Which Vanguard Dividend Fund to pick?

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fireman44
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Which Vanguard Dividend Fund to pick?

Post by fireman44 » Sun Mar 31, 2019 7:50 pm

Hello everyone. I am looking between two funds currently to purchase for my 2018 Contribution into my Roth IRA.
Vdaix and Vhdyx. I have researched both of these however I still am unsure about which would be best for me. This fund will be very long term, possibly in my account for almost 30 years. I am leaning to the Vhdyx because of the higher SEC yield. I currently already have VGTSX, VNQ, VTSMX in my portfolio and just looking to further diversify my portfolio.
Also out of curiosity, between the Vdaix and Vhdyx which fund would be more stable during recessions?

radiowave
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Re: Which Vanguard Dividend Fund to pick?

Post by radiowave » Sun Mar 31, 2019 8:03 pm

So you're asking only about the Roth IRA. Typically growth funds and REITs are a good fit for a tax advantaged account. You already have a total stock fund that covers the entire US market. Perhaps consider simplifying to VTSAX (now $3k minimum) and the Vanguard total international fund? Hi dividend funds don't make sense to me in a Roth as the idea is to keep growing the money not spitting out dividends.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

tibbitts
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Re: Which Vanguard Dividend Fund to pick?

Post by tibbitts » Sun Mar 31, 2019 8:04 pm

You should add the fund names; nobody knows what the funds you mentioned are.

I don't see how adding a dividend fund would add to diversification.

drk
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Re: Which Vanguard Dividend Fund to pick?

Post by drk » Sun Mar 31, 2019 8:06 pm

fireman44 wrote:
Sun Mar 31, 2019 7:50 pm
This fund will be very long term, possibly in my account for almost 30 years. I am leaning to the Vhdyx because of the higher SEC yield.
These appear to be in conflict. What difference does yield make if you’re not using the money for 30 years?

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fireman44
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Re: Which Vanguard Dividend Fund to pick?

Post by fireman44 » Sun Mar 31, 2019 8:07 pm

i apologize for that.
Vanguard Dividend Appreciation Index Fund and Vanguard High Dividend Yield Index Fund

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fireman44
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Re: Which Vanguard Dividend Fund to pick?

Post by fireman44 » Sun Mar 31, 2019 8:12 pm

drk wrote:
Sun Mar 31, 2019 8:06 pm
fireman44 wrote:
Sun Mar 31, 2019 7:50 pm
This fund will be very long term, possibly in my account for almost 30 years. I am leaning to the Vhdyx because of the higher SEC yield.
These appear to be in conflict. What difference does yield make if you’re not using the money for 30 years?
Won't the yield matter if it is all getting reinvested?

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Dialectical Investor
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Re: Which Vanguard Dividend Fund to pick?

Post by Dialectical Investor » Sun Mar 31, 2019 8:16 pm

It makes sense to place a fund with a high dividend payout in a Roth. The question is why do you want a fund with a high dividend payout?

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Re: Which Vanguard Dividend Fund to pick?

Post by drk » Sun Mar 31, 2019 8:21 pm

fireman44 wrote:
Sun Mar 31, 2019 8:12 pm
Won't the yield matter if it is all getting reinvested?
If you’re concerned with the growth of your assets, you should look at total return, not dividend yield. By overweighting companies that pay dividends (whether growing ones or high ones), these funds underweight companies that either don’t pay (or only recently started to pay) a dividend. This latter group tends to include companies that are investing substantially in new product areas and future growth. If you search the forum for “dividends and total return,” you’ll find many discussions on this trade-off.

All that is to say that the standard recommendation would be to own a total market fund (e.g., VTSAX) rather than a dividend-focused one.

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Re: Which Vanguard Dividend Fund to pick?

Post by UpperNwGuy » Sun Mar 31, 2019 8:30 pm

Why do you want dividends? Dividends are not good. You should be looking at the Vanguard Total Stock Market Index Fund instead.

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fireman44
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Re: Which Vanguard Dividend Fund to pick?

Post by fireman44 » Sun Mar 31, 2019 8:47 pm

UpperNwGuy wrote:
Sun Mar 31, 2019 8:30 pm
Why do you want dividends? Dividends are not good. You should be looking at the Vanguard Total Stock Market Index Fund instead.
I was just looking to diversify my portfolio. I already own the vanguard total stock market index fund.

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Re: Which Vanguard Dividend Fund to pick?

