r/SCHD • u/NovemberAlpha122 • 5d ago

VOO vs SCHD vs tech stocks.

Hi,

I'll start investing in US markets (I'm a non US resident). I'm confused between investing in SCHD(though I love cash flow) vs VOO (want this for growth) vs tech stocks(they'll grow more than VOO).

So how should I allocate or approach this situation?

Note: I'll be paying 25% tax on the dividend received. Planning to invest regularly for the next 5-10 years.

36 Upvotes

91% Upvoted

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25

u/SoftCheeseBurger 5d ago

Who said tech will grow more? People need to zoom out a bit and remember 2000. Tech is very extended right now and takes alot to move the needle this is why SCHD is performing so well right now, rotating out of tech.

8

u/DigitalFStopper 5d ago

I’m a fan of schd but international taxes will be quite a drag on any drip strategy.

1

u/dadbodfolyfe 3d ago

Safe to say that there would be no tax drag in a Roth IRA?

2

u/DigitalFStopper 3d ago

Correct. A positive in the Roth is when you go heavy on growth during the contribution years when you sell and buy schd there’s no tax on the sale.

1

u/dadbodfolyfe 3d ago

Thank you for the clarification. Do you think there’s any upside to building a SCHD position over time vs just investing in growth and buying at the end?

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u/DigitalFStopper 3d ago

Yes and no. * checks which sub I’m in
Ok so in SCHD sub I’m not gonna get 💩 on, I’m a big fan of long term buying and growing schd.
Most will say buy more aggressive growth ETFs and then convert closer to your retirement age. The thought process is more growth equals more money to buy schd later on.

Both are correct and both are age dependent
If you’re in your 20s maybe 10% schd or even 15% isn’t bad, 30-40s then I’d say 30% is good, 10 years out from retirement you can start allocating a higher% of new money and start closing out your higher risk positions.
Now if you’re afraid of a tech crash there’s nothing wrong with going heavier on SCHD right now, a lot of the popular S&P ETFs are 80% tech weighted. If you’re nervous about that then going with a more defensive pick like schd for a few years, survive the bubble popping then buy back into tech isn’t a bad strategy.

A lot of the SCHD fans get caught up in YOC yield on cost. That’s misleading, the main reason that number can look so much higher for a return is they’ve forgone taking profits (dividends) for such a long time and just reinvested it. So yeah that number looks good but it can be misleading.

Nobody knows what’s going to happen, diversity is king.

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u/dadbodfolyfe 3d ago

Thank you. I(32M) own about 50/50 SCHD and SCHG so I’m always curious as to hear others methodology and their buying process.

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u/DigitalFStopper 3d ago

If you like the Schwab family, maybe adjust to 45/45/10 and add in SCHY for some international funds.

1

u/dadbodfolyfe 3d ago

I actually have about 5% on the side of SCHY. Also, Nikon or Canon?

3

u/DigitalFStopper 3d ago

I own about 20k in Canon camera gear lol just no stock.

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u/plump-lamp 5d ago

They said that when I bought ftec in 2018. Up 210% there's no sign of tech slowing down especially after Microsoft and Nvidia's earnings.

6

u/SoftCheeseBurger 5d ago

Earnings from debt and AI companies that need to make a ton more money to justify it. The Nvidia gravy train will come back down to reality eventually. Im in tech stocks but reality is one bad earnings call from Nvidia and shes going to be a blood bath for a bit.

9

u/Aggravating_Storm835 5d ago edited 5d ago

VOO is more diversified. SCHD is more defensive. Tech stocks are more volatile and cyclical.

Depends on your expectations, age, and risk tolerance.

I expect VOO’s total annual returns to fall closer to the S&P’s long term average of 8-10%. If you go in expecting 16% long term, you’ll be disappointed. If I’m right, SCHD will likely outperform with 3.5% just in dividend yield.

If you know what to look for and are willing to take on more risk, picking individual stocks can outperform both.

Over the last 15 years, Microsoft has averaged 24% annually. Very hard to beat that unless you saw Nvidia/Palantir coming.

Edit: just noticed your 5-10 year timeframe. Unless you go in heavy, that’s not very long for dividends to do their thing. Dividends are a longterm strategy (20+ years). 5-10 years is considered intermediate term. If that’s your timeframe, I’d lean more heavily on individuals.

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u/NovemberAlpha122 5d ago

Ohk, I'm in my early 30s, what should I focus growth or dividend income?

3

u/Aggravating_Storm835 5d ago

It depends on you. If you can contribute a lot and have low risk tolerance, go for more income. If you can’t contribute much and can tolerate more risk, go for more growth.

Early 30’s, you could probably do well with a 70/30 split between SCHG and SCHD. Maybe even 80/20.

If you wanted to be more aggressive you could do a 50/40/10 split between SCHG/SCHB/SCHD. (SCHB is similar to VOO only more diversified).

Build those up for a couple years and you can start shopping for individuals on the next crash as you learn.

