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Personal Investments • Opinions on significant investment in SCHD

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You will not get much support here for dividend ETFs which is what SCHD is (Schwab US Dividend Equity ETF). The reason being that dividends are tax inefficient and no different than periodically selling small amounts of shares. In other words, there is no such thing as a free lunch. Dividends received are not a free lunch. And in fact, dividends are like being forced to pay for lunch when you aren't even hungry. So you are probably better off holding a truly diversified fund like Vanguard Total Market, collecting the smaller dividend, and then periodically selling when you actually are hungry (ie, need cash). There is no difference between selling shares and collecting a dividend. That's the theory. It makes sense if you think about it.

But there is a difference between SCHD and VTI, which is only indirectly related to the fact that SCHD is a dividend ETF. And that is that companies that pay dividends tend to be in different sectors of the economy than those that do not pay dividends. Of note, there is a distinct lack of MAG7
(mega cap tech) stocks in SCHD.

So, I do hold a significant investment in SCHD, but that is only to counterbalance a heavy tilt towards MAG7 in my other holdings. The end result is a more balanced overall portfolio that more closely mimics a Total Market Fund in performance, but is actually more dumbbell-shaped. But again, you won't get much support for this strategy either, because the standard Boglehead strategy is to hold the entire market from the beginning so there would be no need to counterbalance any tilts that may occur later.

Statistics: Posted by investorpeter — Wed Aug 14, 2024 4:17 pm — Replies 4 — Views 291



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