Why I Quit Dividend Investing

oh i quit dividend investing so let me just take you back to 2014. this is when i first started investing and i was terrified of putting my money to work in the stock market because i didn't understand how it worked and so when i discovered dividend investing i fell in love with it and it made perfect sense to me so let me just show you this is my portfolio right here it's worth roughly 350 000 today well actually 50 000 of that is money i haven't invested just yet but i will soon and this just made perfect sense to me because i get paid dividends every single month without having to sell a single stock of this and if tomorrow this crash is 50 and it's worth half as much 175 thousand dollars well i still get paid those dividends and even though these stocks don't grow in value as much as something like a bitcoin or a tesla when there's a market crash they also don't fall quite as hard they still pay me dividends every single month so i've kept track of each and every single one of those dividend payments that i received dating back to january 1st 2015 when i received a whopping 13 and 24 pennies and i know what you're saying that is not nearly enough to actually retire on and that's true but at the time when i started investing that was all the proof i needed that this concept of money making money actually works and that the stock market isn't this thing that's set up against you and that it's rigged and then it actually works and that anyone can make money so i fell in love and i stuck with it for five years i saved fifty percent of my income where i was earning fifty thousand dollars a year i put it away and everything i received i reinvested it back into itself until it grew into what you see today now this year just seven short years later it's not that long ago that i started i made a little bit more in january because i made 520 dollars and 35 cents and in february of this year i made 665 dollars and 25 cents up from 15 in february of 2015. so the dividend snowball is real it is actually growing and yes i've reinvested i've added more money but the point is is i love passive income it's how i started my youtube journey when i made that passive income video about how i made 781 dollars with robin hood it was one of my first videos that went viral on my channel and it played no small role in helping me get to this point but i have learned a lot over the years and i was lucky enough to collaborate with people that in many ways are smarter than me and some of them i'm lucky to call my friends today so let's talk about exactly why i quit dividend investing and what i'm doing now instead instead of doing card tricks because the stock market's like one giant card trick just when you think the stock market's gonna do one thing instead it does something else entirely but then it goes back up and then it goes down and then it goes up and then it goes down and it becomes something else entirely like this ace of spades let's begin hi my name is andre jake hope you're doing well come for the finance and stay for the crypto just kidding there's no crypto in this video because this is still not a crypto channel so let's talk about why i quit dividend investing and what made me change my mind because here's the thing every single year us nerds in the finance world of youtube come together and we debate because we're nerds and we like to debate on every single dollar which one is better to put your money into dividend stocks that pay you passive income or is it better to put your money into growth stocks like tesla that pay you no dividends at all the critics of dividend investing say that there's nothing magical about dividends but i beg to differ because magic's all around us if you watch my youtube channel you can see this totally ordinary looking wallet that actually has more than meets the eye if you look closer it has a dollar totally not suspicious looking device i wanted to make the case for why dividend investing is amazing and why i think everyone should try it out and then i want to talk about why i quit dividend investing and what made me change my mind so first let's talk about why dividend investing is incredible between the years of 1930 to 2017 dividends have accounted for roughly 42 of the entire market return which means dividends play a pretty big role in increasing the market's value but in a flat stock market aka a market that just goes up and down and up and down but ultimately stays flat that's when the dividend investment strategy really shines because you're not just making money on paper like you do with growth stocks you're just going up but then you decrease then you increase but you're not really making money but with dividends you are actually realizing those gains you're actually collecting the money that gets deposited into your account which then you use to reinvest back into the markets therefore increasing the market share aka you're actually getting more and more stocks so that's reason number one reason number two why dividends are incredible is because it is one of the only investing strategies that exists today where you can earn an above average income and still pay nothing in taxes it's pretty crazy there's no loopholes there's no accounting tricks it's all pure cardistry just kidding there's no tricks it's the law because if you earn between zero dollars to forty thousand four hundred dollars per year you will pay nothing in taxes on qualified dividends if you file forever alone but if you're married and you file jointly you can earn up to 80 800 per year and still pay nothing in taxes just to blow your mind though this is like if you were living in los angeles california filing jointly if you're both making a combined total of a hundred thousand dollars per year so in this case it's almost like you got a 20 000 bonus tax credit to pay off your taxes name any other asset that you can do this with or any other investing