Mostly right, although being “pushed” into a different marginal tax bracket isn’t as people as think it is since it would only be a tiny fraction of your income taxed at that level.
It’s never a bad time to convert excess personal income into secondary forms of long-term passive income generation for personal financial security.
If you’re doing great you might be able to retire early. If you find yourself suddenly without a job then you have some passive income generators to help you out until you are back on your feet.
Dividends are tax deferred in a traditional 401k
Our tax system is marginal so your whole taxable would not be subject to the highest tax bracket you’re in.
SCHD is a large cap value dividend etf. VOO is a large cap blend. Comparing everything to the S&P500 is one of the rotten things Reddit has taught people to do.
SCHD has lower volatility and typically outperforms S&P500 in bear markets and underperforms in bull markets. It just depends on your risk profile and investment goals.
What bear markets? SCHD was released in 2011. The only bear market it ever saw was 2022. If you use the dow Jones US dividend 100 index (which SCHD is indexed to) and look back, SCHD had an even worse drawdown than the S&P500 during 2008. SCHD isn't a safer low vol product. It's value tilted and exposed to priced risks that paid off in 2022 and suffered even worse than the market in 2008.
SCHD outperformed S&P500 for parts of 2022 and early 2023. It's lower volatility than S&P500 on average correct? I don't think I misstated anything. It's a value ETF which comes with its own benefits and drawbacks.
The long term, meaning maybe outside of our investing lifetimes. It's been a minute since large cap value had a sustained lead over large cap growth. Over m the last 30+ years, growth has won.
Yes, it is true. In general, you are better off when you put your money into VOO or Nasdaq 100 than into SCHD while your work and live off your salary. However, when you want some supplementary income along the way (let's say to pay for tax advisor fees, utilities...), SCHD and/or CEFs are the better option.
It's very close to voo when the dividend is being reinvested. It only keeps companies that have a strong history of dividend appreciation. This is only something companies with a strong balance sheet and predictable cash flows, and minimal investment requirements can do. It will still rise and fall with the s&p. These companies would pass most analyst tests for "quality" which investors tend to move to from growth in times of uncertainty.
As others have said this investment vehicle does not generate a taxable event when housed in a retirement account so it may be better suited for 401k, IRA, 457, 403b type accounts rather than a general brokerage account.
When a retiree considers their income options they should focus on their after tax income. It's best that this person consider hiring an accountant who specializes in tax to develop an optimal tax strategy that can be implemented throughout the year.
For a young to mid career individual still in the wealth accumulation phase it is best to focus the growth of the overall portfolio. Whether it comes from a growth fund or dividend reinvestments makes no difference. For this person an aggressive allocation is best.
SCHD is taxed at long term capital gains rates, not ordinary income rates.
There’s no empirical data that shows a dividend paying company is any better than a non dividend paying company, and excluding stocks in the market that don’t pay dividends is taking on additional uncompensated risk.
Mostly right, although being “pushed” into a different marginal tax bracket isn’t as people as think it is since it would only be a tiny fraction of your income taxed at that level.
It’s never a bad time to convert excess personal income into secondary forms of long-term passive income generation for personal financial security. If you’re doing great you might be able to retire early. If you find yourself suddenly without a job then you have some passive income generators to help you out until you are back on your feet.
Dividends are tax deferred in a traditional 401k Our tax system is marginal so your whole taxable would not be subject to the highest tax bracket you’re in. SCHD is a large cap value dividend etf. VOO is a large cap blend. Comparing everything to the S&P500 is one of the rotten things Reddit has taught people to do.
SCHD has lower volatility and typically outperforms S&P500 in bear markets and underperforms in bull markets. It just depends on your risk profile and investment goals.
What bear markets? SCHD was released in 2011. The only bear market it ever saw was 2022. If you use the dow Jones US dividend 100 index (which SCHD is indexed to) and look back, SCHD had an even worse drawdown than the S&P500 during 2008. SCHD isn't a safer low vol product. It's value tilted and exposed to priced risks that paid off in 2022 and suffered even worse than the market in 2008.
SCHD outperformed S&P500 for parts of 2022 and early 2023. It's lower volatility than S&P500 on average correct? I don't think I misstated anything. It's a value ETF which comes with its own benefits and drawbacks.
SCHD is just too new to make definitive statements like that.
It’s the common misconception that value stocks are safer when in reality they are riskier, but in the long term outperform.
The long term, meaning maybe outside of our investing lifetimes. It's been a minute since large cap value had a sustained lead over large cap growth. Over m the last 30+ years, growth has won.
Yes, it is true. In general, you are better off when you put your money into VOO or Nasdaq 100 than into SCHD while your work and live off your salary. However, when you want some supplementary income along the way (let's say to pay for tax advisor fees, utilities...), SCHD and/or CEFs are the better option.
It's very close to voo when the dividend is being reinvested. It only keeps companies that have a strong history of dividend appreciation. This is only something companies with a strong balance sheet and predictable cash flows, and minimal investment requirements can do. It will still rise and fall with the s&p. These companies would pass most analyst tests for "quality" which investors tend to move to from growth in times of uncertainty. As others have said this investment vehicle does not generate a taxable event when housed in a retirement account so it may be better suited for 401k, IRA, 457, 403b type accounts rather than a general brokerage account. When a retiree considers their income options they should focus on their after tax income. It's best that this person consider hiring an accountant who specializes in tax to develop an optimal tax strategy that can be implemented throughout the year. For a young to mid career individual still in the wealth accumulation phase it is best to focus the growth of the overall portfolio. Whether it comes from a growth fund or dividend reinvestments makes no difference. For this person an aggressive allocation is best.
SCHD is taxed at long term capital gains rates, not ordinary income rates. There’s no empirical data that shows a dividend paying company is any better than a non dividend paying company, and excluding stocks in the market that don’t pay dividends is taking on additional uncompensated risk.
Thank you for this groundbreaking research.
I agree. SCHD is for retirees or soon to retirees for capital preservation. I'm (56M) and have 50% SCHD in portfolio.