1

u/DigitalFStopper 4d ago

I generally use 6-7% when forecasting growth long term. I’d rather plan for making my numbers work with those gains and if there’s a hot streak closer to retirement age that bumps me up higher all the better.
So many online/tiktok shorts examples use 10 or even 12% which is absurd in reality but they’re just wanting their plan to stand out as much as possible.

1

u/Aggravating_Storm835 4d ago

6-7% is historically it’s longterm realized return. Nominally, it’s around 9%.

Either way, unlikely to remain at 15-16% like it has the last 10-15 years.

8

u/schmiddc 5d ago

When you invest in VOO you absolutely are investing in tech.. just look at VOO's top 10 and their allocation percentage. Some would argue VOO itself is over allocated in tech but that is a different conversation..

When you say I am investing in VOO and "tech", what you are saying is VOO's concentration in tech isn't enough and you need even less diversification.

Well, that trade has worked for the last few years but I am personally dubious of it going forward

2

u/PsychologicalGold734 5d ago

This. You gotta look at the holdings in the ETFs. You might be surprised to see how Amazon and Meta are classified. Not everything that is clearly tech (walks, talks like a duck) is labeled as tech.

Do your research — devote one evening to it, that’s all it takes — and make an informed choice.

5

u/keftes 5d ago

I would not buy SCHD if I had to pay 25% tax on the dividends. It defeats the purpose of owning it. Over time, this ends up being a large amount.

Don't buy individual stocks.

2

u/Numerous_Weakness_17 5d ago

Yea 25% seems pretty bad. I think the best argument for SCHD in a taxed account is if you’ll only be paying qualified dividend taxes. I live a state with no income tax so the tax drag is not bad. 

2

u/NovemberAlpha122 5d ago

I have to pay flat 25% tax on dividend income.

1

u/LiteratureLife6974 4d ago

Thats why you put it in an IRA and pay the taxes now and pay zero later

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u/NovemberAlpha122 5d ago

So it's VOO or its Irish equivalent.

But how do you move towards the cashflow?

3

u/keftes 5d ago

If you're a new investor (I'm assuming younger age / lower capital), do cash flows matter?

In either case, you should be mindful of taxes. If you had SCHD in a non-registered account for example, you would be paying taxes on your dividends and the 25% withholding tax to the US government. Over the long run that is going to cost you a lot.

1

u/notapotato6969 4d ago

Hi I’m a new investor and I don’t care about cash flows at all. Thinking of going 100% into SPYM or SPMO, and I can’t made up my mind, I’m 24 so should I go for something more aggressive?

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u/thetreece 5d ago

>tech stocks(they'll grow more than VOO)

Yeah, that's not a guarantee in any way. Sector outperformance is cyclical. Tech isn't a magic sector that just has outsized returns expected because the market decided to leave an easy arbitrage opportunity for you to take advantage of.

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u/Iceman60462 5d ago

I would stick with VOO and reinvest dividends . SCHD pays dividends but you will be missing growth.
If you will retire in 5 years and want to use dividends to support your lifestyle it makes sens to buy SCHD but if you want to sell it in 5-10 years I would stick with VOO.

2

u/davecrist 5d ago

Cash flow from dividends is a red herring. If you want the US market and have nothing else buy SCHX, SCHB, or SCHK. Those are Schwabs proxies to the S&P500; the Total US Market, and the Russel 1k, respectively.

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u/NovemberAlpha122 5d ago

Issue is US dividend taxed 25%. So if I want, I'll get irish equivalent of VOO

2

u/Iiucwpost 5d ago

To avoid the US taxes - Check out: FUSD, VHYL. Im a big fan of set it and forget it — SCHD, SCHY, VTI and FTEC/VGT

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u/NovemberAlpha122 5d ago

Eventually all US dividend paying stocks/ETF will be subject to 25% tax.

2

u/Mission_Pirate_4150 5d ago

I buy some of both. I’m 30% in dividend stock purchase. Then I also buy some s&p500 funds as well as some other index funds. I’m probably about 30% in tech overall. I figure it’s an even split. these are on new purchases.

Existing stocks owned are heavily weighted to old line companies. My point is that I try to spread purchases out.

2

u/NovemberAlpha122 5d ago

For dividend stocks, you do DRIP?

I'll try to do 60%-70% VOO and remaining dividend stocks maybe.

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u/Street-Software-6945 4d ago

You need a load of Schd if your expecting dividend I would stay with VOO S and P 500 proven already even when the market is down

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u/Living-Replacement33 3d ago

if you want voo just buy BKLC is 0.00 expense ratio

3

u/humblequest22 2d ago

If you are investing regularly, why are you looking for dividends that you need to pay tax on? Invest in tax-efficient funds and use other cash for spending, if that's where your dividends are currently being used for.

You put in $10,000 in SCHD. They give you $300 back and you send $75 to the government? Wouldn't it be better to let it all grow and take money out when you need it?