Post by UpperNwGuy » Sun Mar 31, 2019 8:50 pm

fireman44 wrote:
Sun Mar 31, 2019 8:47 pm
UpperNwGuy wrote:
Sun Mar 31, 2019 8:30 pm
Why do you want dividends? Dividends are not good. You should be looking at the Vanguard Total Stock Market Index Fund instead.
I was just looking to diversify my portfolio. I already own the vanguard total stock market index fund.
Adding dividends does not add diversity.

lostdog
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Re: Which Vanguard Dividend Fund to pick?

Post by lostdog » Sun Mar 31, 2019 8:56 pm

Total return is what matters.

Stick with Total Stock Market and Total International.
I don't invest looking in the rear view mirror and I know absolutely nothing about the future.

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Re: Which Vanguard Dividend Fund to pick?

Post by fireman44 » Sun Mar 31, 2019 8:57 pm

UpperNwGuy wrote:
Sun Mar 31, 2019 8:50 pm
fireman44 wrote:
Sun Mar 31, 2019 8:47 pm
UpperNwGuy wrote:
Sun Mar 31, 2019 8:30 pm
Why do you want dividends? Dividends are not good. You should be looking at the Vanguard Total Stock Market Index Fund instead.
I was just looking to diversify my portfolio. I already own the vanguard total stock market index fund.
Adding dividends does not add diversity.
I was thinking diversity in the different companies that the fund is investing in. Vhdyx does not have holdings in amazon and other tech companies. Also for me, a young investor I can say it is more fun and entertaining to find new index funds to invest in and track.

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Re: Which Vanguard Dividend Fund to pick?

Post by GrowthSeeker » Sun Mar 31, 2019 9:08 pm

One of those funds has 180 stocks, the other has 396 stocks. Probably each stock is also in Total Stock Market which has 3,573 stocks. How does this add diversification? It's just betting heavier on some of the same stocks you probably already have in an index fund, isn't it?
Who cares what the dividend is? Do studies show that the total return of Dividend stocks is greater than the total return for non-dividend stocks?
Just because you're paranoid doesn't mean they're NOT out to get you.

radiowave
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Re: Which Vanguard Dividend Fund to pick?

Post by radiowave » Sun Mar 31, 2019 9:10 pm

fireman44 wrote:
Sun Mar 31, 2019 8:57 pm
I was thinking diversity in the different companies that the fund is investing in. Vhdyx does not have holdings in amazon and other tech companies. Also for me, a young investor I can say it is more fun and entertaining to find new index funds to invest in and track.
The 3 fund portfolio (total US stock, total international stock, and total US bonds) provides about as great a diversity of funds as you can produce. This approach also provides simplicity and low cost.

https://www.bogleheads.org/wiki/Three-fund_portfolio
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

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Re: Which Vanguard Dividend Fund to pick?

Post by drk » Sun Mar 31, 2019 9:27 pm

fireman44 wrote:
Sun Mar 31, 2019 8:57 pm
I was thinking diversity in the different companies that the fund is investing in. Vhdyx does not have holdings in amazon and other tech companies. Also for me, a young investor I can say it is more fun and entertaining to find new index funds to invest in and track.
If you want fun, branch out from large-cap funds and check out something like VFMF or VIOV.

Miriam2
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Re: Which Vanguard Dividend Fund to pick?

Post by Miriam2 » Sun Mar 31, 2019 11:07 pm

fireman44 wrote: Hello everyone. I am looking between two funds currently to purchase for my 2018 Contribution into my Roth IRA.
Vdaix and Vhdyx. I have researched both of these however I still am unsure about which would be best for me. This fund will be very long term, possibly in my account for almost 30 years. I am leaning to the Vhdyx because of the higher SEC yield. I currently already have VGTSX, VNQ, VTSMX in my portfolio and just looking to further diversify my portfolio.
Why do you have VNQ? the Vanguard Real Estate ETF? Is it for more diversification? If so, it is a sector fund that would usually not be included in a young person's portfolio. However, I admit that my son has Vanguard Health Care sector fund [VGHAX] in his Roth and "loves" it :wink: [BTW - I doubt that sector funds will save you during a recession.]
Also out of curiosity, between the Vdaix [Vg Dividend Appreciation Index Fund] and Vhdyx [Vg Hi Dividend Yield Index Fund] which fund would be more stable during recessions?
My understanding - and others please correct me if I'm wrong - is that stability during recessions comes from your portfolio asset allocation being set for your risk tolerance, not necessarily from the individual funds you own in your portfolio.

