Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

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Esteban
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Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by Esteban »

Good Evening,
First time posting. What is a better option investing in Vanguard Dividend Growth Fund (VDIGXOR) picking your own Stock Dividends? Note: I am looking to use dividends for monthly expenses.
Thank you
dru808
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by dru808 »

I don’t know but I bought in vdigx the day it opened to new investors. I’m excited.
60% SCHK | 25% VIGI | 15% ILTB
tibbitts
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by tibbitts »

Esteban wrote: Wed Aug 07, 2019 8:53 pm Good Evening,
First time posting. What is a better option investing in Vanguard Dividend Growth Fund (VDIGXOR) picking your own Stock Dividends? Note: I am looking to use dividends for monthly expenses.
Thank you
You might want to become more familiar with the forum - read the wiki, etc. The majority of Bogleheads don't recommend dividend-focused strategies, much less picking individual stocks of any kind.
MathIsMyWayr
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by MathIsMyWayr »

Broad market index funds are better than Vanguard Dividend Growth Fund. Picking individual stocks based dividends is even worse.
TropikThunder
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by TropikThunder »

SEC yields as of 07-31-2019:
  • VDIGX Vanguard Dividend Growth Fund: 1.84%
  • VTSAX Vanguard Total Stock Market Fund: 1.82%
Also, since inception of VDIGX in 1992, TSM has had higher CAGR (9.56% to 8.62%) offset by higher standard deviation but giving essentially the same risk-adjusted return (0.54 Sharpe ratio for TSM vs 0.56 for VDIGX). Plus, despite it's name, VDIGX hasn't always given you more income then Total Stock. For example, VTSMX had higher income in 9 of the 10 years from 2003 - 2012 (coming out of the dot-com bust and spanning the GFC). So VDIGX did not give you better risk-adjusted return and during the one recent time when dividend proponents would predict better results ("dividend funds are better in a downturn"), it's income dropped more than TSM, not less than.

Why all the excitement .....
Wakefield1
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by Wakefield1 »

Perhaps the O.P. might like to look at Equity Income Fund or the VHDYX (High Dividend Index?) Fund
Not sure whether the Dividend Growth Fund is really about dividend yield as opposed to stocks that grow or are likely to grow their dividend in the future (so a closet growth fund?)
of course with all of these things,results may vary depending on whether they are held in Tax Deferred or Taxable Accounts and keeping an eye out for Total Return after taxes also
certainly one of these funds is probably a safer choice than betting the house on a single or couple of individual stocks
"High Capital Gains Distribution" Fund? :twisted: :shock:
MoneyMarathon
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by MoneyMarathon »

Esteban wrote: Wed Aug 07, 2019 8:53 pmNote: I am looking to use dividends for monthly expenses.
(1) The idea of buying "Dividend Growth" to get higher dividends (compared to the initial investment amount) later isn't crazy. There's no reason to believe that it will beat just buying the market (and selling shares as needed), but it's not crazy. I've heard of a lot of ideas that make a lot less sense. Just because academics haven't built a fan club around it, doesn't mean it can't work as your way of investing, if you want it to.

You could use a mix of the high dividend yield for current dividends, and dividend growth for possibly larger dividends later.

Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX) - SEC yield 3.37%

Vanguard Dividend Growth Fund (VDIGX) - SEC yield 1.84%

(2) The idea isn't as safe as it seems, either. In a worst case scenario, dividends can be cut by up to half, which is what happened in the Great Depression. There is the possibility of needing to sell assets at this time. To avoid selling a portfolio that is all stocks, you should have some bonds, such as Vanguard's total bond fund.

Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - SEC yield 2.46%

(3) You should figure out an asset allocation you're happy with. For example, a balanced asset allocation is often quoted as 60% stocks / 40% bonds, giving you a healthy mix of safety from bonds and growth of capital from stocks. So you could buy:

40% Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX) - SEC yield 3.37%
20% Vanguard Dividend Growth Fund (VDIGX) - SEC yield 1.84%
40% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) - SEC yield 2.46%

The average SEC yield for the whole portfolio comes out to 2.7% yield (or $225 / month per $100,000 invested).

(4) If you use a portfolio focused on dividends, you can't watch the S&P 500 or other popular metrics, because you will always be underperforming them or over performing at any given time (and, since you have bonds and more established companies in this kind of portfolio, usually underperforming, in a bull market for stocks). If that's a problem, buy the S&P 500 instead, and just sell shares as needed to meet expenses.

Jack Bogle once said:
But you ought to think about all sources of your retirement income. Having said that, when you own an equity portfolio, don’t get into it for market reasons, get into it for income reasons. Oversimplifying, what you want to do when you retire is walk out to the mailbox on Social Security day and on dividend payment day for the funds—assuming they’re the same day—and make sure you have two envelopes out there. One is your fund dividend and the other is your Social Security check. The Social Security will keep up with inflation year after year, and dividends are likely to increase year after year. They have been going up. Every once in a while there is an interruption, such as the Great Depression of the early 1930s. And many bank stocks eliminated their dividends in 2008, so there was obviously a drop. But it has long since recovered, and then some.

