Why I'm SMASH Buying $10,000 of SCHD (Early Retirement)

hey everybody welcome back to whiteboard Finance in today's video I'm going to smash by ten thousand dollars worth of schd this is Schwab's dividend fund uh it's an ETF that I've been investing in for about two and a half to three years now um basically in this video I wanted to piggyback off of my last video talking about dollar cost averaging versus lump sum uh historically I've been a dollar cost average investor um we saw that the numbers mathematically um the phrase still holds true that time in the market is greater than timing the market so basically that it's kind of just an advocation for lump summing early and often and then just letting the market do its thing so again I've been a dollar cost average investor for many many years because I know what I'm investing in I know what my um goals and principles are and then also I want to stay disciplined by doing that it's kind of just like working out Monday Wednesday Friday Saturday right you know that you have to work out on those days I know I have to invest you know once a week for example so let's get right into it this is uh my screenshot from a Robinhood account that I have uh if you as you can see here this is August 4th 2020. this is actually when I started dollar cost averaging uh daily into schd I think I had like uh a bunch of money and I just wanted to get rid of it um so again I don't want to say too scared to invest but I also remember when the market crashed 30 40 50 in 0.708 so that kind of left a bad taste in my mouth and then I've also been investing and studying financial markets for a very long time if you remember Japan's Nikkei uh you know if you invested a dollar in 1991 into their nakay you're getting that back you know almost 30 years later right just because it's been a flat market so that's my Robin Hood account this is my M1 finance account I have about four thousand dollars worth of schd in here I also started investing as you can see right here uh right around the same time August 3rd 2020. so let's get into the perspective so this isn't going to be an entire boring video reading this whole perspectives but I noticed a lot of people they don't really even know what a prospectus is so how can you be investing in something if you've never even read the prospectus or even know what the uh investment objectives are like what are you trying to do here you just blindly you know shoveling money into something because a YouTuber told you to that's probably not the smartest thing to do or a bunch of people on Reddit like something so you're just gonna blindly shovel your money into it no that doesn't make sense so I highly recommend not just for schd but for anyone investing into anything especially something through a brokerage like you know Schwab or Vanguard or Fidelity or you know whoever TD Ameritrade Whoever has their own products um you know you want to be careful and see how they actually manage this fund so very very quickly I don't want this video to become boring or dry but it is important to understand what does this thing even try to be or was is it even training to invest in so the objective is it's basically trying to track the Dow Jones U.S dividend 100 index and the second most important thing that you can understand when you're looking at some of these funds especially with like Vanguard or you know the funds that I've been talking about for years on this channel you got to look at the fees because fees will kill you so this one is actually very cheap so schd actually comes in at 0.06 percent uh which is basically uh six dollars in management fees for every 10 000 that you have invested so in this quick example they give you you know if you invested 10 grand in the fund um for the time periods indicated and you sell all of your shares at the end of those period assuming a five percent return each year you know you'd only be paying 77 at the end of a decade right so uh expensive funds can actually absolutely destroy your returns especially when you consider after tax implications and when you consider that your money is growing over many many decades uh you know two three decades not just you know years or months if you will so those can really start to eat into your returns and at 0.06 that's pretty much nothing so I'm going to read this very very quickly because a lot of people they go on like Reddit or they go on YouTube and some of these people make you know videos about um you know schd or whatever you know it doesn't even have to be about schd but they don't even know what the fund is investing in or what its objectives are so very quickly so as we mentioned earlier is trying to track the Dow Jones U.S 100 dividend index so it's designed to measure performance of high dividend yielding stocks issued by U.S companies they have a record of consistently paying dividends selected for fundamental strength relative to their peers so there's a whole bunch of criteria here which I'm not going to go into but it's important to understand that all index eligible stocks must have sustained at least 10 years of consecutive dividend payments have a minimum of a market cap of 500 million dollars remember my stock market for beginners video market cap is simply just the share price multiplied by the number of shares outstanding so if a company has a thousand shares and each shares worth a dollar that company has a market cap of a thousand dollars for simple math for this video so they have to have at least 10 years of consecutive dividend payments okay so they can't have cut it which is good uh 500 million dollars market cap and then also they're selected by evaluating the highest dividend yielding stocks based on four fundamentals that's cash flow to total debt return on Equity Roe dividend yield and five-year dividend growth rate that's the kicker for me for schd I had a tweet the other day talking about how a bunch of people on Twitter and stuff and also on YouTube they're very disingenuous when they talk about dividends because they never talk about inflation they just talk about oh I got these dividends well congratulations if your dividend is four percent and there's no growth in the stock there's no growth on the underlying right think of it as a rental property that you get you know x amount of