Of course you want high quality, low cost funds, but you don't need the entire 40-plus gamut of fund types from the Callan Table for a good portfolio - ie. the "more is merrier" approach - to weather a recession. You need your risk appropriate asset allocation.

We have all been where you are, looking for more diversification and return in our accounts :mrgreen: And most of us have bought and sold all types of funds trying to beef up our accounts and weather the storms. For young investors, what matters most is your savings rate - plopping it all every month into the basic stock & bond index funds according to your asset allocation, watching it grow, and revisiting your portfolio after learning more about investing.

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Re: Which Vanguard Dividend Fund to pick?

Post by fireman44 » Mon Apr 01, 2019 7:49 am

Miriam2 wrote:
Sun Mar 31, 2019 11:07 pm
fireman44 wrote: Hello everyone. I am looking between two funds currently to purchase for my 2018 Contribution into my Roth IRA.
Vdaix and Vhdyx. I have researched both of these however I still am unsure about which would be best for me. This fund will be very long term, possibly in my account for almost 30 years. I am leaning to the Vhdyx because of the higher SEC yield. I currently already have VGTSX, VNQ, VTSMX in my portfolio and just looking to further diversify my portfolio.
Why do you have VNQ? the Vanguard Real Estate ETF? Is it for more diversification? If so, it is a sector fund that would usually not be included in a young person's portfolio. However, I admit that my son has Vanguard Health Care sector fund [VGHAX] in his Roth and "loves" it :wink: [BTW - I doubt that sector funds will save you during a recession.]
Also out of curiosity, between the Vdaix [Vg Dividend Appreciation Index Fund] and Vhdyx [Vg Hi Dividend Yield Index Fund] which fund would be more stable during recessions?
My understanding - and others please correct me if I'm wrong - is that stability during recessions comes from your portfolio asset allocation being set for your risk tolerance, not necessarily from the individual funds you own in your portfolio.

Of course you want high quality, low cost funds, but you don't need the entire 40-plus gamut of fund types from the Callan Table for a good portfolio - ie. the "more is merrier" approach - to weather a recession. You need your risk appropriate asset allocation.

We have all been where you are, looking for more diversification and return in our accounts :mrgreen: And most of us have bought and sold all types of funds trying to beef up our accounts and weather the storms. For young investors, what matters most is your savings rate - plopping it all every month into the basic stock & bond index funds according to your asset allocation, watching it grow, and revisiting your portfolio after learning more about investing.
thank you for the great information and feedback.
Yes I invested in the VNQ fund for more diversification. I saw the VNQ fund mentioned as part of a boglehead 5 fund portofolio.

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Diworsification

Post by Taylor Larimore » Mon Apr 01, 2019 8:26 am

fireman44 wrote:
Sun Mar 31, 2019 7:50 pm
Hello everyone. I am looking between two funds currently to purchase for my 2018 Contribution into my Roth IRA.
Vdaix and Vhdyx. I have researched both of these however I still am unsure about which would be best for me. This fund will be very long term, possibly in my account for almost 30 years. I am leaning to the Vhdyx because of the higher SEC yield. I currently already have VGTSX, VNQ, VTSMX in my portfolio and just looking to further diversify my portfolio.
Also out of curiosity, between the Vdaix and Vhdyx which fund would be more stable during recessions?
fireman44:

Adding additional US stocks to a portfolio that ALREADY contains all US stocks (VTSMX) does not increase diversification--it actually reduces diversification by overweighting certain stocks.

Strive for simplicity--not complexity. Read my "Simplicity" link below.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Diworsification

Post by vineviz » Mon Apr 01, 2019 8:54 am

Taylor Larimore wrote:
Mon Apr 01, 2019 8:26 am
Adding additional US stocks to a portfolio that ALREADY contains all US stocks (VTSMX) does not increase diversification--it actually reduces diversification by overweighting certain stocks.
Taylor, this simply is not true.

There are many good reasons to hold VTSMX as the main (or even only) US stock fund in a portfolio, but it does no one any good to keep repeating this misinformation.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Diworsification

Post by 22twain » Mon Apr 01, 2019 9:23 am

vineviz wrote:
Mon Apr 01, 2019 8:54 am
Taylor Larimore wrote:
Mon Apr 01, 2019 8:26 am
Adding additional US stocks to a portfolio that ALREADY contains all US stocks (VTSMX) does not increase diversification--it actually reduces diversification by overweighting certain stocks.
Taylor, this simply is not true.
That depends on one's definition of "diversification." :wink:
My investing princiPLEs do not include absolutely preserving princiPAL.

