Avoid these 5 mistakes when investing in dividend ETFs
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- Опубліковано 13 кві 2024
- Avoid these 5 mistakes when investing in dividend ETFs
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02:33 - Expense Ratio
08:58 - Not understanding the index
13:12 - Wolf in sheep's clothing ETFs
17:14 - Not understanding taxes
21:53 - Not considering your time horizon
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I'm not a financial advisor and the content discussed today is merely my opinion and intended only for your entertainment. The content expressed in this video should not be considered as professional financial advice. This video may contain links through which we are compensated when you click on or are approved for offers. The information in this video was not provided by any of the companies mentioned, and has not been reviewed, approved, or otherwise endorsed by any of these entities.
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Foreign tax credits can reduce the tax burden on dividends received from foreign sources. When you receive dividends from foreign investments and have paid taxes on those earnings to a foreign government, you can often claim a foreign tax credit on your U.S. tax return. This credit offsets a portion of the U.S. tax liability on that income, thereby reducing your overall tax burden.
yeah the credit essentially makes the tax a wash, but you still have to pay the tax. I'm not a tax expert, so you will want to read up on your particularly situation.
I love Jake's vehicle example.
Buying high expense ratio ETFs is like booking a helicopter to take you from a building's ground floor to its second floor. The helicopter gets the job done, but is impractical.
But sometimes, buying lower expense ratio ETFs can be like getting what you pay for...lower expenses, lower performance.
Frugal J
Good take!
Low expense ratio ETFs all the way.
Thanks!
Thank you!!!
Thanks Jake. I’m glad I came along.
Hey Michael!
Thank you for another great content.
Thanks for watching!
Great video!
Thanks!
Haha good analogy with the movie Multiplicity. I forgot about that one in the 90s
lol yeah :)
When you mentioned copy of a copy i was hoping for mulitiplicity 😁
lololol yeah....
She touched my pehpeh, steve
@@marchatesyou1 lol omg
Thanks Jake ! For watching out for us, I admit , I fell for some of the YieldMax ETFs for experimentation . Bought 6 totaling 2.75 % of my income portfolio….😂
lol well at least you limited how much you invested. Kudos to you!
You answered something I was trying to figure out for a long time, which I didn’t realize was a common question. How we are “charged” the fees. I’m still confused but now that I know where to look I can look into it more to help me understand it better. Thank you for always delivering good content!
Yeah it’s a bit weird but if you research NAV net asset value, that will help you understand it. It’s automatically taken out of the value of the fund.
Lol, that clip! I can't name it but I definitely recognized Michael Keaton from that era! Great video as always. 👍🏼
lol a classic! One of my favorites as a kid!
I would argue even someone younger should do [at least some] dividend investing. One thing I've learned is having a job is not guaranteed. Finding a new job when you get laid off, or fired, can take longer than you think. Having a dividend stream of income to live off when that happens can be a lifeline. Sure, have an emergency fund, but that isn't going to be able to earn when dividend investing can. While employed and you don't need the income, reinvest it.
I agree, and something I learned recently (in my 40s) is starting a custodial account for my kids so they can have investments when they turn of age. I wish my parents knew that for me, but I can at least do it for my kids and start them off better than I did.
I was thinking about that movie the other day. 😂 Great show!
lol a classic
Be aware that the expense ratio of special ETFs includes things that are only an accounting standard and not part of or paid to the management of that ETF. For example, a business dev ETF (BDC ETF) has to include the salaries paid by each BDC in the ETF in the expense ratio. If you hold each BDC individually you still pay that, but there is no easy way to find out how much is going to each BDC to cover that.
Some expenses related to covered calls are also reported in the expense ratio, but not paid to the fund managers.
JEPI and JEPQ get to hide those costs inside the ETNs as a simple reduction in the return of the ETN instead of calling it out as part of the expense ratio.
Foreign taxes can be claimed (offset your US taxes) if held in a taxable account. Not so if held in an IRA - you still pay, but you get no credit for paying it.
Would love if you did a new DGRO video. This is my #1 holding but curious on your thoughts on why it's still at the same range now since 2021. Thank you! Love the content.
Great suggestion!
Hey Jake, thanks again for great content
What would happen to our investments like SCHD or VYM if Schwab, Fidelity or Vanguard went bankrupt?
The funds would be liquidated and the money would be transferred to you via a third party. Schwab, Fidelity, and Vanguard don't own the shares. They merely hold them for you. You own the shares. If they were to go under, a third party would step in to support. This is a bit different when comparing it with Cash held in the account. That is where FDIC or SIPC insurance would be important.
