Best dividend funds to invest

Feb 12, 2020 18 Comments

Newbie in investing :
Currently using wealthfront for investing want to try something else.
Looking to invest monthly in dividend funds.
What are some good funds ? and what portal to use have etrade account already.
Do u have to pay tax on dividends you get ? any ways to avoid it ?

As to why dividend funds only, seeing returns on wealthfront on different sectors and dividend sector is the max.

TC : 310k

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TOP 18 Comments
  • Amazon / Eng
    kilndried

    Go to company page Amazon Eng

    kilndried
    Put dividend generating investments in a tax deferred account (401k, IRAs). Dividends are taxed as normal income.
    Feb 12, 2020 5
    • Amazon / Eng
      kilndried

      Go to company page Amazon Eng

      kilndried
      Interesting- what type of companies pay income tax before dividends that you’d typically invest in through stock holdings?
      Feb 12, 2020
    • New / Eng
      stoffel

      New Eng

      stoffel
      You’re typical C corp is a good example - they pay corporate taxes on profits first, then distribute dividends afterwards.
      Feb 13, 2020
  • New / Eng
    stoffel

    New Eng

    stoffel
    Probably not a good idea to generalize quite recent performance (< 10 years, where 10 years is a typical business cycle) into future performance. You’re better off on the tried and true indexing plan, but avoid over concentration in US equities (yes, US equities have been on a rocket for a decade, but there’s been other decades were foreign equities did quite a bit better than US ones. It’s good to have diversification here to potentially capture that, and mitigate country-specific ricks)
    Feb 12, 2020 1
    • New / Eng
      stoffel

      New Eng

      stoffel
      Correct, there is that. What I was saying though is that the dividend-first strategy shouldn’t be adopted only because dividends recently performed well in the last year or two. Said differently, I was asking him to look into the matter a little more 😀
      Feb 12, 2020
  • Look into dividend aristocrats. There are etfs that track them too.
    Feb 12, 2020 3
  • The most tax efficient way to get "dividends" is selling near the money covered calls. You get mostly paid in capital returns when those calls expire in the money. Check out ETV, they charge 1% a year to do this for you if you are only looking for a small amount.
    Feb 12, 2020 2
    • Meaning ETV will sell covered calls against my stocks ?
      Feb 13, 2020
    • ETV is equivalent to buying SPY, and selling calls that call away shares at the rate of about 8% a year, wrapped up in an ETF with an extra 0.9% fee on top. It causes the cost basis of the position to decline over time (representing capital return), instead of incurring capital gains. Eventually when you hit a cost basis of 0, you'll start owing LT capital gains every year, since it's now the reinvested profits.

      You also do pay tax on the option premium, strike - entry, and underlier dividends, but that usually comes out to only 20-30% of the distributions, so you're effectively delaying taxes on more than half the gains while being able to take your money now. Beats getting a dividend that's taxed right away.

      Alternatively you can own SPY and sell off a few % a year, but selling calls has a smoothing effect making it more like dividends whereas in a down market selling and incurring excess capital losses that have to be carried over for taxes isn't great.
      Feb 13, 2020
  • eBay
    jhftyu

    Go to company page eBay

    jhftyu
    VIG and DGRO
    Feb 12, 2020 0