audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I think ER50 is pointing out that a dividend paying ETF will not outperform a broader approach in total return, so you aren’t gaining anything.
VTI or VIG or not or something else?
- Thread starter ATXFIRE2034
- Start date
I think ER50 is pointing out that a dividend paying ETF will not outperform a broader approach in total return, so you aren’t gaining anything.
PussInBoots
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VIG outperformed both S&P and VTI all the way till 2014. You guys are looking backwards from today.
S&P 500 performance from 2009-today is so outstanding that it is considered statistical outlier. The fact that VIG nearly kept up with S&P during that period means it is one outstanding ETF.
You will not go wrong with VTI or VIG.
S&P 500 performance from 2009-today is so outstanding that it is considered statistical outlier. The fact that VIG nearly kept up with S&P during that period means it is one outstanding ETF.
You will not go wrong with VTI or VIG.
Sojourner
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This idea of a steady, automatic income stream via dividends is, IMHO, what makes a high-yield/dividend tilt so appealing to some folks. I admit to finding this approach fairly seductive, as well, but not quite seductive enough to put any money into funds like VIG or VYM or DGRO. This is probably because the dividends I've been getting from broad-based funds like VFIAX and VVIAX have been sufficient to fund the majority of my ongoing spending. But I can see the appeal of wanting all of one's spending to be covered by things like dividends, cap gains distributions, and interest income, without ever having to sell or draw down one's nest egg. For some, I imagine that would provide a very compelling feeling of security, even if they knew it wasn't giving them the best total return.
PussInBoots
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VIG did not cut dividends in 2008 2009 (S&P 500 did by 25% +). VIG also did not decline as dramatically as S&P 500 or 2 funds you mention.
It provided downside protection. If steady dividends and downside protection is something that one seeks, VIG is an excellent choice. VIG has nothing in common with VYM. VIG is collection of high quality, wide moat dividend growers.
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HI Bill
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ATXFIRE2034 got the answer he was looking for. It's great to educate others on the difference between total return and dividend investing, though!
RetireeRobert
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+2 Nice post Koogie.
RetireeRobert
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Cash "coming in the door" can do a lot to soothe the nerves during a downturn. It's basic human psychology. Again, it is about the psychology, not the mathematics.
I've highlighted the crux of the argument. You. You are comfortable with total return and it works for you. Other people are not of the same temperament.
One of the best pieces of advice I have read on this forum in the last (gulp) 14 years is that "there are many roads to Jerusalem"
ie: there are lots of ways to achieve success and happiness. Everyone will pick the one that works for them. Your plan may be (and probably is) better than mine. But I couldn't stick to your plan and you wouldn't be happy with mine..
edit: again Van Winkle articulates it better in a couple of sentences than I do with my rambling. "What s/he said !!"
edit: apologies to the OP for hijacking their thread with the endless dividend debate.
+1 Another great post Koogie.
RetireeRobert
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So, you agree it's up to each person to take the road they prefer.
Then let each person take their own road--whether you understand, or like, their decision or not.
RetireeRobert
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Thank you for some much needed perspective.
RetireeRobert
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+1 More good perspective.
ATXFIRE2034
Recycles dryer sheets
Great discussion, I appreciate the diverse perspectives! I also picked up some new tools along the way that I can leverage going forward. After listening here, doing some more research and testing portfolio performance...I’ve decided to stick with VTI. It’s a great ETF and I have a decent cost basis already. Time to hold and grow.
RetireeRobert
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It was Einstein I think who called the magic of compounding the eighth wonder of the world. Or something like that.
Out-to-Lunch
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Well, yes, but the whole point of an internet forum is to exchange information. The OP seemed to be suffering from a misconception that dividend stocks automatically provide a performance advantage. S/he posted on an internet forum to discuss this. ERD 50 (correctly, IMHO) sought to disabuse him/her of this incorrect notion.
Do you think ERD 50 was wrong to do so?
RetireeRobert
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No. But I do think it was not helpful, after ERD50 made his point about "his" preferred way, for him to say OP could do what he wanted, but then immediately harp on the OP for not doing what ERD50 thought the correct way to go.
misanman
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+1 on this. Been tempted many times to post "Give it up" in response to those posts.
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
These strike me as very strange responses to my posts.
"let each person take their own road"? Ummm, in what world am I in any way going to actually not let them do what they want? Of course they can do what they want, I have no control over that. I'm not going to their home and force their hand at their keyboard to buy VTI!
It should be clear, as I stated, my purpose is to inform, and do some myth-busting. And learn in the process (I'm still waiting for someone to show me the superiority of div funds, because I'd invest in them then).
And it has nothing to do with my "preferred way", I'm merely pointing out facts, with historical data. I have yet to see anyone refute those facts/data. Instead, you attack the messenger's motivations? Ok, so my "preferred way" is to follow the data, if you want to look at it like that. But I'm not saying do it because that's how I do it. I'm saying it would behoove you to understands the facts.
