Why I Quit Dividend Investing – Andrei Jikh

Why I quit dividend investing

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Andrei Jikh
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I started my investing journey with dividend investing for passive income. I think it’s one of the best strategies to start investing to get comfortable with. First I want to show you the benefits of why dividend investing is extremely powerful and then I’ll tell you why I quit dividend investing.

Why dividend investing is the best:

1. Between the years of 1930 to 2017 dividends made up about 42% of the total stock market return. And in a flat market, aka a stock market that just goes up and down but doesn’t really go anywhere – the dividend income strategy is where it shines the most because you’re actually getting paid. You are “realizing” your gains, you are actually making money, not just on paper like you would with growth stocks but there’s actually money going into your account every single month. That’s powerful because you can then reinvest that money back into the markets and increase your market share and actually do better than people invested in growth stocks in that flat market.

2. Taxes. Dividends are incredible is because they are one of, it not the only investment that exists today where you can get paid without ever paying taxes on that income. It’s not a loophole, you don’t have to do any complicated accounting tricks, it’s the law. If you make between $0 to $40,400, you will pay nothing in taxes on qualified dividends if you file as forever alone. But if you’re married and you file together, you can make up to $80,800 a year in income and pay nothing. Just to blow your mind. That’s the same as filing jointly if you’re making $100,000 a year living in Los Angeles California – so that’s $20,000 you’re basically getting for free as a tax credit.

3 . It turns out the 4% rule that we’re told we can live off of without ever running out of money, aka, if we invest 60% of our money into the S&P500 index aka the VOO stock, and the other 40% of that into bonds, we could live like that without ever running out of money but, we can actually increase that withdrawal rate to 5% instead of 4% if we invested in the top 100 highest paying dividend companies in the S&P500. Dividends can give you a higher standard of living by 1%.

4. Better / more accurate retirement planning based on expenses vs passive income rather than selling off principe equity.

5. The psychology. It’s much easier to invest long term as a dividend investor with a better mindset.

Reasons why I quit.

1. When I started my YouTube channel, I was making a lot less than $40,000 a year, so at that time, it made sense to focus on dividend investing because I wasn’t paying taxes on my qualified dividend income. Now I’m really fortunate to be making a lot more than $441,451 dollars a year – I’m now in the highest tax bracket where I will be paying 20% on my passive income.

2. Growth / index fund investing gives a better overall return. I’ve searched decades of data to try to find some dividend index that beats a broad market index like VTI or VOO and I have found zero of them. They don’t exist. I looked at SPHD, SCHD, VIG, VYM, NOBL, all dividend focused ETFs but none of them – over a long period of time have historically beaten broad market funds.

3. Goal is to FAT FIRE instead of just FIRE. This means my new goal is to make $100k passively in income per year.

4. I’ll be buying more of VTI and VOO ETF stocks – which is the broad market index and the S&P500, they track almost identically in terms of how they perform, there’s almost no difference but I like VTI, the whole market because it incorporated companies like Tesla earlier before the S&P500 did, and I like VOO because it’s almost the same but it gives me the benefit of tax loss harvesting where I can sell one and buy the other and it wouldn’t be considered a wash sale. I guess “I quit dividend investing” is a little dramatic, I’m no quitter – I’m just taking a detour while I’m earning a higher income.

*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.

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