What do you think about the claim below?
3 Dividend Stock ETFs to Buy With $2,000 and Hold Forever
Some background information will be helpful for responses to your question. What will you be substituting the dividend ETF’s for? Where are you on your financial journey? What percent of your assets are in stock funds, bond funds and cash assets?
It all depends on what you are looking for…
I own SCHD over VIG. I own O and NNN and ADC instead of VNQ. I do not own any international equities. Just my personal preference…doesn’t make the article right or wrong.
I am not sure what the deleted response means, but I will make some general comments. It’s total return (capital appreciation and dividends) that matters, not just the income. A dollar of dividends is equivalent dollar of capital appreciation. In the long term, Total stock market and S&P funds have outperformed dividend funds
That depends on where you are in life. During the accumulation phase it’s all about total return and growing the portfolio value. During the retirement phase it’s about generating income for your lifestyle.
A retired individual can generate income in multiple ways including through interest, capital appreciation, dividends, from a rental property etc. For funds, the total return approach (capital appreciation and dividends) is generally recommended both for the accumulation years and for the decumulation years. Christine Benz, Morningstar’s director of personal finance and retirement planning, was asked about the best way to generate income in retirement. Her response was “The key reason that academics and other firms like our firm at Morningstar tend to like the total return approach is that you’re assembling the portfolio without regard to income characteristics. So, you’re not artificially constraining the set of securities that you would use to populate that portfolio. You don’t care if they are generating income or have growth potential; you have a good blend. And then there’s a built-in rebalancing mechanism, if you’re using a total return approach, that I think is also pretty attractive from the standpoint of retirement income in that you are harvesting those appreciated securities. That means you’re periodically taking risk out of your portfolio. So for retirees today, for example, with stocks and bonds in their portfolio, well, bonds haven’t done great. Stocks have done very, very well. You can trim those appreciated equity holdings to supply your cash flow needs, leave your bonds alone, leave your cash alone, and sort of optimize the portfolio on an ongoing basis.”
https://www.morningstar.com/retirement/best-ways-generate-income-retirement
I would add that nobody, including experts or people who write financial articles, can predict the future with 100% accuracy. Just because these ETFs have performed well in the past does not guarantee they will in the future.
If adding these helps diversify your portfolio in a reasonable manner, go ahead. But don’t expect to sit back and expect guaranteed future income from these or any other funds or individual stocks.
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All other things being equal, in a taxable account I’d rather sell stock to generate the income, rather than get dividends, because the Capital Gains tax is less.
Same rate as Qualified Dividends…which is all you would want in a taxable account. Of course, there are some ROC options as well…