DIVIDENDS AND TAX
US dividend ETF SCHD
I am currently invested in the following and am divided as to what the next funds to add. Ideally, I would like to add more dividends ETF like SCHD as considering retirement in 10-15 years time. But having found out recently that dividends are calculated as part of tax even when on DRIP is giving me second thoughts. My next alternative would be to just add more into IVV as I seem to be under-invested currently. - MOAT @ 34% - IVV @ 14% - A200 @ 17% - PLTR @ 15% - IBIT @ 20%
Chrissy Lim.
19 February 2025
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Hi Chrissy.
Given the ETFs you already have, there’s not a lot of advantage to adding more.
If you wanted more dividends, then keep in mind A200 actually pays pretty decent dividends and comes with franking credits as well.
But if you just wanted to pick another holding to top up, as you said IVV is the smallest one and it’s a very diversified holding in itself so that could make sense too.
If I’ve learned one thing it’s this: don’t overcomplicate the portfolio. Keeping things simple makes a lot of sense for many reasons.
All the best.
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When considering your investment strategy, especially with a focus on preparing for retirement in 10-15 years, it’s important to balance growth potential with income generation. Given your current portfolio distribution and your interest in dividend ETFs like SCHD, let’s explore your options.
Dividend ETFs and Tax Considerations: It’s true that dividends are taxed as income, even when reinvested through a Dividend Reinvestment Plan (DRP). However, the advantage of DRPs is the ability to compound your investments without incurring transaction fees, and often at a slight discount to the market price. This can be particularly beneficial in a long-term growth strategy, as reinvested dividends can significantly increase the number of shares you own over time, potentially leading to greater capital gains in the future.
Increasing Exposure to IVV: You mentioned feeling under-invested in IVV, which tracks the S&P 500 and offers broad exposure to the U.S. equity market. Increasing your stake in IVV could be a wise decision for growth, especially as it diversifies your investments across many sectors and companies. This ETF is known for its low expense ratio and strong performance history, making it a staple in many long-term investment portfolios.
Balancing Your Portfolio: Currently, your portfolio is somewhat concentrated in specific areas (MOAT, PLTR, IBIT). While these investments might have specific strategic roles, broadening your exposure could reduce risk and increase potential returns. For instance, considering global or emerging market ETFs could diversify your investments further, potentially offering higher growth opportunities as global markets expand.
Considerations for Retirement Planning: Since you are considering retirement in the near future, it’s crucial to think about how your portfolio can provide both growth and income. While dividend ETFs like SCHD provide re
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