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Re: Which Vanguard Dividend Fund to pick?

Post by jeffyscott » Mon Apr 01, 2019 9:28 am

Dividend Appreciation would be adding to "high quality" and High Dividend to value stocks, allocating more to those type of stocks than total stock market.

In 2008-09, Dividend Appreciation declined less than High Dividend Yield and total stock market.
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: Which Vanguard Dividend Fund to pick?

Post by bloom2708 » Mon Apr 01, 2019 9:30 am

fireman44 wrote:
Sun Mar 31, 2019 8:47 pm
UpperNwGuy wrote:
Sun Mar 31, 2019 8:30 pm
Why do you want dividends? Dividends are not good. You should be looking at the Vanguard Total Stock Market Index Fund instead.
I was just looking to diversify my portfolio. I already own the vanguard total stock market index fund.
Total US stock index has "all" 3,600 stocks at the market cap weight. Shares x price.

Fund A has 100 of the 3,600.
Fund B has 500 of the 3,600.

If you have Total US + A + B, you have 3,600 stocks still. You own extra of 100 and extra of 500 (which probably includes some of the 100). Taking you off the market cap weight.

It isn't diversification. These are tough concepts. Just like dividends and how the share price drops on the ex-dividend date for the same amount as the dividend. Then you have tax due (in taxable).
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

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Re: Diworsification

Post by vineviz » Mon Apr 01, 2019 9:53 am

22twain wrote:
Mon Apr 01, 2019 9:23 am
That depends on one's definition of "diversification." :wink:
We don't generally grant people, even Taylor, the right to make up their own definitions of words.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Diworsification

Post by bloom2708 » Mon Apr 01, 2019 9:59 am

vineviz wrote:
Mon Apr 01, 2019 9:53 am
22twain wrote:
Mon Apr 01, 2019 9:23 am
That depends on one's definition of "diversification." :wink:
We don't generally grant people, even Taylor, the right to make up their own definitions of words.
You claim Taylor is wrong, but do not correct. Explain what type of diversification is increased by owning the same dividend paying stock in 2 different funds?

If you have them all, you own the dividend paying stock (at market weight). If you buy more of that same stock, what type of diversification are you adding? In this context where the poster already owns the US stock index.

And if it is not "that" type of diversification, please give the type of diversification that it is adding. For my understanding.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

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Re: Which Vanguard Dividend Fund to pick?

Post by BogleMelon » Mon Apr 01, 2019 10:02 am

fireman44 wrote:
Sun Mar 31, 2019 8:47 pm
UpperNwGuy wrote:
Sun Mar 31, 2019 8:30 pm
Why do you want dividends? Dividends are not good. You should be looking at the Vanguard Total Stock Market Index Fund instead.
I was just looking to diversify my portfolio. I already own the vanguard total stock market index fund.
OP, If you own Total Stock Market Index Fund instead then you own every public company in the U.S.
Adding more funds that invest in the same U.S companies (but with different ratios of shares), won't get you more diversified! You are basically overlapping and will end up owning more shares of specific companies that you are already owning before buying that newly picked fund.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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Re: Diworsification

Post by Taylor Larimore » Mon Apr 01, 2019 10:10 am

vineviz wrote:
Mon Apr 01, 2019 8:54 am
Taylor Larimore wrote:
Mon Apr 01, 2019 8:26 am
Adding additional US stocks to a portfolio that ALREADY contains all US stocks (VTSMX) does not increase diversification--it actually reduces diversification by overweighting certain stocks.
Taylor, this simply is not true.

There are many good reasons to hold VTSMX as the main (or even only) US stock fund in a portfolio, but it does no one any good to keep repeating this misinformation.
vineviz:

Of course I may be wrong, but I believe that owning every U.S. stock by market weight is the most diversified you can get with U.S. stocks.