Good video…can you create a video on a portfolio that is a ROTH account…I understand taxes in Reit’s…but would it make a difference in a Roth? What three/four ETF would you recommend & the percentages with different age brackets? Do international taxes still apply in a Roth?Thanks!
If you have foreign companies in a Roth and those companies pay dividends, you may well end up paying taxes to that foreign jurisdiction and have no way to get them back.
General rule: Do not own foreign companies in any tax advantaged account.
Exception to the rule: The US has a tax treaty with Canada, and Canada recognizes the IRA and will not require taxes. (In a taxable account, Canada will claim 15%.)
Movie: Multiplicity
Michael Keaton is amazing
Luv the copy concept - LOL :) YieldMax ETF is one that I don't understand; therefore, I stay away altogether. My investment thesis is a long term one. I would like to reach MARS with my long term investment. Quality index and amazing companies with a strong MOAT will eventually win the race. 🤗
lol haha
Ishares divb (buyback & dividends index) is now 0.05 expense ratio
LMAO. .. im 53.. that was absolutely perfect .... a copy of a copy! Love it!
lol :D
Just to be clear on tax, there is no "international tax". You'll pay a tax if the jurisdiction where you're buying the stocks taxes non-residents (eg Canada) but not all jurisdictions do so. Here in Hong Kong there is no tax on dividends. But the 30% non-resident tax I'm levied by the US on US company dividends is brutal!
How would you categorize the tax if not international tax?
@@DividendGrowthInvesting I agree it's the simplest phrase to use - sounds much better than "tax arising from the host jurisdiction where you purchase the stocks"... I wasn't implying you were wrong, but didn't want the audience to misunderstand and get the impression there's a global tax system or international organization collecting tax from these purchases.
Great videos, btw. Really love and appreciate what you do for us 🙏
@@DividendGrowthInvesting I refer to them as "foreign taxes." No matter where you are, if you invest in foreign companies, be prepared (do your research) regarding tax implications both in regards to the foreign country and your domestic taxes.
Like your videos I'm torn between bst vs jepq performance vs expense ratio I wondering if it's worth it?
I personally prefer jepq. I don’t see anything wrong with having both.
I love your videos man, keep it up! They got me into dividend investment.
Glad you like them!
Multiplicity!! Such a funny movie.
lol ya
How do most of you guys still make profit? Even with the downturn of the economy and ever increasing life standards
This is a typo. Just 15% withholding tax for Canadian stocks (TD, BCE, BNS, etc) because of US Canada treaty. Plus with your US taxes you will recover these withholding as a foreign tax credit. No withholding lf you keep Canadian stocks in IRA.
Good to know. I thought 25 was high. I don’t follow it so if it changes I don’t really track it
It's not a show, it's a movie and I believe it was called Multiplicity.
Growing up my parents would always say "were going to the show" when referring to go see a movie. It kinda stuck with me all these years.
Your channel is underrated bro, appreciate all the good advice and wisdom you share. If it means anything I follow your advice and it has changed my life, I feel better about my financial future and like I'll be able to achieve my goal of early retirement. 13:24 gave me a good laugh 😂. In my opinion it is to risky to put money into a ETF with no index to track, that's like getting on a cruise ship with no life boats. Putting a lot of faith in the fund management and gambling your own future, yeah I'll pass.
Appreciate you taking the time to comment this! I'm glad you are getting value from my videos and taking action on what you are learning!!
I have a short time horizon, 7-8 years. Would iShares HDV be a good choice rather than SCHD or DGRO?
Could have a combination of all 3. Check out my time horizon videos. They will help you understand growth rates
What website you use to cal mutual Fund calculator?
Nerd wallet. But I think they recently made it so you can only view after logging into their site.
What is SPYD is held in a ROTH IRA? Would you still be taxed?
No it would be tax free
If I’m 30 years old, would it make any sense to add DGRO or SCHD to VTI and VXUS in my Roth IRA and traditional IRA? Or just do total market funds
Makes a lot of sense if you want to live off dividends. Watch my video from two weeks ago.
Que manera de vender sueños
What app/web page are you using to find out the expense amount from ETF"s?
seekingalpha.com
What show is that? I love Michael Keaton!
Multiplicity
Multiplicity.
yup!
Isn't there a tax credit for foreign dividends? Like 600$ i think
You won't be double taxed on the international tax portion, but the remaining amount you will be taxed on.
