Without a doubt, 2022 has been a tough year for investors.

Inflation is at 40-year highs… The Federal Reserve has hiked interest rates more aggressively than any other time in recent memory… China, the world’s second largest economy, has yet to reopen following the COVID-19 pandemic… And global supply chain issues are being exacerbated by the war in Ukraine.

I get it. Times are scary. And I feel terrible that so many investors – especially those in or near retirement – are feeling anxious about their money nowadays.

But who can blame them? The methods they’d been promised would help them through their retirement years aren’t showing signs of being able to withstand this volatility.

However, in the face of it all, I continue to sleep well at night. That’s because my financial plans don’t revolve around the direction of the markets. Instead, they’re supported by what we focus on at Intelligent Income Daily: reliably increasing passive income from the safest, most resilient holdings.

That’s why today, I’m putting a spotlight on some of the traditional models we’ve been told to follow. And showing you the importance of focusing on reliable passive income, instead. So you can find the same peace of mind I have throughout all market conditions.

Ignore the Noise About Traditional Portfolio Allocation

To me, what we’re looking at today is an unfortunate series of events, which has created a perfect storm of negative volatility.

To combat it, I’ve heard a lot of talk of financial advisers tinkering with asset allocation levels to manage today’s portfolio problems.

They’re playing around with algorithms to find the exact equity-to-bond ratio that makes the most sense for markets moving forward. But the fact is, the future is uncertain, and therefore, each of those models is going to be flawed.

The traditional 60/40 asset allocation plan isn’t working right now.

The more conservative 40/60 isn’t either.

Honestly, all this talk about the correct asset allocation in today’s markets is enough to make your head spin.

So, here’s my take: Forget about all that.

Instead of focusing on returns, simply focus on your income stream. Focus on accumulating assets that provide a predictable, reliably growing stream of passive income. Because if you’re like me, that’s all that truly matters in retirement, anyway.

The Failure of the 4% Rule

Looking at traditional portfolio construction and retirement plans, you often hear about the 4% rule.

In short, this means investors should build up a nest egg of savings that will allow them to sell approximately 4% of their assets every year (or less, depending on the extent of your wealth) and live off the proceeds.

This idea works well because the goal of the 60/40 portfolio is to generate roughly 7% per year. So if you’re only taking out 4%, you’re able to pay your bills and still see your money grow.

Makes sense, right?

But that doesn’t factor in situations where the market is down 20%-plus like we’re seeing today. That forces investors to break one of my primary rules for long-term wealth generation: Never sell high-quality assets into weakness.

Ideally, we’re supposed to buy low and sell high. But if you’re a forced seller because of a retirement plan that dictates annual asset liquidation… well, you may not have a choice.

I don’t know about you, but the idea of working hard and storing away strong assets… only to be forced into selling them in retirement seems like a terrible idea.

I don’t want to be in a stressful situation in retirement where I have to wonder whether my money is going to last.

What if I live longer than expected? What if unexpected expenses arise? What if I want to take my grandkids to Disney World? You get the point… These aren’t the types of things I want to be worried about while I’m enjoying my golden years.

Building a Long-Lasting Legacy

This is what inspired me to pursue the dividend growth strategy.

My strategy is centered around the idea of never touching the principal.

By avoiding the traditional 4% rule and basing my retirement plans off passive income, I never have to sell a share.

Share prices are volatile. They’re full of jagged peaks and troughs. Bulls and bears are in a constant tug-of-war match. So anyone relying solely on the value of their holdings to dictate success in the markets is likely to be in for a wild ride.

That isn’t the case for my portfolio.

Every year, regardless of what the market does, the dividends that my portfolio generates continue to climb higher.

And the best part?

I don’t have to do anything, except patiently hold onto blue-chip stocks, to make that happen.

The portfolio management decisions I’m making today aren’t just about me and my happiness in retirement. They’re about building generational wealth.

My legacy is important to me.

As a father, everything I do is to ensure that my children are able to have a better life than I did.

I plan to teach my kids about the dividend growth strategy, highlighting the benefits of long-term compounding, so they can take over the passive income machine I’m building.

Honestly, this is probably the aspect of owning blue-chip dividend growth stocks that puts the biggest smile of all on my face.

This is what true financial freedom and stress-free living is all about.

So instead of relying on traditional models that deplete your assets, if you make income generation your primary goal to sustain you through retirement… You’ll have peace of mind today and a legacy you’ll proudly leave behind tomorrow.

Happy SWAN (sleep well at night) investing,

Brad Thomas
Editor, Intelligent Income Daily

P.S. Is your portfolio following the 60/40 model or some other allocation? Do you feel confident it’ll help you reach a comfortable retirement?

Let us know what kind of returns you’re hoping to achieve, right here. And we’ll continue bringing our best ideas to help you reach them.