You will find these article about "diworsification" enlightening:

http://www.investorwords.com/11572/diworsification.html

https://www.investopedia.com/terms/d/di ... cation.asp

http://www.questinvestment.com/wp-conte ... er2015.pdf

http://www.businessdictionary.com/defin ... ation.html

https://www.ft.com/content/220c76fe-a1b ... 144feabdc0

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Diworsification

Post by vineviz » Mon Apr 01, 2019 10:49 am

bloom2708 wrote:
Mon Apr 01, 2019 9:59 am
You claim Taylor is wrong, but do not correct. Explain what type of diversification is increased by owning the same dividend paying stock in 2 different funds?
Taylor made two blanket statements:

1) "(a)dding additional US stocks to a portfolio that ALREADY contains all US stocks (VTSMX) does not increase diversification"

2) "it actually reduces diversification by overweighting certain stocks"

Both of these statements are untrue because the effect of "additional US stocks" on a portfolio that "contains all US stocks" is indeterminate: the level of diversification depends on the characteristics of the stocks being added. It's an empirical question, in other words, with no universal outcome.

It would be correct to say this:
Adding additional US stocks to a portfolio that already contains all US stocks (VTSMX) does not necessarily increase or decrease diversification of the portfolio.
It's not clear what you are referring to by "type of diversification", but diversification is always increased when the risk of the portfolio is spread more evenly within the portfolio.

In this particular case, the improvement in diversification from adding any of Vanguard's dividend-focused funds to a portfolio of 100% VTSMX is minimal. Positive, but almost imperceptibly so.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Diworsification

Post by vineviz » Mon Apr 01, 2019 10:54 am

Taylor Larimore wrote:
Mon Apr 01, 2019 10:10 am
Of course I may be wrong, but I believe that owning every U.S. stock by market weight is the most diversified you can get with U.S. stocks.
Indeed, this belief - though a common one - is wrong.

That's not to say that "diworsification" isn't a real phenomenon: it's what happens when adding assets to a portfolio when they don't improve the diversification of the portfolio.

A key step investors can take to avoid "diworsifying" their portfolio is to properly understand the concept of diversification.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Which Vanguard Dividend Fund to pick?

Post by MotoTrojan » Mon Apr 01, 2019 11:12 am

fireman44 wrote:
Sun Mar 31, 2019 8:57 pm
UpperNwGuy wrote:
Sun Mar 31, 2019 8:50 pm
fireman44 wrote:
Sun Mar 31, 2019 8:47 pm
UpperNwGuy wrote:
Sun Mar 31, 2019 8:30 pm
Why do you want dividends? Dividends are not good. You should be looking at the Vanguard Total Stock Market Index Fund instead.
I was just looking to diversify my portfolio. I already own the vanguard total stock market index fund.
Adding dividends does not add diversity.
I was thinking diversity in the different companies that the fund is investing in. Vhdyx does not have holdings in amazon and other tech companies. Also for me, a young investor I can say it is more fun and entertaining to find new index funds to invest in and track.
Changing your plan often will hurt you but I know the feeling. Personally I’d opt for small-cap or small-value tilt which will be a much bigger diversifier and over a long time span actually has more rationale to increase returns via small and value factor exposure. Also gets you your apparent goal of diversifying away from large cap tech stocks.

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Re: Diworsification

Post by bloom2708 » Mon Apr 01, 2019 11:52 am

vineviz wrote:
Mon Apr 01, 2019 10:54 am
Taylor Larimore wrote:
Mon Apr 01, 2019 10:10 am
Of course I may be wrong, but I believe that owning every U.S. stock by market weight is the most diversified you can get with U.S. stocks.
Indeed, this belief - though a common one - is wrong.

That's not to say that "diworsification" isn't a real phenomenon: it's what happens when adding assets to a portfolio when they don't improve the diversification of the portfolio.

A key step investors can take to avoid "diworsifying" their portfolio is to properly understand the concept of diversification.
In your previous reply to me you both state Taylor is "Wrong" and "Indeterminate". Which is it? A hard "wrong" seems unsupported.

You are making a firm statement and then getting wishy washy and obfuscating by saying people don't understand diversification.

Every day of trading, stuff happens. The day ends. That is the market.

You have 4 scenarios:

1. You own the market (or at least a close representation), get the market return
2. You own something other than the market and you did better
3. You own something other than the market and you did worse
4. You own something other than the market and you did the same

You add up all the results of every day and subtract the costs and that is how you do for the year.

You trade risk for the hopes you fall into #2 more than #3 or #4. Tilting means you accept both #2 and #3. You'll take #4 most times. Perhaps long periods of either.