strategy real estate crypto there's really nothing like that unless of course you had like a 100 million dollar tax write-off from real estate losses but you probably don't want to base your money-making strategy off of making money from losing money i make money by losing money what's up it's almost like those coupons that give you 50 off yeah you get to save 50 but why not save 100 of your money and not spend it at all stonks reason number three why dividends are amazing is because of something we discovered in 2008 and by we i mean people way smarter than me i was just graduating high school and i didn't care about any of this stuff but the four percent rule was actually updated because of dividends remember the four percent rule is basically the infinite money glitch right so if you invest sixty percent of your money into the s p 500 aka the voo stock that's the etf of the s p 500 and if you put the other 40 into bonds then you can live indefinitely without ever running out of money at the 4 withdrawal rate but we can actually bump that up to 5 by instead focusing on the top 100 companies from the s p 500 that pay dividends so now that one percent difference makes a big change i know that doesn't sound like a lot but if you're retired and you have a million dollar portfolio that's the difference between living off of forty thousand dollars a year and fifty thousand dollars a year that ten thousand dollars is a big difference because i'm good at math the fourth reason why dividend investing is amazing is because it allows you to plan and anticipate your retirement way better and more accurately because as a growth investor sure your net worth is increasing faster and it's growing at a higher rate but you also have to sell off your principal equity aka your stocks which means you need good timing and good luck on your side which people in 2008 did not have imagine you've been saving and investing away for 20 plus years and then one year you're like i'm so ready to quit my job and start my magic and cardistry career said no one ever then 2008 happens and you lose 50 of your portfolio well guess what that just set you back a decade well if you're young that's fine you can continue working or maybe you can retire and maybe supplement some of that income with a part-time job but what happens when you're old and you no longer can work well then you're forced to retire and sell off your stocks anyway except now you're gonna be selling them at twice the rate at that you i got the first vaccine i swear but now you're gonna be selling off the stocks at twice the rate that you plan to except with dividend investing i could plan that much more accurately because all i have to do is look at my expenses aka what am i spending every month and then compare that to my dividend income aka the interest that it's paying me and if the two are the same or if the passive income is greater than my expenses i can just quit my job and if not well then i continue working and if the market crashes and my portfolio decreases in value well then i still don't really care because if i did a good job investing in good blue chip solid dividend paying companies well then i still continue to get paid roughly about the same so i can still plan for that regardless but andre dividends are not guaranteed to be paid to you especially in a market crash well guess what neither is price appreciation so that point is kind of canceled out the fifth reason is really what changed everything for me but it was the psychological benefits of being a dividend investor because as somebody who earns and gets paid these dividends i can look at that stuff and think of myself as a real actual investor rather than somebody who's buying pieces of paper or random digits on a computer or on a phone screen this way i feel like i'm an actual owner of these businesses and i'm an investor that gets paid those dividends and that income that is a really powerful strategy that has helped me invested in the market for as long as i have been that in the bull market that's lasted over 10 years but don't question my genius andre if dividends are so great why did you stop doing it then the first reason is because when i started my youtube channel i wasn't making 40 400 a year i was making a lot less and so it made more sense to be a dividend investor because all of the income that i made from the passive income of my dividends i wasn't taxed on the qualified income and now i've got rich people problems because now i make more than 441 451 dollars and now i'm placed in the highest tax bracket where now i have to pay 20 on my dividend income and that's a lot of money i have nothing against paying taxes i think that's an important part of society but at the same time that's also money that i don't really need to pay to the government if all i do is invest in growth stocks instead and i get to save a lot more money on taxes i'm still going to pay taxes it's still not going to be free because even index funds like vti give you a yield of 1.35 percent but that's still a lot lower than the four percent my stocks are giving me today but andre just put your stocks into a roth ira account that way your dividend income is not taxed at all you idiot and that's true if i put my stocks into a roth ira account then the income i make won't be taxed until i'm ready to retire the thing is the roth ira has a contribution limit of six thousand dollars per year which is better than nothing but that's still a lot less money than what i typically want to invest every single year the real work around to that problem is the mega backdoor roth conversion which allows you to put in way more than 6 000 per year which is something i'll be doing this year and i'll make a video about that if enough nerds watching this video ask me about it the second reason is because growth investing or index investing in the overall broad market has almost always beat dividend investing