VG Dividend Growth vs. VG Russell 1000 Growth ETF

[Looking4Ward]

I've been holding Vanguard Dividend Growth (VDIGX) for a few years and am thinking of replacing it with Vanguard Russell 1000 Growth ETF (VONG).

In side by side comparisons, VONG seems more attractive to me with lower fees, higher historical return, similar risk, etc.

Curious what anyone else's thoughts are.

 

[OldShooter]

Thoughts:

1) "Past performance does not predict future results." Mountains of studies show this. Look for S&P "Manager Persistence Report Card." A couple decades of these semiannual reports always reach the same conclusion. Also good short video here: French on picking a manager: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

2) Making sector bets is a mild form of gambling.

3) A fund restricting itself to dividend-payers inherently restricts its investing options and will almost certainly underperform relative to an appropriate market benchmark.

 

[Looking4Ward]

Thoughts:

1) "Past performance does not predict future results." Mountains of studies show this. Look for S&P "Manager Persistence Report Card." A couple decades of these semiannual reports always reach the same conclusion. Also good short video here: French on picking a manager: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

2) Making sector bets is a mild form of gambling.

3) A fund restricting itself to dividend-payers inherently restricts its investing options and will almost certainly underperform relative to an appropriate market benchmark.

I get #1 and #2. Thanks for #3, that's the sort of advice I was looking for.

Maybe I could just split my holdings in half between the two? This is in a tIRA that I won't be drawing from for at least another ten years.

 

[38Chevy454]

Thoughts:

3) A fund restricting itself to dividend-payers inherently restricts its investing options and will almost certainly underperform relative to an appropriate market benchmark.

I agree with Oldshooter, especially number 3. Unless you are targeting dividends for (somewhat steady) income or for tax purposes, it has historically been lower total net account gains than compared to stock market in general. In the end it comes down to money is fungible, it really does not matter if you get money out of your account from dividends or from selling appreciated value stock. Many people like the dividend approach as it is mentally comforting to not be selling stock, without considering stock returns as a whole.


If I were OP Looking4Ward, I would probably do that swap. But I like being in stocks without the dividend handcuffs.

 

[OldShooter]

... Maybe I could just split my holdings in half between the two? This is in a tIRA that I won't be drawing from for at least another ten years.

Well, one is sector bet on growth and the other is a sector bet on dividend players. Without looking at their holdings I'd guess that a 50/50 provides some additional diversification, which is good. But why not buy VTSMX and be done with it? Or VT for even more diversification..

 

[Looking4Ward]

But why not buy VTSMX and be done with it? Or VT for even more diversification..

Good point. This tIRA is currently about 50% Wellington, 20% Healthcare Fund, 20% Dividend Growth, and 10% International.

I'm okay with higher risk in this account as I don't need to draw from it for ten years or so, which is why I'm reconsidering it's holdings.

 

[OldShooter]

... I'm okay with higher risk in this account ...

Well, what you have now is higher risk and higher volatility than a more diversified choice. So maybe you're good to go!