In the purest sense, the OP was asking if adding some dividend stocks (that he already owns) improves "diversification". You can't say "wrong" and then say "indeterminate". Or say "not that diversification". The other diversification. :wink:

You personally can stand by your portfolio, when helping others get started you must first understand the core concepts and if/when build up from there. Onward and upward (or sideways or downward).
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

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Re: Diworsification

Post by vineviz » Mon Apr 01, 2019 12:15 pm

bloom2708 wrote:
Mon Apr 01, 2019 11:52 am
In your previous reply to me you both state Taylor is "Wrong" and "Indeterminate". Which is it?
I think you are misreading what I wrote.

Taylor made general assertion that adding additional stocks to a market cap weighted portfolio of stocks does not improve diversification and, in fact, reduces it. He was making a universal claim that is simply untrue.

If, instead, he had said something like "(a)dding additional US stocks to a portfolio that already contains all US stocks does not ALWAYS increase diversification" then he'd have been okay. But that's neither what he said nor, I'm sure, what he meant.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Diworsification

Post by vineviz » Mon Apr 01, 2019 12:25 pm

bloom2708 wrote:
Mon Apr 01, 2019 11:52 am
In the purest sense, the OP was asking if adding some dividend stocks (that he already owns) improves "diversification".
The answer to this question is, then, what I wrote earlier: "In this particular case, the improvement in diversification from adding any of Vanguard's dividend-focused funds to a portfolio of 100% VTSMX is minimal. Positive, but almost imperceptibly so."
bloom2708 wrote:
Mon Apr 01, 2019 11:52 am
You can't say "wrong" and then say "indeterminate". Or say "not that diversification". The other diversification.
I'm sorry if my explanations further confused you.

Let met try it this way: if someone says "turning left will leave you facing north" then I'd say that statement wrong. It's wrong because there are many times when turning left will leave you facing west, south, or east.

To clarify that the direction you end up facing after turning left depends on the direction you were facing to begin with isn't "obfuscation". It's just being accurate and precise.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Which Vanguard Dividend Fund to pick?

Post by KyleAAA » Mon Apr 01, 2019 12:25 pm

Both of those funds are good at what they do. What are you trying to accomplish? What does the rest of your portfolio look like? It is never wise to evaluate an investment in isolation. What matters is how it works in the context of your overall portfolio. The way you phrased the question makes it seem like you don't have an overall portfolio strategy. Plus, if you already own VTSMX 100% of the stocks in either of these new funds are also going to be in VTSMX. So what are you trying to accomplish? Are you trying to tilt to a particular factor? Are you trying to generate current income?

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Re: Which Vanguard Dividend Fund to pick?

Post by dkturner » Mon Apr 01, 2019 12:36 pm

GrowthSeeker wrote:
Sun Mar 31, 2019 9:08 pm
One of those funds has 180 stocks, the other has 396 stocks. Probably each stock is also in Total Stock Market which has 3,573 stocks. How does this add diversification? It's just betting heavier on some of the same stocks you probably already have in an index fund, isn't it?
Who cares what the dividend is? Do studies show that the total return of Dividend stocks is greater than the total return for non-dividend stocks?
Yes they do. In this respect note the research done by Kenneth French at the Tuck School of Business at Dartmouth College. The data on his website clearly demonstrates that,since 1928, dividend paying stocks have provided higher returns than non-dividend paying stocks AND their returns are less volatile. Of course 1928-2018 only covers the last 91 years. Maybe over the next 91 years there will be no difference in the total returns of dividend paying and non-dividend paying stocks.

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patrick013
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Re: Which Vanguard Dividend Fund to pick?

Post by patrick013 » Mon Apr 01, 2019 1:06 pm

fireman44 wrote:
Sun Mar 31, 2019 7:50 pm
I am looking between two funds currently to purchase for my 2018 Contribution into my Roth IRA.
My views are a little radical. I think dividends are a valid separate factor and several fund providers are taking this view.

When I convert my tIRA someday it will include ticker PEY, SPYD, or SPHD. They are structured differently than the VG dividend funds. Some advisors recommend them when bond yields are low. Similar dividend indexes have beat the market stock portfolio by about 1% long term. Slightly less after tax. So I think they are an interesting tilt especially in a Roth. The VG dividend funds are cap weighted so don't directly exploit a potential dividend factor by yield or equal weighting.

