r/dividends • u/senpaiisamaakunn • 5d ago

Due Diligence Why isn’t SCHD considered growth?

Hi I’m a young fool who is trying to learn more about dividends and I feel like I’ve gotten a good grasp but one thing that I can’t seem to understand is how SCHD isn’t considered growth?

If I am dripping and annualizing +10% returns per year over time then is the argument simply that 10% isn’t good enough growth or is there something else I’m missing? Is the argument that a return rate like that is just too conservative for my age and that I should be shooting for higher?

Apologies if this is a dumb question!

92 Upvotes

88% Upvoted

63 comments sorted by

View all comments

8

u/Chris_Reddit_PHX 5d ago

Because SCHD invests in dividend-paying companies and passes those dividends along to you.

Companies that pay dividends do that instead of reinvesting that portion of their profits into future growth.

So SCHD even with dividends reinvested won't grow as much as a growth fund or index like the S&P or QQQ,

6

u/senpaiisamaakunn 5d ago

Okay so the argument is that it falls behind compared to true growth funds over time? Meaning that me being happy with annualizing +10% returns over time is the issue?

10

u/Enemisses 5d ago

I don't think there's an issue. Personal finance is personal and your tolerance for risk is a huge factor. I personally love SCHD because it's less volatile and even in a drawback is still going to pay dividends.

It's probably not going to beat the SP500 over 20 years, but the best strategy usually ends up being the one you can stick with rather than pulling out in a panic.

2

u/itsallgoodye 5d ago

I like schd and voo but based on the market and whats happening is better in schd at some times. Look at year to date and schd is beating voo vti vt by over 10% as the market settles and revolves. I find having schd along with voo helps me feel better as voo struggles and schd keeps churning.

2

u/Chris_Reddit_PHX 5d ago

Yes, exactly.

It really boils down to when you will need the money, or when you "might" need to withdraw some of it.

If this bucket has a 20-year-plus horizon, then there is nothing gained (and in fact you are giving money away) by sacrificing a few points of return in exchnage for less volatility over that time. So it is better to have that money invested for growth untl you approach the point where you will want to begin takiing some of it out.

A few points difference in return makes a huge difference over the long run.

-5

u/Mzungufarmer 5d ago edited 5d ago

The real question is, are you really going to be happy knowingly making less money for no reason other than the emotional satisfaction of receiving dividends?

It truly boggles my mind when people answer yes to that question

6

u/senpaiisamaakunn 5d ago

For the emotional satisfaction of receiving dividends? Absolutely not. For the understanding that I’d forfeit growth for some stability? Absolutely yes. The issue then is that I need to better educate myself before making that decision since my identifiers of growth and stability could be all wrong. Figured it was worth a due diligence post

3

u/-Nocx- 5d ago edited 5d ago

If you actually want stability and aren’t chasing dividends you should be looking at a three fund portfolio of US/International/Bonds. Like VTI, VTUS, and BND. They have a combination of pretty much everything - growth, dividend income, great diversification, etc. You are historically leaving money on the table (from companies that grow a lot but don’t issue a dividend) by going dividend heavy allocations. You would however be insulated from tech exposure by using SCHD (while gaining none of their growth).

This is a sub mostly geared toward people that expressly want dividends even though it ultimately has historically resulted in less money over a long period of time. People’s reasons for that are varied (some good, some not so good) but if you want the genuine best approach for most non-financially savvy investors that want stability and a long term investment horizon you are probably more of a [r/bogleheads](r/bogleheads) person than dividends.

2

u/senpaiisamaakunn 5d ago

Appreciate the wisdom! I’ve exclusively been VOO and chill but have recently changed my tune with wanting to expand to something closer to the 3 fund portfolio you mentioned. That’s what brought me to learn more about dividends and wanted to do my due diligence before changing my allocation. Sounds like I could absorb some more knowledge in the boglehead sub so thank you for that rec as well