Why Selling A Few Shares Is Not The Same As Getting A Dividend

In the dividend debates, it has been stated unequivocally that one can create his own dividend by just selling a few shares. It has also been stated that receiving a dividend is the same as reducing your investment in the stock that sent it. Both notions are simplistic and false. They are not true in theory, let alone actual life. I would like to prove what I just said.

The retiree cannot simply presume that prices will rise when he needs them to rise. Indeed, sometimes they fall instead of rise. When that happens, the retiree must sell more shares to create the ersatz "dividend" than if the price had risen. That's why Monte Carlo tests are run on withdrawal schemes to estimate the probability that a particular scheme will fail (meaning that the retiree runs out of money while still alive). The Monte Carlo tests attempt to mimic what may actually happen in the market over the course of a 30-year retirement.

Source: Seeking Alpha

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