Bet on the dividends, and not on the market price. You’ve got those two envelopes and that’s your retirement. If you have a pension plan (one that is not likely to go bankrupt—and a lot of them are likely to) that is a third envelope. You want to be concerned about whether you have enough income to pay utility bills, pay for your food, pay your rent or your mortgage, whatever it might be, every month. You want income to help you pay those bills. And in the retirement stage, that’s what investing should be about—regular checks from dividends and/or from Social Security and/or from a pension account.
Found here: https://www.mymoneyblog.com/jack-bogle- ... money.html

And:
If you really need the dividend income, I see nothing wrong with overweighting high-dividend stocks, knowing you’re taking a small risk of falling significantly behind the total market. But you can own blue chip stocks, and you’re going to get a higher dividend, a situation I think would be attractive to an awful lot of investors. But once you depart from the market portfolio, you’re taking on extra risk. Any strategy may have done very well in the past, but in this business, the past is not prologue.
So you're taking on some extra risk, in the sense of possibly underperforming the market, but that's balanced against other considerations. For example, if you know you would not like to buy and sell stocks, and that it's easier for you to stay invested if you can generally just use the dividends, then the problems of behavioral error with just buying the market could be more important than the problems of not tracking the market index.

At some point, of course, your understanding and comfort may change, and you might end up buying the market eventually anyway.

You may want to take a look at the Getting Started page of the Wiki:

https://www.bogleheads.org/wiki/Getting_started
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Tyler Aspect
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by Tyler Aspect »

Esteban wrote: Wed Aug 07, 2019 8:53 pm Good Evening,
First time posting. What is a better option investing in Vanguard Dividend Growth Fund (VDIGXOR) picking your own Stock Dividends? Note: I am looking to use dividends for monthly expenses.
Thank you
The dividend generated by a stock fund is similar to a forced sell of the fund. Dividend distribution lowers the net asset value of the fund, so that the distribution is basically a zero sum situation. If a fund distributes $500 in the form of dividend, then the fund's valuation is reduced by $500. The total return of a fund is more relevant than its dividend.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.
tj
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by tj »

TropikThunder wrote: Wed Aug 07, 2019 9:50 pm SEC yields as of 07-31-2019:
  • VDIGX Vanguard Dividend Growth Fund: 1.84%
  • VTSAX Vanguard Total Stock Market Fund: 1.82%
Also, since inception of VDIGX in 1992, TSM has had higher CAGR (9.56% to 8.62%) offset by higher standard deviation but giving essentially the same risk-adjusted return (0.54 Sharpe ratio for TSM vs 0.56 for VDIGX). Plus, despite it's name, VDIGX hasn't always given you more income then Total Stock. For example, VTSMX had higher income in 9 of the 10 years from 2003 - 2012 (coming out of the dot-com bust and spanning the GFC). So VDIGX did not give you better risk-adjusted return and during the one recent time when dividend proponents would predict better results ("dividend funds are better in a downturn"), it's income dropped more than TSM, not less than.

Why all the excitement .....
Vdigx was the vanguard utilities income fund for all of those early years. Didn't the strategy change in the early 2000s? Apples and oranges. The current manager started in 2006. Performance has been quite good since then. Will it continue? Who knows?
ernieM
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by ernieM »

Given your goal, it's sort of hard to answer your question without knowing more about your portfolio. Fund over individual stocks? OK. But VDGIX (Dividend Growth) has performed somewhat similarly overall (at least in more recent history......(with all appropriate caveats)) with, for example, the similar TR Price Fund (PRDGX; Dividend Growth).....but these are dividend growth funds...i.e., stocks w/ growing dividends, not necessarily those with the highest yields. The Vanguard High Dividend Yield Index Fund (VHYAX) has a higher yield...as already noted.....(as does, for that matter, the 40/60 VWIAX....Wellesley Income fund, which I believe uses the High Dividend Yield Index as a stock benchmark). Should you invest in any of them? Up to you, but you'll get a better answer if viewed against the remainder of your holdings.
dbr
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by dbr »

If by picking your own dividends you mean investing in a few individual stocks, then that is a very bad idea because it is very risky. It is very risky because individual stocks one by one are risky on average and because you are adding the risk that you will not do a good job of stock picking.
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Esteban
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Re: Vanguard Dividend Growth Fund Vs Picking your Stock Dividend

Post by Esteban »

Thank you all for your advice. I apologize should of added more info. I am already using the three fund portfolio thanks to The Bogleheads guide to the Three-Fund Portfolio. On a side note, that is how I found out about this amazing forum.
The allocation I am currently using is:
70% (VTSAX)
20% (VTIAX)
10% (VBTLX)
I am planing to buy a multifamily properties down the road to diversify. My goal is to be financially free and live a simple life. I currently have zero debt. I was researching on how I can make $250-$500 a month from investments and stock dividends came up. Obliviously I searched to see if there was an index fund for dividends. Naturally my question was is it better to invest in the vanguard dividend growth fund or pick my own stocks that pay dividends? I am still researching into this. I did see some mentions in this posting regarding the difficult of choosing stocks.
Thanks again everyone.
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