Many people operate under the illusion that their investments are performing satisfactorily, usually because their portfolio manager assures them it is, if they ever ask. It can come as a nasty surprise then, when they reach retirement age, to discover that their retirement savings are insufficient to cover their annual cost of living and they have to keep working.

 

The only way to verify that your investments will meet your requirements when you retire, is by checking their performance at least once each year and by calculating the growth of the dividend income being generated by your portfolio. ​This information should be used to determine whether your savings and annual dividend income are on track to meet your financial goal within a reasonable length of time, or whether you need to adjust your rate of saving or investment strategy. Not knowing this information is akin to driving on a narrow, winding mountain road at night with your eyes closed. The probability of arriving safely at your destination is very low.

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It is not necessary to track the market value (share price times the number of shares) of your investments. It is essential, however that you track the growth rate of the dividend income generated by your portfolio, to verify that you will reach your required minimum dividend income when you plan to retire. The dividend income and its growth will be much less volatile as compared to the market value of your investments.  

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Tracking your dividend income (or asking your portfolio manager to track it for you) is neither difficult nor time consuming. Once you know the average annual growth rate of your dividend income over the most recent 3 to 5 years, you can adjust your rate of savings and/or your investments, as necessary, to ensure that you meet your financial goal when you plan to retire.​​

 

​​1. Stephen Hawking was a renowned theoretical physicist, cosmologist and author, celebrated for his groundbreaking work on black holes and the origin of the universe. Born on in Oxford, England, in 1942, he made significant contributions to science despite being diagnosed with motor neuron disease at the age of 21, which gradually paralyzed him.​​​