Tai Family Fund Distribution Strategy

The creation of the Tai Family Fund is to support the family. A strategy is needed to decide how to generate cash from the fund, at what frequency, and how much to distribute.

The fund is in the accumulation phase, so the distribution strategy will not be executed until later.

The way to generate cash from the fund is simple. It does not sell any holdings to generate cash. It only relies on dividend and interest income. In that way, the strategy ensures the perpetuity of the fund and totally eliminates sequence of returns risk. How about for stocks which do not distribute dividends, like Amazon, Tesla, and Berkshire Hathaway? The hope is that one day they will give cash dividends to shareholders. That happened to Alphabet and Meta recently that they started distributing quarterly dividends after 10+ years of not giving one. At some point when a company gets to a more mature state, they will start distributing dividends. That is how a responsible management would decide (they usually say the board of directors decide the dividends, but it's actually up to the management in my opinion). A corollary is that we should only invest in companies with responsible management. We want the management to have the integrity to decide the best capital allocation policy for the company, which is, to give dividends to shareholders when the company cannot grow with a good return with the capital it hoards.

The frequency can be as soon as the dividend and the interest income are received. However, to make it more "chill", I foresee that I will go with a monthly distribution. In other words, I will look at how much cash is generated by the end of the month and distribute it.

I also want the fund to be able to evolve and adapt to any new investment environment. While I do not want to sell any existing holdings, I would want it to at least invest in new opportunities. That needs cash as well. To make it simple, I foresee that for every dollar of cash generated from the fund, I will only distribute half of it to the family, and reinvest the other half into the fund.

Updates

2026/01/13 Initial draft

At this moment, the fund is still in the accumulation phase, so this draft is to plan about the strategy that will be executed later. I expect at least 10 years from now, when any incremental contribution of $2000 each time is too small to matter..