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I started my investing journey with dividend investing for passive income. I think it’s one of the best strategies to start investing to get comfortable with. First I want to show you the benefits of why dividend investing is extremely powerful and then I’ll tell you why I quit dividend investing.
Why dividend investing is the best:
1. Between the years of 1930 to 2017 dividends made up about 42% of the total stock market return. And in a flat market, aka a stock market that just goes up and down but doesn’t really go anywhere – the dividend income strategy is where it shines the most because you’re actually getting paid. You are “realizing” your gains, you are actually making money, not just on paper like you would with growth stocks but there’s actually money going into your account every single month. That’s powerful because you can then reinvest that money back into the markets and increase your market share and actually do better than people invested in growth stocks in that flat market.
2. Taxes. Dividends are incredible is because they are one of, it not the only investment that exists today where you can get paid without ever paying taxes on that income. It’s not a loophole, you don’t have to do any complicated accounting tricks, it’s the law. If you make between $0 to $40,400, you will pay nothing in taxes on qualified dividends if you file as forever alone. But if you’re married and you file together, you can make up to $80,800 a year in income and pay nothing. Just to blow your mind. That’s the same as filing jointly if you’re making $100,000 a year living in Los Angeles California – so that’s $20,000 you’re basically getting for free as a tax credit.
3 . It turns out the 4% rule that we’re told we can live off of without ever running out of money, aka, if we invest 60% of our money into the S&P500 index aka the VOO stock, and the other 40% of that into bonds, we could live like that without ever running out of money but, we can actually increase that withdrawal rate to 5% instead of 4% if we invested in the top 100 highest paying dividend companies in the S&P500. Dividends can give you a higher standard of living by 1%.
4. Better / more accurate retirement planning based on expenses vs passive income rather than selling off principe equity.
5. The psychology. It’s much easier to invest long term as a dividend investor with a better mindset.
Reasons why I quit.
1. When I started my YouTube channel, I was making a lot less than $40,000 a year, so at that time, it made sense to focus on dividend investing because I wasn’t paying taxes on my qualified dividend income. Now I’m really fortunate to be making a lot more than $441,451 dollars a year – I’m now in the highest tax bracket where I will be paying 20% on my passive income.
2. Growth / index fund investing gives a better overall return. I’ve searched decades of data to try to find some dividend index that beats a broad market index like VTI or VOO and I have found zero of them. They don’t exist. I looked at SPHD, SCHD, VIG, VYM, NOBL, all dividend focused ETFs but none of them – over a long period of time have historically beaten broad market funds.
3. Goal is to FAT FIRE instead of just FIRE. This means my new goal is to make $100k passively in income per year.
4. I’ll be buying more of VTI and VOO ETF stocks – which is the broad market index and the S&P500, they track almost identically in terms of how they perform, there’s almost no difference but I like VTI, the whole market because it incorporated companies like Tesla earlier before the S&P500 did, and I like VOO because it’s almost the same but it gives me the benefit of tax loss harvesting where I can sell one and buy the other and it wouldn’t be considered a wash sale. I guess “I quit dividend investing” is a little dramatic, I’m no quitter – I’m just taking a detour while I’m earning a higher income.
*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.
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Nice one for Ghana
i want to say what I got from this. You can be old/retire and have a youtube channel , no physical gardening work or labor on the train tracks to make. Everyone is a star and support one another leaving youtube as the middle ware to pay us sorting it all out on their end. Two parts done already from my perspective. I better youtube my dad. He fixes washer machines and refigerators! I should start filming him. AA in film currently as a student.
What’s a wash sell
Ponzy ponzy
Interesting video. I'm from the UK so dividend investing is the only course of action that seems sensible to me right now. I have exposure to the US market as it massively outperforms ours on almost every measure, but only through two ETFs which are in £sterling. One simply tracks the S&P 500 and the other is more focussed on what they call "Dividend Aristocrats", which are also from the S&P 500.
I did used to own some American companies but I bought them when the dollar was incredibly strong, and it annoyed me when I saw my portfolio growing in dollar-terms but shrinking in £s as the dollar came back to normality ($1.20-$1.25 per £, rather than $1.08 or whatever it was at one point this year) and it annoyed me, which sounds silly, but it just did lol. But I know that UK companies aren't going to get me that far on their own even though I only invest in our large-cap ones like BAE (a bit of an ethical conflict as they sold weapons to the Saudis to bomb Yemen), GSK and consumer staples like Unilever which owns a lot of brands that are recession-proof. It's why Walmart and CostCo are such great companies. No matter the economic situation, people still need their groceries.