monthly rent but the property never goes up in value congratulations you're getting crushed by inflation okay it's that DJ Khaled meme uh congrats you played yourself okay so what I'm trying to say is these people say like oh you know just invest in these dividend stocks um you know in 20 years from now it'll be worth you know 20 grand a year in dividend payments well what's 20 grand in 20 years gonna be nothing it's going to be a third of a Toyota Corolla okay Toyota Corolla is going to be 50 60 Grand 20 years from now um and that's I mean I'm exaggerating that's tongue-in-cheek but still you there's no purchasing power maintained so that's why growth is huge for me and shd has done an excellent job of that so the other thing is no single stock can represent more than four percent of the index and no single sector is defined by the index provider can represent more than 25 percent of the index as measured at the time of the index construction reconstitution and rebalance so there's a bunch of other stuff that goes into this but I don't want to bore you to death with this but I just wanted to show you very very quickly the last thing here and that's the annual total returns uh the nice thing is Schwab does a real a good job of just showing you um what this has done let me see if I can zoom in just a little bit more okay they've done a good job of showing this as of December 31st 2022. so uh if you look at and I'll show you all this in portfolio visualizer and when I back test this against the S P 500 and also when I back test it against another popular Vanguard dividend ETF and I'm also at the end of the video obviously going to buy 10 grand worth of this stuff so hang on till the end here but you can see here the average annual total returns as of um 1231 oh this is 21 I'm sorry so this is actually a year old my bad because this perspective prospectus is actually from January of 23 so sorry about that so basically you can see here you have the one year five year tenure and we're going to see all this in portfolio visualizer so I don't want to beat a dead horse but basically after tax distributions are very healthy past 10 years it's 14 and a half percent and this is assuming you're in the highest tax bracket okay so most of the people watching this video probably aren't in the highest tax bracket so these um returns are actually higher than what they're showing here so this is a super strong this is actually outperformed spy which we'll see here in the next slide it's a super strong ETF I've been buying it for years I'm going to smash by a little bit more just because I've gotten too much into the habit of dollar cost averaging we're going to get into back testing this so I can actually show you the numbers and also what it really means after you ingest for inflation now I'm not the only one who's making some changes to my portfolio as you're watching in this video uh with Marcus going haywire Morgan Stanley themselves just released a report just a few weeks ago with some great insights and strategies especially with the Silicon Valley bank failure and volatility in bonds which were supposed to stabilize a portfolio this gives you another way to potentially lower volatility because as this graph shows for the last 30 years a portfolio that included alternative assets would have had lower volatility and higher returns this is part of a larger push into Alternatives by big institutions A playbook that lots of other investors are following according to financial times but which alternatives to diversify into there are lots of options but I'd like to show you another for this time from Barons it's on an asset that saw prices rise in average of 29 percent just last year handily beating stocks this asset was fine art it's the same asset I've talked about for months that you can invest in with Masterworks because not only did prices rise 29 percent last year but Masterworks had nine more successful exits in 2022 all of them delivering over 9.2 percent net returns obviously art isn't going to be your whole investing strategy but these numbers are super encouraging and lots of my subscribers have signed up for Masterworks already so to diversify check out Masterworks at the link below you'll get my special Priority Access okay thank you for sitting through that it pays for the production cost of this channel so here's portfolio visualizer if you haven't used their back test back testing tool I highly recommend you do this some of you have already seen this on my channel so I'm not going to beat a dead horse but basically what I'm doing here is comparing schd to spy to vym not one one thousand percent Apples to Apples but you get the picture it's just to paint a picture of hey everyone tries to Benchmark their performance against the S P 500 let's see how these two other funds have done over the you know over the last I want to say uh 11 years or so so the reason I say 11 years or so is because this only goes back to January of 12. why does this goal only go back to January 12th that's because schd was created in January of 12 or that's the information they have on schd I should say so if you want to zoom in you can see right here uh schd is first spies second Vanguard is third so if you put in 10 grand in January of uh the date that we just talked about 11 years ago you can see here that you would end up with almost forty thousand dollars with schd you're ending up with almost 39 with spy and you're ending up with 33 312 with vanguard's vym and you can see the kager you can see the standard deviation So Not only was schd the winner in absolute nominal terms but you can see here that its best year was the best and its worst year was the best too so you're getting all the upside and none of the downside relatively speaking you can see that the max drawdown at any given time was 21.5 percent uh it's almost 24 percent for both s uh for both spy and vym so here's the chart that you're all interested in this is basically showing you all three of these Securities compared to one another again you can see the numbers are the same but it's schd first uh spy second vym and a far third the nice thing about portfolio visualizer is that you can click this button right here for inflation adjusted because it knows the CPI for each year so remember we're almost at 40 Grand