Statistics don't always repeat themselves but similar dividend indexes have charted well in long term observations.
age in bonds, buy-and-hold, 10 year business cycle

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Taylor Larimore
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Example of Diworsification

Post by Taylor Larimore » Mon Apr 01, 2019 4:55 pm

Bogleheads:

Diworsification:

Five years ago the financial industry was urging us to add a Small Cap Value fund to Total Stock Market Index Fund. Let's look at the results:

According to Morningstar, Total Stock Market had a 5-year annualized return of 10.57%. Meanwhile, Small Cap Value stocks had a 5-year annualized return of 5.21%--less than half.

http://news.morningstar.com/index/indexReturn.html

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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vineviz
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Re: Example of Diworsification

Post by vineviz » Mon Apr 01, 2019 6:07 pm

Taylor Larimore wrote:
Mon Apr 01, 2019 4:55 pm
According to Morningstar, Total Stock Market had a 5-year annualized return of 10.57%. Meanwhile, Small Cap Value stocks had a 5-year annualized return of 5.21%--less than half.
Today is the day that Taylor Larimore recommended that we invest based on the premise that past returns are the best indicator of future returns.

I'm marking my calendar.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Mr.BB
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Re: Which Vanguard Dividend Fund to pick?

Post by Mr.BB » Mon Apr 01, 2019 6:50 pm

The easiest way to learn more about the funds you are interested in, go to Morningstar.com
It will have fund reviews for you as well as in-depth information about each fund your mentioned.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

zuma
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Re: Example of Diworsification

Post by zuma » Tue Apr 02, 2019 3:14 am

Taylor Larimore wrote:
Mon Apr 01, 2019 4:55 pm
Bogleheads:

Diworsification:

Five years ago the financial industry was urging us to add a Small Cap Value fund to Total Stock Market Index Fund. Let's look at the results:

According to Morningstar, Total Stock Market had a 5-year annualized return of 10.57%. Meanwhile, Small Cap Value stocks had a 5-year annualized return of 5.21%--less than half.

http://news.morningstar.com/index/indexReturn.html

Best wishes.
Taylor
I greatly respect Taylor's writing and wisdom (I'm a 3-fund investor), but

1) including a small-cap value tilt in your portfolio is a reasonable strategy if you're willing to stay the course

2) using 5-year return data to inform, support, or defend your own strategy seems very un-Boglehead

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fortyofforty
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Re: Example of Diworsification

Post by fortyofforty » Tue Apr 02, 2019 7:13 am

zuma wrote:
Tue Apr 02, 2019 3:14 am
Taylor Larimore wrote:
Mon Apr 01, 2019 4:55 pm
Bogleheads:

Diworsification:

Five years ago the financial industry was urging us to add a Small Cap Value fund to Total Stock Market Index Fund. Let's look at the results:

According to Morningstar, Total Stock Market had a 5-year annualized return of 10.57%. Meanwhile, Small Cap Value stocks had a 5-year annualized return of 5.21%--less than half.

http://news.morningstar.com/index/indexReturn.html

Best wishes.
Taylor
I greatly respect Taylor's writing and wisdom (I'm a 3-fund investor), but

1) including a small-cap value tilt in your portfolio is a reasonable strategy if you're willing to stay the course

2) using 5-year return data to inform, support, or defend your own strategy seems very un-Boglehead
There is no free lunch. Those investing in SCV expecting higher returns just paid the "risk premium" in the form of lower returns. What else, after all, would be the risk in tilting towards one thing or another? Inevitably higher returns are no risk at all.

A tilt toward dividend paying stocks is also a reasonable strategy if you're willing to stay the course and await the inevitable, triumphal return of value investing's period of outperformance.

Any tilt can pay off if an investor has the nerve to buy when that factor is underperforming, and sell when it is outperforming. Or, just own the market, at the weight the market gives, and call it a day.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

indexonlyplease
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Re: Which Vanguard Dividend Fund to pick?

Post by indexonlyplease » Tue Apr 02, 2019 8:09 am

I think the problem that we get forget is what investing is really about. Us that have been investing for 30 plus years and have made many mistakes understand setting a simple portfolio with the correct AA and keeping it long term may be the best we can do. Moving to other funds beause we think will get us better returns may work but may not and then we bail on them and take a loss.

This is why I keep thinking for most of us the best we can do is invest into a low cost index target dated fund and just hope the pros are correct. Sure many here can do better or many here think they can do better but really won't know for 30 plus years ( Not around then or available to me).

I also believe I would of been better of investing in a target dated fund 30 plus years ago and then just fund the plan. Then do the same in my Roth IRA.

Anyway this is how I started and advised my 22 year old son. Now he just has to fund it. Maybe someone else can set a better portfolio but we won't know if it's any better until 30-40 years from now.

