SCHD Mistakes People Make (Top 4)

[@FundamentalsofFinance]

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[@DEEZEEMTB]

SCHD is a long play and a good base for some portfolios

[@FundamentalsofFinance]

Agree

[@bradmcmillen49]

So just to make sure I do understand dividend investing correctly. With a dividend ETF like SCHD it pays $.99 per share owned correct? So if you own 100 shares at $28 you are getting paid $.99(price per share) x 100 (number of shares). Even if the share price drops 10% to $90 you are still getting paid the exact same thing right? $.99 x 100? Am I right on this?

[@ahnottingham]

Great point how expectations are built in! Brilliant! 🎉

[@dougmanck4149]

If that's really the case, expectations really change a heck of a lot every day

[@FundamentalsofFinance]

Thank you!

[@FundamentalsofFinance]

Yeah they do. And many things impact stock prices. Interest rates, possible law changes, random job report, something that impacts a specific industry, some random comment from a politician, the list is endless.

[@onlinecux]

Thank you for the information. What do you think of including BRK-B in the portfolio? I currently investing 1/3 growth (VGT/QQQM/SCHG), 1/3 VOO and the last 1/3 have been SCHD and FDVV. However, I have been thinking about replacing with BRK-B. Any suggestions would be greatly appreciated.

[@BigDataDan]

Excellent question. I'd like to know as well.

[@nickv4073]

BRK.B is not a dividend paying stock so it depends on what you are replacing.

[@onlinecux]

​@@nickv4073replacing SCHD in my taxable brokerage account for tax efficiency and potential downside protection but still outperforming SP500 long term.

[@tomcarl8784]

Your example at 5:00 seems to display a lack of understanding of yields and dividends.

[@PeterChristiana-x3g]

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[@mjs28s]

@5:00 That argument that you make has nothing to do with the comment. The comment, even the part you highlighted, clearly states, "The income stream is more important than the price appreciation...." Your argument starts of with an income that is based on yield and then you have the price drop. Well, that immediately would cause the person who posted the comment to take notice. They said the INCOME was more important, not yield, Yield is your appearing to strawman. Also, more important doesn't mean 'the only important thing'. Two things can be important and desired but one can have priority over the other and that doesn't mean that you completely ignore what the other is doing because one is ranked more important than the second thing.

[@badass6656]

Seems I picked up on the same point.

[@FundamentalsofFinance]

Well I'm responding to many comments along those same lines, not just that one, and there is a key misconception that only the income matters. If it goes down, whatever. Incorrect. Your future income is based on the share price/NAV. That's what I'm explaining here. And, mathematically, the income stream has literally 0 relevance to your outcome (except sometimes for tax reasons). Unpopular opinion on KZbin but the CFA institute agrees. I tried to explain why... that you can create your own income stream if there's money in your account and your income stream will inevitably fall if the value of your investment goes down over time but maybe i didn't do a good job since it doesn't seem like that was clear.

[@jesster178]

I love the fact that you show unknown funds to people, maybe make a video on great less known ets and there well known option

[@peterbedford2610]

So, buy the dip?

[@joshuamatkin8306]

SCHD- price appreciation led to a stock split 3 to 1 which means the price appreciation was internalized and shareholders receive two additional dividend payouts

[@FundamentalsofFinance]

Actually a stock split wouldn't impact the dividend. You'd have 3x the shares at 1/3 the value and your dividend would also be 1/3 the value per share (so exactly the same value since you have 3x as many shares)

[@joshuamatkin8306]

@ but the dividend didn’t go to a third it increased as well. That is in the case of SCHD.

[@timlane8061]

If you own 1k of SCHD, where its in 37 shares (at 27$) or 12 shares at pre-split price.... The dividend is still 3.3 percent of $1000 total investment

[@Kep19901]

There's a lot of dumb people in the world.

[@jesster178]

Another fantastic video!

[@FundamentalsofFinance]

Thank you!

[@samuelmajtan8509]

In 5min u calculate with yield which is still 5% when price is falling ->>> that’s means u calculate cutting dividends , if not and dividend remains same or increases , yield would be higher and higher. S-

[@gabriellechaparro762]

Great opportunity to buy low for a higher yield. Do you believe future reconstitution of schd will be positive for price appreciation?

[@bribradt3450]

How do we know it's "low"? & Relative to what? Maybe you buy low, and it goes lower..nobody knows anything

[@FundamentalsofFinance]

I have no idea. Here's how i would think about it. It's run based on a set of rules so it's always going to be focused on value-oriented dividend payers. You can get more detail in our schd vs cgdv video but in general that's what it'll own even after reconstitition. So in an environment where dividend payers do well (like maybe in a weaker stock market or if the AI hype dies down) I would expect schd to do well (relative to the S&P 500).

[@rigo.garcia]

Great video ❤

[@FundamentalsofFinance]

Thank you!