and 39 Grand now look at where we're at we're at 29 846 after inflation when adjusted for inflation we're right twenty nine thousand one hundred seventy three when adjusted for flight inflation and just under 25 000 for vym so see how powerful inflation is you guys no one no one talks about this people understand it but they don't really understand how powerful it is look at these two numbers right here we go from thirty nine thousand seven hundred eighty seven and almost 39 000 for spy again to not even thirty thousand for both and 29 000 for spy so what I'm trying to say is all those videos and all the people that talk about like you know your Dividends are gonna pay for this you're gonna pay for that yes it's important to have that stream of income okay I really do believe in that that's why I'm buying 10 000 of this stuff here in the next couple minutes however you have to realize the underlying has to grow as well and schd has not only grown their dividend to um to surpass CPI uh it's also outperformed the S P 500 so you can see with this bar chart right here these are the annual returns for Schwab which is blue spy which is red and vanguard's vym which is yellow or orange depending on the color on your screen but you can see schd has held its own I mean it's outperformed in 2013 it's kept up in 2014 it's right around there in 2015. I mean it's done a great job you guys and look at this in 2022 spy was down 18.17 percent while vym was only down 46 basis points and Schwab was down 3.23 percent so it's really uh it's really held its own and again that standard deviation and also the low uh the lower lows of the S P 500 and the lower highs of vym uh to me makes schd kind of a no-brainer the one thing I do want to harp on before I do get into smash buying 10 grand of this stuff is obviously um history isn't indicative of future results everyone knows that otherwise we'd all be rich you know otherwise you know Cisco would still be at you know 70 80 90 100 a share um when it was like 70 in the.com bubble now it's sitting you know significantly under that you know 20 something years later so don't don't take this as the end-all be-all but you also have to go with the numbers you guys so with all this being said not only has schd um grown its dividend it's also grown its Equity position its underlying share so that's why right now we're going to let me see if there's a good dramatic we're going to buy 10 grand of it so this is my Charles Schwab account um you can see right here it's my taxable account I have a hundred grand in here ready to trade um you know no more Mr dollar cost average let's just smash by a hundred grand you guys let's do it and I'm just kidding I got a wife and a kid on the way dude another kid a year and a half old um oh I also got another video coming out um the banking crisis deepens uh actually it should be out by the time this video is out as well watch until the end of the banking crisis video I call my daughter on the phone she's only a year and a half old you guys I'm like who do you like more the European Central Bank or the fed and she's like hi it's so funny you guys all right so I'm gonna do buy I'm gonna do markets because I don't really care what I buy this at the smartest thing uh to do in my opinion would actually just be to do a cash secured put I have a video on cash secured puts you can actually get paid uh to buy a stock at a discount which I'm gonna stay out of this video real quick I'm just gonna smash by 10 grand right here but the better move most likely if you're not eager to let these dividends start compounding uh is most likely to do a cash secured put so uh Market we're gonna do a little calculator right here let's say ten thousand dollars 139 shares there we go ready set hit the like button hit the like button when I hit Play Store ready one two three okay like subscribe do all that good stuff great so we're good to go so this has been confirmed so we just bought 10 grand of schd hopefully you learned a little bit about it this wasn't supposed to be some you know video getting into spreadsheets with the drip and showing you what the returns are going to be in 10 15 years and doing all that stuff it's just to better understand what you're investing in and understanding the prospectus the historical returns and the fees it's really all that matters when you're investing you guys in ETFs and index funds not individual stocks so hopefully you got value out of this video um as always take a look at the link in the description below for whiteboard Finance University uh it'll be a private Community with access to me on a weekly basis through live streams I'm an open book I'll be teaching you about literally whatever you want to know getting a career in finance uh how to land a job uh all the other things that we talk about in the University I'm basically like a mentor at this point because I feel like I have enough life experience with being you know a father husband parent and then also you know I've had my whole career was in finance and Commercial Real Estate so uh it's almost like a mentorship but really it's just going to be an ever expanding library with access to four real professors real estate professors on 400 units in Dayton Ohio stock market CFA Charter Financial analysts very prestigious designation not easy to get a budgeting coach with personal finance lessons and then also an ETF portfolio construction guy as well lessons weekly live streams all that good stuff check it out in the link down below thank you so much and have a prosperous day I had to go casual on them today my buddy got me this hat shout out to Nino El Nino uh he got me this hat for my birthday I thought it was kind of funny bought me a hat with my business's name on it I'm about to buy him a hat with his business his name here you go bro oh thanks dude all right guys have a good one I'm going on vacation tomorrow I'll see you guys in a week or so peace [Music]

Channel: Marko - WhiteBoard Finance

Views: 108,420

Keywords: schd etf, dividend portfolio, dividend investing, dividend stocks, dividend income, live off dividends, passive income, best dividend etf, schd etf review, schd vs voo, schd dividend, schd vs vym, schd vs jepi, schd vs vti

Id: k44m4VvZCyU

Length: 18min 21sec (1101 seconds)

Published: Tue Apr 04 2023