Where did I "harp on the OP for not doing what ERD50 thought the correct way to go"? I pointed out that a dividend sector investor would likely leave $400,000 on the table, based on that back test. Is that not important, and worth being made aware of?
To paraphrase the song, "If that's wrong, I don't wanna be right!".
-ERD50
PussInBoots
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As I said from it's inception in 2007 VIG outperformed VTI and S&P 500 all the way till 2014. It did so without cutting dividends in 2008, 2009 and with less decline during financial crisis.
Investors are sometimes very myopic.
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Regardless of dividends cut/ not-cut (it's all money), the broad market outperforms almost all the div paying sector funds since their inception to today.
VIG was one (of only two in that group of seven) that actually did provide a relatively small amount of downside protection. But then goes on to lag overall. And five of them dropped further than the broad market. Try for yourself, subbing a 70/30 for each of the seven I have at 10%:
https://bit.ly/2ZWbklN
If it is downside protection you want, why not just go for a more conservative AA? Here, I went from 70/30 broad market stocks/bonds, to 60/40, and now that blend dropped less than the div sector 70/30 in 2008/2009, and came out far ahead in the long run (and I've included 3.5% inflation adjusted withdraws in all these, so the retiree has their steady income):
[-]https://bit.ly/3d2o1n7[/-]
https://bit.ly/2Z9Wqbw
SORRY HAD A TYPO, I HAD LEFT DVY in that link, and had a slip in my copy/paste..VIG underperformed, but just slightly..
60/40 index $1,000,000 _ $1,992,496
70/30 VIG__ $1,000,000 _ $1,968,106
[-]70/30 DVY__ $1,000,000 _ $1,676,213[/-]
For me, even though VIG looks pretty good overall, and in no way is a "bad" choice, based on history, it leaves the investor dependent upon the active managers. Since most of those div-sector funds didn't do as well, it makes me think this is not easy (it might even be luck), so I'd be worried that the performance might return to the average of those other funds, leaving one even further behind the broad markets.
I just don't see the attraction.
-ERD50
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Well, I'm not cherry picking the data, I take as much data as is available in the analyzer. 2014? Did you stop spending money in 2014? I didn't. Why stop at 2014 - this is 2021? So you are saying VIG underperformed for half of it's life, yes, that's what I'm saying too.
Why would I want to invest in something that "nearly kept up", when I can invest in the superior product just as easily, if not easier? This makes so sense to me.
(I meant to include this in the previous post)
-ERD50
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PussInBoots
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You have no idea what will be superior product in next 10 years. It is not likely to be bonds though
. (reference to your 70/30 portfolio)As I said both VIG and VTI are excellent funds. I am not saying to OP to buy VIG. I am saying both funds are about equally good. I should add VIG is *not* actively managed fund. It is index fund.
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
You have no idea what will be superior product in next 10 years. It is not likely to be bonds though
As I said both VIG and VTI are excellent funds. I am not saying to OP to buy VIG. I am saying both funds are about equally good.
Well, I can't really disagree with such a broad statement (though I can't go as far as saying "equally good", close, yes - but they are different, so not equal). You are right, neither of us know what the relative performance will be over then next 10 years.
But I have much more confidence that VTI will track very close to the overall market, than I do that VIG will do that, or over perform. That just seems like a safer bet to me.
I also think it is prudent to include bonds in the portfolio, historically, they have provided better survival rates than stocks alone (but you only needed ~ 5%~10% bonds for that). Future could be different, but I don't have a crystal ball.
-ERD50
RetireeRobert
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+1 Myopic to the extent of repeating their same point over, and over, and over, and over, and.....
Some just can't seem to give it up, and so they in effect bury the impact of their original argument. And any ears that might have listened are now deaf to whatever they say.
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Dd852
Full time employment: Posting here.
None of us EVER completely optimizes for growth. You have some cash? That’s a drag. You have some bonds? That’s a drag. You buy a broad market instead of betting it all on Gamestock when it was hot? That’s a drag. Buy dividend stocks? Yup, that’s a drag on growth results too. But as long as you know why you’re doing it and do it with intent and care, it is all good.
I have cash because I want to be able to fund my costs for a couple of years without selling. I have bonds because I want the safety factor. I have the broad market because I want diversification. I have dividend funds because I want an income stream. I’m willing to “pay” some growth away for the things I want.
Just make a plan, know the consequences, and go forth.
I have cash because I want to be able to fund my costs for a couple of years without selling. I have bonds because I want the safety factor. I have the broad market because I want diversification. I have dividend funds because I want an income stream. I’m willing to “pay” some growth away for the things I want.
Just make a plan, know the consequences, and go forth.