We would all invest in that great guru professional financial advisor if he was able to get us the returns no one else could get us.

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Re: Example of Diworsification

Post by bloom2708 » Tue Apr 02, 2019 8:19 am

vineviz wrote:
Mon Apr 01, 2019 6:07 pm
Taylor Larimore wrote:
Mon Apr 01, 2019 4:55 pm
According to Morningstar, Total Stock Market had a 5-year annualized return of 10.57%. Meanwhile, Small Cap Value stocks had a 5-year annualized return of 5.21%--less than half.
Today is the day that Taylor Larimore recommended that we invest based on the premise that past returns are the best indicator of future returns.

I'm marking my calendar.
Tread lightly mon boglehead frere. :beer
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

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Re: Which Vanguard Dividend Fund to pick?

Post by jeffyscott » Tue Apr 02, 2019 8:53 am

indexonlyplease wrote:
Tue Apr 02, 2019 8:09 am
I also believe I would of been better of investing in a target dated fund 30 plus years ago and then just fund the plan. Then do the same in my Roth IRA.
I don't think there were target date funds (or Roths) 30 years ago :wink: .

Our investing history is just over 20 years and did not have target date funds available in employer plans, but we probably would've done as well or better had I put all my money in Wellington in my employer's plan and my spouse all hers in a T. Rowe Personal strategy fund in her employer plan. I guess I could do a comparison to our lifetime IRR of about 6.5% to see.
Time is your friend; impulse is your enemy. - John C. Bogle

indexonlyplease
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Re: Which Vanguard Dividend Fund to pick?

Post by indexonlyplease » Tue Apr 02, 2019 9:35 am

jeffyscott wrote:
Tue Apr 02, 2019 8:53 am
indexonlyplease wrote:
Tue Apr 02, 2019 8:09 am
I also believe I would of been better of investing in a target dated fund 30 plus years ago and then just fund the plan. Then do the same in my Roth IRA.
I don't think there were target date funds (or Roths) 30 years ago :wink: .

Our investing history is just over 20 years and did not have target date funds available in employer plans, but we probably would've done as well or better had I put all my money in Wellington in my employer's plan and my spouse all hers in a T. Rowe Personal strategy fund in her employer plan. I guess I could do a comparison to our lifetime IRR of about 6.5% to see.
Yes I don't think so either and my plan only had non index funds for th 32 years I was employed. I allocated 100% into funds no bonds, 25% equal to growth, international, small and mid cap. I cant tell you want my return was but I believe ok. 3 years ago bought into the 3 fund at 50/50 AA. So I will be happy whatever that return gives me.

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Re: Which Vanguard Dividend Fund to pick?

Post by jsprag » Tue Apr 02, 2019 2:11 pm

Count me in the club that sees no reliable benefit from adding VDAIX or VHDYX to a portfolio already heavy with VTSAX.

But...it is interesting to note that, for the available data from May 2006 to Mar 2019, a portfolio of 80% VTSAX and 20% VDAIX delivered a tiny bit better return at less volatility than a 100% VTSAX portfolio.

Meaningful and actionable going forward? Not really, in my opinion. But it's interesting to me that we now know an investor in May 2006 would have been better off with the "diworsified" portfolio than the market weight.

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Re: Diworsification

Post by FactualFran » Tue Apr 02, 2019 2:51 pm

Taylor Larimore wrote:
Mon Apr 01, 2019 8:26 am
fireman44:

Adding additional US stocks to a portfolio that ALREADY contains all US stocks (VTSMX) does not increase diversification--it actually reduces diversification by overweighting certain stocks.
Minor point: in this case, some of the stocks in a fund that was mentioned (VHDYX) are not in VTSMX. Some of the holdings of VHDYX that are not in VTSMX (as of 2019-02 fund holdings from Vanguard) are:

Coca-Cola European Partners plc
Bank of NT Butterfield & Son Ltd.
International Game Technology plc
Atlantica Yield plc
Ship Finance International Ltd.

The sum of the market value of the holdings of VHDYX that are not in VTMSX is less than 1% of the assets of VHDYX.

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Re: Which Vanguard Dividend Fund to pick?

Post by pascalwager » Tue Apr 02, 2019 3:28 pm

VHDYX is categorized as a large value fund by Vanguard. So, yes, it might add diversification to your existing portfolio if you accept the idea that more factors (value, small, etc.) add diversification.

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