Hey Jake how goes it. I would like your honest opinion on M1 finance. I was there and didn't like how I couldn't buy stocks when I wanted to and had to wait for the trade window or windows if M1 plus. I have been looking at going back but do they have a high yield savings or if I have uninvested cash does it go to a sweep account or MMF
Hey there! Going good! It really depends on you and your goals. If you want to actively buy in and out of your investments, then you want to avoid M1. If you want to have options or a more traditional experience that you may be used to with other legacy brokerages, then you will want to avoid M1. M1 is not for trading. If you want to automate everything and make everything set it and forget it, then M1 is something you should check out. I also really like their Margin/borrow interest rates. You also get 5% on your savings. It really depends on you. Some people have different strategies for each investment account, for example, if you want to be more active and trade, I would avoid M1. If you want to automate a Roth IRA and not trade, then M1 may be something to consider.
I really like M1 because I wanted to automate everything and not focusing on the emotional roller coaster of buying in and out of stocks.
@@DividendGrowthInvesting Yea I hear you on that. I dont do any active trading by any means but I also do not like how uninvested cash sits in a brokerage fund not gaining any interest where as in Fidelity it grows also at 5%. I guess I could just have a savings account with M1 keep my DCA money in that and transfer it to my brokerage as I want to buy. I can't have a roth cause I am not working. My pension and VA disability pay all my bills and still allow me to save between 1500-2000 a month tho
@@Gunny_1775 you can set up an automatic transfer that once your invest account gets over $0.1 cent, everything is automatically transferred to you m1 savings account. That’s what I do.
@@DividendGrowthInvesting I just logged in over there and I dont have access to the Savings yet they said they do not have any more savings accounts ready?
@@Gunny_1775 email them and ask about it. I think there are regulatory conditions for certain states.
Jake sir, Off topic from your video...
I see in one of your accounts ( The M1 ) that you have more than 500k in that account. I'm in the process of selling the house and I'm concerned with having more than the insured amount per brokage of 500k in my account. Are you not concerned or am I missing something. It seems people do keep over 1 million in these brokage accounts. I don't want to lose my life's savings. What are your thoughts in protecting your capital? I'd have around 1.5 mil once all is said and done... I have Googled this and can't seem to find a straight method or answer.
This is really important and something everyone should be educating themselves on. Check out this video where I talk about this more in detail: ua-cam.com/video/ZYBb0FPgHkk/v-deo.html
Wait, doesn't that fee pay the workers who manage the account that follows the individual stocks in the ETF? The data programmers who do the 'electronic' work? The paperwork and documentation? When I pay bank fees, it's because people work at the bank, it's the same and more complicated for the people behind the ETFs. The ETFs don't just form out of thin air.
Not sure if sympathizing with Wall Street is something you should be concerned about. Sounds like you aren’t old enough to remember 08-09.
As SPYI and QQQI giving the tax advatages, however, the fee is 0.68%, is that worth investing ( Im from Hong Kong)
The expense ratio is a very big part of it, but also the index and methodology of the fund. I personally prefer JEPI/JEPQ.
Im 32, i totally lost all my money in previous crypto market, im not sure if i should put money on voo/qqqm/schd to buld up the foundation first, or looking for high yield etf and keep reinvesting. i quite like the concept of getting dividends to pay my daliy life fee. im a little confused of it. Would you mind to give me some suggestion based on my situation? Thank you so much
I have like 300usd to invest per month, after two-three years can up to 2000-2200usd permonth
So far for me QQQI & SPYI are superior to JEPI & JEPQ. More tax efficient, better growth on capital, and higher returns. I’ve owned the JP Morgan funds since inception.
I mean 200 in a month.i concider dgrw or nasdac 100 1c ucits of course because of taxes.. I hope to answer my question thanks you 🎉
DGRW and QQQ are great options for growth.
Thank you jake i priciate a lot for your respond...so i have to find QQQ ucits
I found EQQQ nasdac-100 ucits 0.30 D.yeald distributing i guess this is it
Do you get a $100 dividend from TD Bank or $100 dividend from Titty Bank? That is the question!
lol...
Taxes is the biggest one imo, Should be talked about more openly.
The tax drag is real! At first, you don't really realize it.. but once you start making more and you make more at your day job, those taxes add up!!
It's funny how QYLD got so much love years ago and everyone bailed on it! I've been DCA and dripping back into it. I'm up 15K in growth not including my dividends paid back! Love this ETF! It's above 18 now FYI!
Yeah it’s done well. The Nasdaq had been going up like crazy
Could you please post a link to the fund fee calculator? I was trying to Google it but I couldn't find it, thanks!
www.nerdwallet.com/article/investing/mutual-fund-calculator
@@DividendGrowthInvesting Thanks to such! I'm putting together a presentation for my direct reports and I'll add this as a resource 😁👍
First
wow you are fast today!
I’m on my game lol. Was watching another video when the notification came up
@@ethanshy280 :D
She touched my peppy, Steve.
Lol
Waiting for the next Rate my Portfolio episode to feature my submissions 🥲
soon :D
Long High yield!!!!!