stocks, potentially compromising their total returns. Understanding total returns—which consider both dividend income and capital gains—is crucial for a comprehensive investment strategy, especially as retirees plan for sustainable income.
"While it's fine to prefer dividends, focusing solely on yield can be misleading and may compromise total returns, which combine appreciation and dividends."
"Total returns encapsulate both capital appreciation and dividends, presenting a more comprehensive view of an investor’s gains over time."
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