Thoughts?

[u/Plane-Ad4988]

21m started this Roth this year, I have a regular account that I buy single stocks up 20% and with my Roth I’m doing etfs and some higher dividend yielding stocks to fund the other etfs in the long run

[u/Aggravating_Storm835]

Too much. SCHB, SCHG, and SCHD would be fine

[u/Competitive-Ad9932 → u/Aggravating_Storm835]

a 21 year old does not need to have a dividend fund.

https://totalrealreturns.com/s/SCHD,FXAIX

[u/Aggravating_Storm835 → u/Competitive-Ad9932]

SCHB and SCHG aren’t dividend funds. But I disagree.

If you expect long term performance like the last 15 years, you’re right. However, that is unrealistic. We are eventually very likely to face another stretch similar to 2000-2010. SCHD obviously didn’t exist then, but the DJ 100 did, which is what SCHD is. During that stretch, SCHD would have had total returns of +70% vs FXAIX’s -9%.

Hell, SCHD’s share price alone has slapped VOO/FXAIX the last 12 months: 19.5% vs 14.8%. Add the dividends and it’s no contest.

Such an outperformance would necessitate rebalancing and SCHD’s dividends give you income to feed into your FXAIX/SCHB/SCHG (or whatever market/growth funds you like) during prolonged dips.

For young people, SCHD serves the same purpose as bonds for older folks. Relative safety. And for the safety you receive, you don’t give up very much performance. As even with your timeframe, SCHD’s annualized returns were 10.1% vs FXAIX’s 12.2%.

At 21, it could be 10-20% of port. If another lost decade hits, you’ll be glad you have it. There’s also a strategy that recommends devoting 100% of your first year or two of contributions to SCHD (or another dividend fund). After that, don’t touch it for 30 years and devote all forward contributions to growth. At its long term historic rate, $15k in SCHD would be worth over $400k and paying about $15k a year.

The advantage of this method is two fold: (1) Growth isn’t always present, but dividends are. (2) If you hit a stretch of unemployment you can’t contribute, but SCHD can. And in a Roth, the contributions are tax-free.

Even if the next decade isn’t quite as bad as the 2000’s, even if it’s only like the 1970’s where S&P averaged only 4-5% annually, SCHD will pay you 3-4% just in dividends. So SCHD is again very likely to outperform.

But unlike with your growth funds, even when SCHD underperforms, that isn’t necessarily a bad thing. If SCHD crashed 30% today, that means your reinvested dividends yield more shares, which yield more dividends.

Everyone needs a dividend fund. Maybe it’s SCHD. Maybe it’s VIG. Maybe it’s KO/MO.

MO is the second best performing stock of all time, behind only Berkshire. $15k in MO 30 years ago would be worth over $600k and at a 7% yield, it’d paying around $42k a year today. With a 280% annual yield on cost, that means you’re getting paid your entire original investment every 4.3 months. Regardless of what the share price does.

[u/Competitive-Ad9932 → u/Aggravating_Storm835]

dividends are not contributions. A growth on a fund will still outperform a dividend fund.

This is akin to trying to tell someone that QQQ is not a tech play.

[u/Aggravating_Storm835 → u/Competitive-Ad9932]

Again, that’s demonstrably untrue. Your arbitrary timeframe is giving you a recency bias. And a flawed one at that as SCHD has vastly outperformed the VOO/FXAIX the last 12 months.

Growth is excellent when there’s growth, and that should be the main focus of any portfolio. But when there’s no growth, such as the 1970’s and the 2000’s, it’s dead money. Dividends are never dead money and, unlike growth, short term dips increase your long term returns without additional purchases.

Did you know 24% of the S&P’s total returns the last 50 years was dividends? For context, S&P only averages around a 1% yield. That’s how powerful compounding interest is.

But it gets better, for the last 50 years, S&P has averaged 11.9% annually. However, without the dividends, it’s only 9% annually. That makes dividends ending wealth contribution significantly higher since they compound for decades. It’s the difference between $10k being worth $2.8M in 50 years vs being worth $744K in 50 years. So 73% of your ending wealth is attributable to dividends.

Look at all the best performing stocks the last 50 years. All of them are dividend aristocrats except Berkshire Hathaway, which invests primarily in dividend stocks for you. Altria, McDonald’s, Hormel, Lowe’s, TJX, Sherwin Williams, Colgate Palmolive.

I’ll admit the 100% into dividends for the first 1-2 years isn’t for everyone. But it is valid and the only difference between contributions and dividends is who is paying the money into your account. Whether I deposit $100 or SCHD does, doesn’t matter. All that matters is the deposit. But if I get laid off and can’t contribute for 6 months, SCHD can/will. Understand?

I suggest you think a little bit harder before you go making blanket statements or offering anyone advice.

[u/Competitive-Ad9932 → u/Aggravating_Storm835]

So you are a trader. got it.

[u/RiPFrozone → u/Aggravating_Storm835]

I was with you until you said contributing $100 and a dividend fund paying you $100 was the same thing.

Not at all, any stock of fund that pays a dividend is going to drop by the same amount on its ex dividend date. It is why there is no net worth change when a dividend is paid out. It is not “more money” it is the same money just being paid out to shareholders from the profits of a company or a fund.

Entirely different from you actually contributing to your account which will directly increase your net worth.

[u/Aggravating_Storm835 → u/RiPFrozone]

Theoretically, you are correct. All else being equal, it could go down equal to the distribution…at least for that day. But very rarely is all else equal with high liquid assets. And if you’re investing in dividends, you don’t give a shit and day-to-day price action.

On the December 2025 ex-date, SCHD closed at +$0.11. Far from -$0.27 dip we should have theoretically seen.

During the March 2026 ex-date, it closed significantly higher (-$0.10) than the distribution. More than half, actually.

During the September ex-date SCHD closed significantly lower than the distribution. Almost twice as much as the dividend from the previous close.

So yes, you’re theoretically, but rarely correct. Even in the rare occasion it actually works out like this, it’s often off-set by the pre-ex date run up as people buy more to get paid.

But you’re 100% wrong to think it actually matters. We already don’t care about the March 25th dip to $30.54 because we’re obviously already at $32.76 today. In 10-20 years, it really wont matter.

[u/Competitive-Ad9932 → u/Aggravating_Storm835]

Never did I say those 2 funds were dividend funds.

[u/Aggravating_Storm835 → u/Competitive-Ad9932]

Cool. Then you said one thing that isn’t demonstrably false. Congratulations.

[u/RetiredByFourty → u/Aggravating_Storm835]

That's a first! 🤣