You can also try to convince her that she can have an immediate income from dividends that is automatically adjusts to inflation and market conditions while doing nothing and selling none of the assets. Taxwise not very effective, we know, but with 600k invested in for example
Would provide around 1.5k per month before taxes.
I am distrustful of such advisors. I think they could potentially give worse advice than me, but they would be regarded with higher respect than me.
I don’t think going for high dividends achieves anything than an illusion of making money.
You sort of answered the question. 6% of 10-year periods have been negative for US stock market returns. There is no sure way to know whether the following 10 years will become part of the 94% positive or 6% negative. Given the current situation, I’d say anything less than 10 years is pretty risky, but for an 8-year term I personally would still consider investing some of my assets (20% or 30%) in stocks. But I’m an eternal optimist.
Good evening,
I would trust VZ. It’s a serious institution.
They are relatively conservative, which makes sense since they focus on soon-to-be retired clients. They don’t sell their own funds, and give back 100% on any commission they receive.
You basically pay for neutral, professional advice
But you might be wrong.
What does your screenshot prove? That in a recession, blue chip high dividend yielding stock drops more slowly and later? Well, yes. But we’re interested in a longer time horizon than 1 year, and we don’t want to only invest in the asset which loses the least at the start of a bear market. We want an asset that performs best over 20 years.
They don’t sell their own funds but they still sell their own wealth management solutions. They simultaneously mention that it’s important to invest with low fees and then try to sell their own wealth management with >1% fee. I no longer consider them neutral.
My screenshot proves nothing, but you might still be wrong.
Just like low TER, high dividend is like a guaranteed income, from profitable companies, as opposed to gambles on cash-burning “disruptive innovators” with poor performance prospects like Zoom or DocuSign, that are way too heavy in today’s indexes, hence in today’s portfolios.
A reasonable tilt towards low volatility and high dividend can help: -5% instead of -20% YTD is a large difference, that could lead to a large difference also in 20 year’s time.
A typical example: P/E ratios of the likes of Tesla are worrying. Tesla is treated almost as a blue chip now, is usually in the Top5 of S&P500 and has a market cap above Berkshire Hathaway despite a P/E ratio around one hundred.
thanks everyone, this turned into a bigger discussion, which is great.
Question: what about dividends? A good part of investing this money into VT is getting dividends. Any input on VT vs something else that pays better dividends especially if you invest a big amount of money?
CHrad what’s the ETF you are talking about?
It’s the price of fancy Swiss bankers with fancy salaries and Swiss tax expertise.
Indeed not the cheapest, but I am not aware of a better deal with a comparable institution in Switzerland.
The same answer to both: when a company is already generating huge cashflows and doesn’t know how to grow further and reinvest this money, it will return money to shareholders. If you aim for high dividends, you’re then aiming at companies at a particular stage. Historical data shows that you achieve higher overall return if you DON’T focus only on high dividend earners.
I’d say going for high dividend stocks is a form of timing the market, as these stocks outperform in certain scenarios, like at the start of a recession.
Before it turns into our usual argument, may I remind you that high dividend ETF was brought up by me in a discussion how to motivate your girlfriend to invest. So it is rather investing in some type of stocks vs. not investing at all.
I will put it more bluntly.
Current indexes contain disproportionate amounts of crap.
A tilt towards profitable companies helps mitigate that.
It’s fine to burn some cash when you have actual growth perspectives. It’s not when you want to sell pretty standard products like videoconferencing or electronic signatures.
Tesla’s P/E of 100 cannot be reasonable, on any standard.
It’s pointless to look at Tesla’s P/E, when they’ve only just become profitable a few quarters ago and their earnings are set to increase significantly in the coming quarters. You want to arrive at a valuation, predict future earnings, apply a time discount to the cashflows, the DCF model will tell you the fair value. Comparing current price (forward looking) with past earnings makes little sense for growing companies.
Either you believe you’re dumber than the market, which makes you a passive indexer, or you actually think you’re smarter, which means you should be picking stocks. Statements like this imply the latter. Sure, in retrospect the last few months haven’t been the best, with companies which benefited from covid lockdowns, like netflix or zoom, gaining too much in price. But these things are only obvious in hindsight.
Obvious in hindsight, but also very obvious in foresight: This valuation is not reasonable and makes sense only for gamblers, not for investors.
Not only the financial analysis is worrying, but anyone can rent a Hyundai Ioniq 5, an electric VW or Volvo and wonder how on earth Tesla’s hype can still work on retail investors.
Long story short: When Twitter and Reddit drive market valuations to this extent, it might be a good idea to have at least some tilt towards profitable companies. Otherwise, just like the for dotcom bubble, I’m afraid that 10 years won’t be enough to heal from the return to reason.
In my opinion, the rule for investing in dividend stock is no different as for other stocks. If your investment horizon is under 10 years, I wouldn’t recommend it for the bulk of your assets. If you end up having to sell your stock at a bad price, the loss may nullify the dividend income.
Of course, if you would not necessarily HAVE TO sell your stocks after 8 years, that’s another story. In that case the current market could be a discount.
It’s important to be realistic though. Currently there is currently a high risk of western companies losing certain growth markets and possibly not getting back into them for a long time. The growth needed to recover from the resulting price corrections will have to come from elsewhere. That is why I would look at 10 years+ as a realistic investment horizon for stocks at this point.
Congratulations Tobias on your terrific achievement in building up your asset base to such a degree at 35. This is a fantastic achievement that you can be very proud of. Well done!
You are also willing to learn and grow your investing skill by soliciting feedback. That is also admirable.
I suggest that you take some time exploring the Motley Fool website. It is more geared for US investors but the principles you will find there apply universally. (Plus companies listed on US exchanges are still your best source of long term wealth IMO.)
You might like their Rule Your Retirement portfolio recommendations as it suggests various mutual funds and ETFs, including ones with international exposure. You get a one month free trial and then it costs $99 a year, less if you subscribe for two years. Their Stock Advisor service is also helpful.
Depending on your risk tolerance you might decide to keep 60 or 80% of your portfolio in equities (either invested directly in stocks or in ETFs or funds that are) and the rest in cash or bonds.
As you are still young, I would encourage you to invest in stocks. Long term the stock market has always gone up and the benefits of long term compounding are truly life changing and miraculous. It is good to learn about how to harness this dynamic to your benefit as soon as possible.
The Motley Fool with teach you how to do this: at least 25 stocks that you are willing to hold for at least 5 years.
As you gain in experience you my decide to treat certain stable stocks as cash equivalents with upside potential and allocate a small percentage of your portfolio to high growth stocks with great potential but also more volatility. Even owning one of these stocks has the potential to wipe out all your losses from other investments and still garner life changing returns.(Think FANG stocks.)
I am fortunate in having started my investment journey at about the same time as you but with far less that $1 million to invest and was able to retire at 50 with more than I could ever have imagined thanks to stocks and compounding.
I wish you the same good fortune and commend you on what you have achieved so far.
I’d recommend she reads the book Plötzlich Geld. It’s a great book on basics of money management, written by a Swiss, for a Swiss audience.