But I'm nowhere near where you are. You''ve done amazingly well to get that far so quickly. I use something called an ISA which allows me to invest £20k tax free (about $24,000) per year. You can put the 20k into a savings account (lol), or an Innovative Finance ISA (extremely risky) or stocks and shares. The latter option was a no-brainer. Of course, for some people, that's too low a limit and we still have to pay 15% tax on any US dividends we earn. So that's unfortunate as I would like to be more invested in companies on the NYSE/NASDAQ (if I could get over my annoyance at currency fluctuations). Other than that, it's fine as I'm not even at the level to invest 20,000 pounds per year (more like half of that).
I used to invest in commodities but no longer do so. Warren Buffett was right when he questioned the value of gold. It doesn't do anything – you're simply relying on someone to buy it from you at a higher price than you paid for it, which isn't really the way to invest. You want to be invested in companies that create something. Perhaps I shouldn't take his word as gospel but he is the richest investor in the world (the other guys above him in the rich list are mostly entrepreneurs) so I think he's worth listening to even if I have to remind myself that his investing strategy, given his vast wealth, is obviously not going to be the same as mine.
Is VFIAX the same essentially as VOO?
want to watch but can't, with that weird bugeye effect this guy feels he has to do. what is that supposed to communicate ? sorry but there are plenty of other financial videos that don't creep me out.
its been a year now, how is your portfolio doing now? lol I bet it's doing really well.
The key is to NOT sell off your dividend growth stocks. My avg dividend yield is 10% and I reinvest 100% of my dividends. When the market drops, I buy more. Dividend investing has changed my life completely. I wish I had discovered it years ago. I'm 60 now, and I invest in an avg yield of 9-10% dividend stocks (BDCs, CEFs, preferred stocks, REITs, mREITs, and very few large CAPs). The best part is that I moved out of the U.S. to reduce my cost of living and save more of my income. That means I can earn up to $112,000 and it's tax exempt! As a result, the downside of that is that I can't do a backdoor Roth.
You got the vaxxx ? Aww dang
Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. Hence what are the best stocks to buy now or put on a watchlist? I’ve been trying to grow my portfolio of $260K for sometime now, my major challenge is not knowing the best entry and exit strategies… I would greatly appreciate any suggestions.
Everyone says dividend investing is good but im always in the red
So we should all do YouTube basically 😅
Making money is not the same as keeping it there is a reason why investments aren't well taught in schools, the examples you gave are well stationed, the market crisis gave me my first millions, people shy away from hard times, I embrace them.. well at least my advisor does lol
Is there anything like proof recession stock? I am 58 years and would like help in managing my retirement portfolio which is currently $1.25M…down from a high of $1.67M….
What "RAF AA account you mean? Please if you can explain what you said. And what is that more specific. I am curious
joke on him in 20 years a roll of toilet paper will be worth 15k
180,000/1,670,000 is 10.7% on dividends per year? I doubt that is true as nothing would be able to beat that interest return (ie. it is higher than appreciation+dividends of the S&P 500 avg historically 100+yrs), if you would reinvest it. Perhaps he mispoke, or can anyone elaborate?
Interesting video, but the distortion on the fisheye-like lens looks a bit strange. Might be better to use longer lens and sit further from the camera
Why not just buy the stock the day before the ex date of the div and selling back , div are not free they are priced in the next day , it has nothing to do with your expected yield …. Appl did not pay div for a long time
Andrei
Do intrinsic value compounding investment.
The direction of value investing is actually aiming for "compounding interest".
Compounding interest is actually talking about compounding dividend.
A growth stock which consistently pay dividends, consists of “Intrinsic Value Compounding” and “Dividend Compounding”.
Rather than saying “Intrinsic Value Compounding” is being invented, i would say that “Intrinsic Value Compounding” is rather a discovery of a buried compounding inherited in a consistently growing stock.
Nobody knows there is so called “intrinsic value compouding” except Buffett, Munger and Li Lu. I am very sure about this argument.
If you want to have a breakthrough in the new value investing, i suggest you start to do research on “Intrinsic Value Compounding".
Logic and reasoning are utmost important.
Hope you found the way to reveal the right formula of “Intrinsic Value Compounding”.
Cheers
Dont be dramatic. You adjusted your future investment allocation to save on taxes, you didnt quit dividend investing.
So I have always checked the total return of funds on seeking alpha but dont like how many different tabs there are to click through to find the important information.
When I was checking SCHD it actually had a higher total return than SPY or other near-index funds. I have not checked recently however.
Does anyone have a better place to find the total return?
Also the economic growth was not from 2010 to today. The government destroyed the housing market artificially and then we had a bare bones recovery until 2016-2020 when the government again artificially destroyed the economy and has continued to do so through devaluing the currency (aka not very secretly stealing the value of your savings and investments).
Smart video. Indexing and Dividends are both good for different reasons, which you pointed out. So it's smart to do both.
To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough. I've been quite unsure about investing in this current market and at the same time I feel it's the best time to get started on the market, what are your thoughts?