[@PaulSmith-zt7ix]

Happy new year

[@FundamentalsofFinance]

Happy new year!

[@bribradt3450]

Problem is, nobody can predict anything. You can buy low, and it goes lower. You can sell high, and it goes higher. I dont invest in SCHD. But set and forget is the best way to go. Dont focus on short term movements

[@FundamentalsofFinance]

Yep 100% agree. That's why I said it's better not to react at all but if you must, trying to buy low is better than chasing what's hot

[@dougmanck4149]

You still don't understand the stock vs bond investing decisions investors make. So to put it another way, if bonds yielded 30% don't you think a lot of investors would move from dividend stocks to bonds? And the reverse is true when bond yields go really low.

[@FundamentalsofFinance]

There are bonds that yield 30%. I don't see a lot of investors buying Turkey's debt in place of stocks. I'm not saying no one would every make that choice to switch to treasuries, I'm saying they shouldn't. This video is about mistakes people make with SCHD. If you owned treasuries and then moved to SCHD because Treasury rates went down to 2%, that would be a very dangerous decision because you'd be taking on a significant amount more risk. Treasury bonds and SCHD are absolutely not alternatives for each other. But you're right, I'm just a CFA charterholder and career investment professional, I probably don't understand.

[@dougmanck4149]

​@FundamentalsofFinance Your theory is correct but it doesn't give with reality. The point is what investors actually do not what they should do. Investors will move to SCHD if interest rates drop drastically which will boost the price of SCHD. Simple demand theory. But yes every CFA is taught to stick to the golden 60/40 or whatever percentage split you want to choose rather than do the research to maximize returns. Safety first

[@huanchaoli3004]

I do not care about the price because I purchase schd 5 dollars per day.

[@badass6656]

We can see you have a mindset of prioritising total return. This is not the same as the income investor mindset. I feel you did not fully understand the comment from the income investor. In your model you assume the yield is fixed relative to the capital value. My guess is the comment meant the income is fixed or increasing so that if the price falls the yield will increase. It is a matter of mindset neither is right or wrong. Focussing on rising cashflow can in the long term produce capital growth as the assets providing that cash become more valuable over time. Rising total returns can deliver more cash over time particularly if the yield is fairly constant.

[@FundamentalsofFinance]

Right but that's a misunderstanding of how income and yield work. Yield is the last year of div payments divided by the current stock price. If the stock price goes down, the yield goes up in that moment. Your income didn't change but the yield %will appear higher. But going forward, if the company isn't doing well, eventually it will have to cut its dividend. So, price appreciation is not something you can ignore. On the other hand, what I'm trying to explain to people is that total return is the only thing that matters. If you have money in your account you can create an income stream. If you don't, you can't. I can't tell you how many people i hear say they hate this ETF or that one because it cut its dividend one month... just an unnecessarily stressful way to live imo.

[@Quest88]

I agree dividends are based on company performance/earnings vs stock price, which is your argument, but they are related. He may be making the assumption that a negative forecast on earnings is the reason for the lower the stock price - assuming the forecast comes true, this would align the two views. Of course markets are never fully efficient, and companies could also force themselves to pay a dividend that they cannot afford in short-term, so that's why there's always volatility.

[@badass6656]

@@FundamentalsofFinance We all know how income and yields work but do not all invest the same way or have the same mindset.

[@ophirmayer1]

My question goes viral? :)

[@FundamentalsofFinance]

You're famous! Haha 😁 Keep bringing on the good questions!

[@dougmanck4149]

It's total return that matters, not just price appreciation. If the price of two stocks rise by the exact same percentage each year but one of the two also pays a dividend wouldn't you prefer one over the other?

[@FundamentalsofFinance]

I would only every consider total return so if one had a higher return, yes i would prefer that. I would think anyone would

[@QuakerPop]

If you are in a regular (not tax advantaged) account, dividends are INFERIOR. They are taxed as income. Other appreciation is taxed as a capital gain, which I substantially favorable tax treatment over dividends

[@dougmanck4149]

​@@QuakerPop No, qualified dividends are taxed as LTCG.

[@dougmanck4149]

​@@FundamentalsofFinance okay, thought you said price appreciation was the determining factor in the video

[@doublet__7417]

Number 1 problem people have with schd.....buying it to start with. Schd is the most over hyped and under delivering etf on the market. Far better options available

[@danielsvids7325]

You high?

[@FundamentalsofFinance]

I agree CGDV is a better option. We mentioned that in our first SCHD video ~9mo ago 😁

[@dougmanck4149]

​@@FundamentalsofFinance Don't be a short term investor. Look at the total return over the long term

[@schwingtrader6101]

Your yield/income example is wrong on too many levels to explain, the math is just wrong

[@DonaldDunlap-s1q]

You are correct he missed it

[@FundamentalsofFinance]

Yes, of course, that's what a simple example means... It was simplified to make it easy to understand. Also things don't go up or down exactly 10% each year and these are fake hypothetical investments.