CerebralAccountant

I wish you a safe trip and successful competition, Shannon! If you had a choice between representing Eritrea and Canada, what made you pick Eritrea? Does being an Olympic athlete give you any recognition or honors there, or is it more like a volunteer position?

Bingo. Stocks are more for growing the portfolio balance, bonds for taking the existing principal, lowering the risk of a big loss, and spinning off interest to serve as a partial or total income replacement. As you get closer to retirement and (hopefully) wealthier, your risk tolerance might go down a bit. A 30% stock market drop only takes $3,000 off of a $10,000 portfolio, but $300,000 off of a $1 million portfolio - and if you're retiring in five years that might be a problem.

I think your financial advisor's advice is technically right, but it's also misleading. Yes, the mutual funds in your 403b might not pay a lot of dividends, but that's not a bad thing.

Companies that do pay dividends are usually older, more established, and don't have much room to grow. Because of that, high dividend stocks tend to have lower returns over time. 1, the company is usually at a slow growth phase of its life cycle, and 2, it is giving away cash to shareholders rather than using the cash for future growth.

That's good if you're retired and you want cash to withdraw, but not as useful when you're younger - and especially not useful in a 403b where you can't really touch the cash anyway!

Meanwhile, companies that don't pay a dividend either can't afford it... or they have bigger plans in the works. Amazon is a perfect example of this. They went public in 1997 and they've never paid a dividend. Instead, they used their earnings to grow into a global behemoth. Their stock price has grown by 137% per year since 1997, and by coincidence, 134% per year since 2010. A very good dividend is 5-7% per year. Amazon is an extreme case, but that's why I don't really worry about dividends. The gain in value is usually a lot more.