and it's hard to admit but i have looked at decades worth of data going as far back as the 1900s and i still have not found anything that beats a simple vti or vo etf and i've looked at a lot of them i've looked at sphd schd vig vym nobl some of which i've owned and none of them beat an overall broad market index or the s p 500 so if i can pay less money to the government up front and make more money in the long run then it makes more sense and that's really the biggest reason why numerically speaking anyone should be a growth investor versus a dividend investor but it's just not as easy as some people make it seem especially not in the beginning unless you have the emotional nerves and capacity of a robot or a meet kevin but we can certainly learn from each other the third reason is much more personal to me because when i started my dividend investing journey i was so motivated and inspired by this fire movement financial independence retire early movement that said that you could just quit your job in your early 30s or 40s and that really motivated me but now just two years later after starting my youtube channel i'm very fortunate to say that i've kind of reached that point and if i wanted to i could disappear forever and ever and live on a beach somewhere off of 50 000 a year and never run out of money but that does not sound appealing making these videos answering your comments engaging with people that seems to be giving me way more purpose and a sense of fulfillment that i'm not ready to let go of just yet and maybe in the future i could reconsider but i feel like as a content creator right now there's a lot more that i can do than just make videos maybe in the future i can be a business owner that has a brokerage like robinhood or block fi so as i've become more financially independent obviously my goals have been upgraded as well so now instead of fire fat fire which is basically instead of spending an average income you're going to spend an above average income of roughly 100 000 a year of passive income but when i'm actually ready to retire then dividends will make a lot more sense because then from a taxation perspective i'll probably end up earning less money in retirement than i do working 24 7 today but if i end up being wrong then that's a good problem to have and if i end up being some successful business mogul with tens of millions of dollars well then by that point i don't think i'll care spending an extra 30 40 on taxes that's a good problem to have but in the meantime i'm not gonna sell my dividend portfolio i'm gonna leave it exactly as it is and i'm gonna take every single dollar and reinvest it back into itself and if i do that consistently for the next 20 years this portfolio will be worth roughly 1.67 million dollars and it'll be paying me roughly 178 000 a year or about 15 000 a month i can get behind those numbers i'm not gonna sell that because if for whatever reason the economy and the stock market is not doing well that year when i'm retired well then guess what i can just live off of my dividends even if they get cut in half that's still enough to keep me afloat and if the market is doing well like it is today well then i can sell off my etfs to pay for my expenses and i can balance the two out and if interest rates ever go back up well that's when growth won't do as well because remember growth does better when interest rates are low because it's cheaper to borrow money and that's what stimulates growth so my dividends will do better in that environment and if i have cash on the side i just feel like i'm covered from all sides no matter what's going on in the world so now let me share with you exactly which of the stocks i'll be focusing on now that i'm more focused on growth rather than dividends i'll be buying a lot more of vti and vo so vti is the broad market index fund and voov roman numeral for 500 is the s p 500. so both of these etfs are ridiculously similar take a look at their charts over the last i don't know how many decades they almost performed identically and so they're great the reason i like vti is because it has stocks like tesla incorporated into it long before the s p 500 does because it has to get approved by a committee so stocks like tesla go under the radar in voo while vti incorporates it and the other reason i like vo is because it allows me to do what's called tax loss harvesting between the two since they're so similar if one of them's lost money i can just sell off one and buy the other and it's not considered a wash sale and it's a really cool strategy that i'll use so i guess quit dividend investing is a little bit over dramatic of a title but i guess i'll just say i took a detour for a little bit and if you haven't already don't forget to grab up to 250 dollars worth of free bitcoin using this blog file link right here block fi.com forward slash andre and once you've done that go get two free stonks from weeble if you deposit one hundred dollars using the link down below you'll get two free stocks each of which can be valued up to one thousand eight hundred fifty dollars and then track them automatically with my spreadsheet link down below in my patreon love you thank you so much for watching this video i'll see you back here on monday and friday sometimes on wednesday i'll see you soon bye

Channel: Andrei Jikh

Views: 740,284

Rating: 4.8286719 out of 5

Keywords: passive income, dividend investing, dividends, dividend stocks, bitcoin, crypto, crypto crash, ethereum, stock market crash, bitcoin crash, NFT, dao token, how to buy bitcoin, cryptocurrency, stock market, robinhood app, best trading app, stocks, investing, investing for beginners, how to invest in real estate, how to invest in stocks, best stock trading app, credit score, real estate 101, andrei jikh, best investment, bitcoin vs ethereum, dogecoin, bitcoin etf, ethereum 2.0

Id: ATVOakZhDUU

Length: 16min 28sec (988 seconds)

Published: Mon Mar 29 2021