Part 5/9:
- Generational Wealth Creation: By relying on dividends, investors can preserve their investment principal. This approach allows them to pass down financial assets to their heirs rather than depleting their investments.
Cons:
Tax Planning Complexity: Dividend income can complicate tax planning, making it harder to predict annual income accurately.
Risk of Dividend Cuts: Corporate fortunes can change, making dividends non-guaranteed.
Limited Upside Potential: In a bull market, dividend-driven portfolios may lag behind high-growth stocks, potentially capping an investor’s upside.
Pros and Cons of the 4% Rule
Pros: