Correction: For some brokers, not all, W8-BEN forms can reduce witholding taxes to 0% if the shares are held within a SIPP.

To manage investment risk, consider maintaining a broad diversification of your investments that reflects your personal risk tolerance, time horizon, and the nature of your financial goal. Remember, diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline. Because investing can be complicated, consider working with a financial professional to help guide you on your wealth-building journey.

Dividends do not make a lot of sense until you factor in one thing. What is the long term price of every stock? It is 0. Sooner or later the company will disappear. So getting some of your money back is a hedge. Also most good companies will continue to pay a dividend when times are bad. You do not want to sell your stocks when they are down. Picking good dividend stocks is not being lazy. It takes work and you need to stay on top of it.

The problem with growth stocks is that we have no idea when to cash out. Look at how Tesla has lost value overnight.

James, first of all it's great that you take the time to answer so many of the comments on this video, so you should be applauded for that and some great content. What is also clear is the wide range of opinions on the subject which just shows that everyone's circumstances, experience and objectives vary greatly. There is no right answer - it just depends on the asking the right questions. Your central premise is that reinvesting dividends and benefitting from compounded growth will lead generally to better overall returns than if dividends are taken and when buying a stock, you buy a quality company first and foremost based on fundamentals, with dividends being a secondary factor. After all, dividends can be cut or stopped, there may be insufficient dividend cover and there is usually a good reason why there's a high yield or low P/E (eg, it's a lower quality company or has less scope for growth) . And you are absolutely right in this respect to buy quality first and dividends second, if at all, and mathematically, reinvesting gives the best total returns. I think this is the message you were trying to convey but was perhaps misunderstood by some. Taking dividends tends to be psychologically comforting - I watched another video shortly after yours by a US based CFA who was extolling the virtues of taking dividends so even the experts can't agree. So the decision comes down to one's personal view, experience and circumstances. Personally I like dividends from quality companies as it suits my investment, cashflow and tax planning where, outside my SIPP and ISA, I can offset the income actually received and taken against my personal tax allowances. I can also generate sufficient income to still allow my employment earnings to be invested into my SIPP and get tax relief on the contributions, I can create tax efficient income to generate excess income over expenditure, gift this to my kids, save 40% on IHT immediately in addition to some capital gifts ( I don't need to accrue more capital as I'm well into IHT already), they can reinvest into pensions and get tax relief on their contributions that they otherwise couldn't afford and I can also decide whether to spend any spare cash, reinvest or replenish my cash pot. And yes, I will sell at appropriate times to also use my CGT allowance, whatever that may be in the future. If I was much younger, yes, I would reinvest my dividends to compound the growth. Share buybacks can help by reducing the shares in circulation and thus increasing the price, but one needs to understand why companies do this. Some CEOs are rewarded on increases in the share price, not profits or earnings, and often companies have leveraged their debt in times of low interest rates to buy back shares but place a huge burden on future profitability, especially when debt has to be renegotiated. Reinvested dividends are subject to bid / offer spreads and dealing charges as well as future gains and losses. A dividend received is cash in hand, not a number going up and down on a screen. It's definitely not straightforward as some like to think and one needs to do the right research before investing. Diversification is also important. One commenter stated that he had been tracking the FTSE 100 index. If he invested in August 1999, the index was about the same as Oct 2022 (circa 6800) so only by reinvesting his dividends would he have been able to make money, otherwise his clever low cost strategy, investing in both good and bad companies alike ( however one defines this), would have been pretty abysmal and failed to keep pace with inflation - so for him dividends had to be reinvested and he was only saved by the rise in his one other investment, the S&P500 tracker. Not sure that the future will be quite so kind and further diversification may well be beneficial but that is for him to decide. Do keep up the good work. This video has certainly promoted much debate, which is healthy as it means folk are thinking about investments and their financial strategy at a time when every penny counts.

Hi James. New to the channel and investing in general. Appreciate this isn't the topic of this video, but just want to say a big thanks. I have traditionaly saved in cash ISAs, but want to build a pot of money to retire as early as possible. Learning about index funds and the life strategy funds is a game changer, rather than clinging onto the intrest earned from saving in cash alone. I have downloaded your income calculator to understand what I need to put away for a given income in retirement etc, and I glad to say that at 26 years of age, I am in a position to do so. Big thanks again, subscriber for life!

Thank you for this interesting contribution! I'm focusing on Dividend Investing avoiding those dividend traps that looks so tempting in the market, like some builders companies for example. For me Dividend investing means Expanding: within the 20k limit of ISA being able to generate extra money to buy more share, expand and diversify my portfolio is the keystone of my strategy at the moment

Really like your vids. As a cautious investor i love dividends, gives me peace of mind. Do not have to worry about sequence of returns, not fretting about Re balancing portfolio. Seems to compliment my final salary benefits.

Great video as always, but gotta love those lazy dividends though😃. At retirement, in a few years time, my wife and I are planning on having a big part of our pensions in the iShares UK Dividend ETF (IUKD). Appreciate that we'd be able to better returns by not doing that but our outgoings are going to be low and the dividends will help us sleep at night, while the other part of our pension makes stonks in growth ETF's (hopefully🤣).

Dividends are like a personal pension, if invested in good companies it provides income and inflation protection as good companies increase dividends on a regular bases. I have been retired 13 years taken 400K out to spend and have increased my capital by 500K. We take the money we need and the one issue that needs discussion is cash flow. We keep a year of cash on hand at all times. We also tax plan and get the maximum government benefits every year. I know we will retire millionaires but who cares as long as we have the money and comfort it brings. Most people get too emotional and sell when markets go down. Holding good dividend paying companies we know our income is quite secure and just ride out the market fluctuations. cheers

I beg to differ, I love my dividends, no messing about having to keep selling all the time.

you've no idea how much I appreciate your information! my favourite financial youtuber along with Andy clever cash.

Just with automated regular investing during accumulation, do you suggest automated regular withdrawals during retirement? Takes timing the market (and the big regret issue) out of the picture in both accumulation and retirement phases.

Your channel is wonderful James. I am now very interested in financial / retirement topics and can't stop watching your videos. Regards from Barcelona! 👏👏👏

Great video as always. Nothing gets people more excited than the perennial dividend debate 😁🍿

Your right about potentially hanging on to long to do a bit of spending, just brought two sipps into payment, one is Dividend based and will draw 95% of Divs Av over 12 months. The second is growth based over eight funds and will dispose of anything that outperforms the diversified eight base starting figures, indexed at equivalent of 3.6% per annum. Will see how it goes. Both SIPPs were sitting as essentially "life insurance" but it does make sense to use a bit, until the state pension kicks in, just over six years away. But then I'll probably want to use the state pension to buy more investment trusts for a while 😂. Very good video, Thanks

Thank you James for stopping me making a big mistake. Love the channel.

Solid video, the name of the game for 2023 will be dividend and value investing, but the question becomes when... We are about to get hit with market news that could rock us into a recession (FED rate hikes).. invest cautiously and I am eager for more deals to present themselves, but I will be dollar cost averaging

Great video again James, I find that within the industry our behavioural baises towards dividends are often overlooked so it's great to see someone tackle that. I have a question regarding funds that invest in overseas holdings. For example, would Vanguard 100% Lifestrategy (Distributing) be subject to the withholding tax on the overseas dividends that make up the dividend yield? If so, can it be avoided by being in the accumulation class?

Thank you for another great video James. I am always fascinated by the psychological aspects of investing that you point out. There's a chimp in my mirror for sure!

Love the video as always ! Do you need to fill out a w-8 Ben form for vanguard etf within isa or sips, been looking online and can’t find anything telling me to do so ?

Really helpful videos!! Thank you so much James. 🙂 Is there somewhere I can find some modelling software where I can plug in figures against the last 40 years of stock growth like you have shown on your Timeline system to help with understanding? I understand this software is only available to advisers. Last question, I have property as well as funds. Often people only talk about the rental income and do not take into consideration the yearly growth in the property value that adds a significant portion to the asset value. Although obviously, selling a property is not easy to do in retirement and perhaps why this is not mentioned much but still important to understand. Not forgetting about capital gains charges in selling!!!! 🤪

A tricky subject but well explained James 👍🏻 There isn't a share holder out there who doesn't like receiving money via a dividend note but at the same time growth companies can give you a return over time!! For me having a well diversified portfolio that has growth / value companies within it makes sense as you want a bit of everything really. Yes I do actively manage my portfolio and am not a buy and hold investor / passive.

If you own shares, you are an owner of the company. As an owner of a business it’s a basic expectation that you would get some income from it without reducing your share of ownership. That’s not irrational. If one can accumulate enough of a portfolio that they can live a comfortable retirement at the budget they’ve determined is need for that, why sell down?

Interesting video. I'm very big on dividend investing, so watching this video was very intriguing. Regarding your comparison of selling shares rather than taking dividends, you don't mention transaction costs which you don't get when you receive dividend income (at least not in my investing accounts). If you need to sell shares every month, you have 15 holdings and choose to sell a bit of each holding to keep yourself diversified, you will have 15x your transaction cost (eg £10) EVERY month, which is a HUGE amount of return. The UK has some really good dividend companies (Unilever, Legal and General, British American Tabaco etc), so you don't need to invest abroad and be subject to that withholding tax. You mention the idea of mental accounting (how we count money in different ways in our head), but this isn't true. The whole point of investing is to get liquid cash and stocks are just a way of acquiring it. £5 in a dividend is better than £5 in increased stock value because that £5 in cash won't fluctuate in value (ignoring inflation). You also mention how dividend investors are subject to executives deciding how much you get, but investing in quality dividend stocks means you have a very good idea of how much you are going to get, so you can plan reasonably effectively. A stock that doesn't pay a dividend is just subject to market forces, and you the individual investor are always going to be behind the big hedge funds and pension funds when it comes to knowledge. You also fail to mention longevity. No one knows how long they will live, so if you take a non-dividend approach, you could run out of capital before you die, meaning you're screwed. Having income means (theoretically) your money generation lasts forever, so you don't have to worry about living too long. Also, what if you want to leave something for your children? Owning dividend stocks means that you have something to leave for the next generation. Your analogy of fast cars painted red is extremely weak. A dividend signals that the company is confident enough its current situation that it can pay money back to investors. It shows the market that it is stable, and therefore is a solid investment. I really hope you aren't just doing this so people feel the need to come to financial planners (like yourself) so they can try and get their estimates of income needed, life expectancy etc right.....

I am retired using exactly the dividend investing strategy you are against here. I live comfortably on 2/3 of the dividend income and I reinvest 1/3 into the markets. ( either more dividend payers or whatever takes my fancy.).. One thing I know is that I sleep well at night not worrying about markets ups and downs. When you yourself reach an age when peace of mind is more important than building for the future, you might understand our mindset.

It's worth mentioning what price you pay for that dividend share that will make a difference to the yield. Also, the compounding of re investing over time. Dividend shares brought at a good price and re invested over time can produce growth and income. I retired recently as a dividend investor as well as growth mixed in. A lot of people have retired successfully with dividend paying companies when they buy at a good price.

I loved the Venn diagrams at the end. They really help to support the argument.

Thanks James, I love the way you explain things! You have a spreadsheet to help us plan retirement, but I can no longer find it. Could you please send me the URL?

Holy smokes. I just got to your big revelation. This is so eye opening. You're right about how hidden this is from my biases. i would rather have more control. Thanks for your rationale.

Great video! About the withholding tax, does it apply to indexes such as S&P? I am UK based and invested a lot in Vanguard S&P. Should I invest in UK indexes instead to avoid the withholding tax?

Great video. I personally don't care for dividend stocks because where I live dividends are heavily taxed. And also because I don't want to deal with more forms to fill out in my tax return

Great info James. Happy New Year to you

I had trouble with this at 1st. How to get income in retirement. Natural Income ?, no NAV on funds is important and we draw our income from our SIPP. Just like a salary every month no capital reduction.

Both capital growth and dividends have their place. The key omission from this ok video is first you need to identify your time horizon and your end state. For example - a SIIP is currently a very tax efficient way of transferring wealth to the next generation - so capital preservation is important is this regards. However, if this is not your priority a mix of capital drawdown and dividend income could be the way forward. But…like any good journey - you need to plan fIrst!

Mind blown. 🤯 You just earned yourself a subscriber, congrats. 🎉

The biggest challenge you'll face as an investor is you. If you'd like to learn more about how our biases affect our investment decisions and how to overcome them give this video a watch: kzfaq.info/get/bejne/e6ughNSCzae5Y4k.html

I'm just thrilled I got a question right

Interesting video. Is there any difference between investing in Company A vs Company B if the dividend is immediately reinvested, as in an accumulation fund or wrapper?

Are there any platforms which offer factor investing within a stocks and shares Isa? Could you list a few?

Interesting and thought provoking - makes even more sense when considering preference for buy-backs vis a vis dividends in the US.

When I saw the poll, I knew that the answer would be it doesn't matter but as that wasn't one of the options and the way the question was worded I put dividend. I had a feeling there would be a video explaining why that wasn't the case

Invest in the company not the dividend... sound advice as always, trick question though when you can only pick one or the other and they are impossibly "identical"🙂 I decided not to vote as I didn't think there was a good answer. Instead I tried to second guess what you would say. I was expecting an answer that involved not self-selecting single company investments as you head in to retirement (especially if you're basing your decision on dividend yield). I invest in single companies now, but expect to wind that down to "fun money" by the time I retire and to be fair it's not a large part of my pension now. Having tried to build a dividend portfolio just before the financial crisis I know how things can change quickly.

It's almost like James times the video drop perfectly...I'm logging off for work at 17:00 and there it is!

I like investing in dividend ETFs because they have the tilt toward the outperforming factors of value and robust profitability. There are other studies that point to non-dividend paying stocks as having the lowest returns long term, so I don't think it's a big deal to trade lower diversification for potentially higher returns. Plus you get the added psychological benefits of dividends, even if they are irrelevant to the value of the business. Long term dividend ETFs will do great. Whether they outperform the market, who knows. But at that point one is splitting hairs. A vast majority of the benefits of equity investing will be captured.

As the statisticians like to say "Correlation does not equal Causation". Dividends correlate with quality companies.

TBF I think the biggest case study that has both the fors and againsts of your argument can be found in just one company. Berkshire Hathaway/ Warren Buffett. Their investment holdings are heavily weighted to companies that pay a growing dividend and shareholder yield (granted also with focus on buybacks), majority of his picks over the years have a growing dividend and revolve around a longterm hold. So much so that his Coca Cola now yields over 50% YOC purely from the dividend, he gets his initial investment back in under 2 years. Now KO wouldn't be a stock that you'd have highlighted, it's mature and little growth yet hugely valuable to Buffett due to the dividend? Same can be said for multitudes of his longterm holds over the years, even getting preferential higher dividend yields for his investment ( the banks in 08) so again tell me how dividends mean nothing? BH is also an example of not paying a dividend and instead focusing purely on buybacks, growth and mergers and acquisitions along the way for shareholder yield, believing they offer greater value than paying you a dividend which again appears true. So both arguments in a single company right there. Also are you impacted by recency bias? A decade plus long bull run fueled purely by high growth tech companies. You've said dividends have had less impact since the 70s which is true but look at the low growth and multiple recessions in the 00's any gain at all was purely from dividend stocks as per your chart. Those dividends are often the only returns an investor gets in a sideways or bear market (as long as companies financials/debt load is healthy). But long bull runs in growth have possibly blinded us to this. What use was holding high growth high valuation companies in 2000 many went bust and many are only now recovering to those values, if that's the case id feel more comfy being paid a dividend to wait.

This was amazing, new subscriber! I’m a factor guy myself, and would highly appreciate more detailed videos on this. For example, if momentum belongs in a portfolio, even with its questionable behavioral explanation, but with clear negative correlation benefits to value. Would love to hear your take!

Great video 👍... it helped me understand properly something, which has always felt not right. Its amazing how many retired people with all the time in the world available to them, are such "lazy" investors.

The point of owning dividend companies is for cashflow. I think its a fundamental difference between people who realise cashflow is king vs people who just want to speculate in markets.

Hi James, great video and lots of truth told. But I do have a question. Do people prefer dividends because it’s real cashflow paid out compared to capital gains which is often a function of demand and supply and market sentiment? Ie could there be a great company doing really well but the market price doesn’t reflect it? If you need income now? Is it actually rational to sell asset at a lower price and “wait” for it to bounce back? When a client comes on board and has an income requirement as part of their mandate, selecting a dividend paying fund combined with fixed income products and income producing investment trusts is common. I’m not sure dividend investing is purely in the mind but actually suits a persons objectives, time horizon and risk appetite and mandate.

I think one of the reasons why people prefer dividend stocks is that they dont understand that they are less efficient. You just explained it in the video and I still dont understand it.

Brilliant video as always!

I recently did an analysis of my investments and my best performing investments by far are from solid companies like CVX and BMY that pay dividends. And the dividends paid are a major part of the total return. The presence of the dividend with the yield and payout ratio are markers of the health of the company. I understand the emphasis on total return and that I am likely sacrificing that long term return but as a retiree I no longer have a long term perspective. Investing in dividend stocks for the dividends is not sensible for a younger investor, but I think it makes sense for a retiree in terms of the risk, income, and marker of company health. Anyway, it makes me feel better, even if my total dividend is only about 2.2%. Not much more than the S&P average. One thing that I don't see properly emphasized in videos and analysis like this is just how important dividends are for total return. It might be true that it is not sensible to prefer the dividend in your example. But it is true that in the real world of companies that a majority of the total return is in dividends. Compare the total return of the S&P and the total return with reinvested dividends.

Dividend investing is one of my investment strategies in my ISA. My other one is in my pension mixed between Index & Mutual funds. With my dividend investing I have some REITs and property. Some in energy and so on. I seem to be making a nice return in dividends so far. :-)

The way I always thought about it is that you're missing out on 'compound interest'. If Company A pays you the dividend, then that 5% isn't reinvested to make another 10% the next year so your return in Year 2 is only £10.50, meanwhile Company B reinvests the money and makes you $11 in Year 2 and so on... obviously you can minimise this by reinvesting your dividends, but why not just leave them within the companies in the first place rather than have them paid out and then buy more shares with them.

Quick question, if you could answer great and if you feel it might be worthwhile video even better. When investing for the long term and picking a diversified fund. What happens to that fund, will it always be still around or do they typically come to an end at some point? Ie if you look at a lot of vanguard funds they only started 2012 - 2016.

Out of interest, if a UK retiree does have a divi portfolio in one or more equity income investment trusts, are they better than an equivalent but lower cost equity income ETF or Index fund?

Great video James. Exceptionaly explained. I wonder how UK based investor can get exposure to these factors mentioned. Vanguard has closed their factor funds some time ago becuase they were unpopular. What a shame. Maybe this could be good material for next episode? This episode kind of covers with what I was thinking when I decided to alocate 10% of my protfolio to high yeld dividend fund. It was not about dividends(I reinvest them into the same fund anyway) but about getting exposure to value factor. But I did not knew about tax implications that you have mentioned because (as you have also said) it's an ISA right? I am now full of doubt wether my allocation was a correct decision. On one end exposure to value is good, on another tax implications are bad, which one wins 🤷‍♂

I can understand this theory when stock prices are rising, but is it equally applicable when stock prices are dropping particularly in the current climate where prices seem to be dropping independently of the underlying fundamentals of the business. Also does ignoring dividend paying stocks not limit the impact of compounding which is an important factor when growing wealth?

Interesting video James, I liked the red car analogy a lot - but what if you automatically reinvest your dividends? Don’t you benefit from as much from that as you would from a company that does not pay dividends? Does it not also smooth out the highs and lows a share price can have over time?

Great video as always James, just wanted to pick your brain on something. I'm aware of the Fama and French five factor model, in which "investment" forms part of 4 of 5. (Conservative minus Aggressive) is a factor that states that the more aggressive a company is with re-investing, the lower returns are vs a business that is more conservative with re-investments. I presume I'm overthinking your example that you've mentioned and the CMA is more useful when combined with other factors rather than stand-alone? Would love to know (if you know) how much of an effect CMA in your example (based on the Fama and French) has on future expected returns (although not sure if it's possible to run a regression on two identical hypothetical businesses).

Great video I like to receive some dividend so that it covers broker fees etc but invest for growth at this time mainly. I would be interested to see this video again but three ways Company a and b the same however company c say half the dividend and half share buy back just for comparison

I sort of have the opposite problem. I automatically reinvest all my ISA and SIPP index fund dividends back into the fund. So I have a massive income that I never actually see (except if the FTSE is the same level as a year ago, then the price of my unit has increased 3.5%). I'm perfectly happy with the strategy and mathematics, but there are times when my human frailty wonders whether that income ever really existed at all.

Interesting video and different perspective. What is your view to external factors that could impact performance of non dividend paying company. It's share price isn't just based on its performance and outlook. At least dividend is guaranteed income (at that point in time). Too many external factors drive share prices.

In the uk, it’s worth noting that the gov is reducing tax free limits on dividends outside of ISAs and pensions over the next few years making it more unattractive

Does it make a difference that the basic rate of dividend tax is only 8.75% vs the capital gains tax rate of 10%, are you surely not paying an extra 1.25% points of tax by selling shares rather than taking a dividend? I may just be misunderstanding!

I added a dividend ETF and Bond ETF to my portfolio as I understood that the dividend usually continues to be paid out in a downturn in the market. Which could be any time. The dividend will cover maybe 20% of our retirement requirements. The rest will mostly be covered by pensions or selling shares. Are these ETFs an inefficient approach?

Thanks for sharing, glad I found your channel, right now everyone needs to find what gives true financial freedom and happiness. Making passive income is really cool I will try this in addition to my investment income😅

What if I re-invest my dividends?

I am sorry, but it seems to me, you ignore a few things and also some mindsets: As a retired person, you are kind of a *short-term* investor, you *need* X$ per *year*. Stock prices perform well *in the long term*. This is good for the wealth accumulation phase. Dividends are more stable, especially so in certain companies ('aristocrats'). Low volatility=>short term plans. Tradeoff: worse performance, as always with low volat. investments. Also, stock prices are not rational in the short term, while dividend payment decisions result decision of the management and will not ruin the company - if it is a good company. I see a crucial difference between the two strategies easiest understood via thinking of Monte Carlo simulations ie. modelling many (we hope) realistic alterntive scenarios. Lets take it to the extreme for easier understanding - total loss: A dividend strategy will never kill the portfolio of well managed companies (unless total bankrupcy occurs), they may lower dividends during huge crisis. However, a "sell X$ regularly " strategy *can* damage or destroy the portfolio value when a sufficiently bad/long bear market of stock prices occurs - even without the companies suffering greatly, as stock prices are not really linked to that on the short term. Regarding buying red cars.... No, I do not want to buy companies *because of dividends* - I want to buy *good* companies, sometimes only dividend paying ones! Indeed, the tradeoff for low volatility is lower performance and lower diversification (risk) - at least the latter may be offset if you have some free cash to buy non-dividend companies.

How do I know if I am being charged the 30% withholding tax? For example if I own shares in a dividend paying ETF VWRL which is registered in UK, do I pay additional tax on it?

Plan A for this year was to sell part of my S&P 500 index fund and look at dividend investing with FTSE 100 companies. This has made me question it and now I need to watch the next video. Bet I end up back at square one!

It's been proven many times that dividend paying companies outperform non dividend paying companies in the long run. In a long downturn , say 5 years , the A option continues to give you 5% ( all being well ) even if the stock price goes down , whereas the B option becomes less and less valuable and if you need to sell shares for income you could eventually sell the total holding and run out of options. Company A then recovers in price giving you 5%. Company B is now worthless as you`ve sold the lot.

In the video you say that those in the poll who selected Company A are wrong. But in fact those who selected Company B are also wrong as the video sort of suggests. As a retiree who needs/wants the $5 income from the $110, I'd much rather received the dividend than hope that the stock price didn't drop 20% due to god knows what just before I was going to sell.

yes, in theory 5% from a div or 5% from sales is the same on a day when mr market is placid. But it's very much not the same on a day when mr market decides to drop your stock by 10% in addition to your required sale.

Slightly off topic James, but what are your opinions of the worrying articles I have read recently regarding the possibility of looking at the state pension being unsustainable in its current form and therefore looking at an individuals total assets and only having a state pension for those with no or low pension/ ISA provision. If something like this were to come about it would turn my plans on its head and would be unfair to those who have done the responsible thing and saved throughout their lives.. What are yours and your viewers thoughts. Thanks

First of all I want to say that this is great video and nice starting point for dividend topic discussion. I would like to point out one huge missed point in this video (and one smaller one). With dividend investing you are still holding your shares. Therefore you don't need to sell them, at bear market, or (worse case scenario) Covid bottom to sustain your living. That's not regret issue, rather security and sleep well one. And if you want to, you can still sell them to compensate your lifestyle, just like with not-dividend stocks (in let's say 2020-2021 recovery with great "growth"). You can even use those dividends to buy more shares in that scenario, which selling stock won't provide (cuz obviously you are selling them). There is also another point, smaller one - not all investors want to drown down their 'nest egg' to zero, at the end of excel life (or whatever age you put border for living). Some see this as opportunity for stable life, for future generations, so they are not selling and still accumulating. PS. All red cars are faster - that's common knowledge! (joke)

How about ETF that offer dividend?

Why do you only have 71k subscribers? Your content is amazing

OMG. I need you standing over my shoulder like all the time. I read that dividends are an important part of your portfolio in a down market because they proved some cushion against falling stock values. I think you are correct in your observations of how retirees (and soon to be retirees) look at their portfolios. I do have three Dividend Funds (SCHD, SPHD DGRO) in my portfolio along with my other funds. Is your "Factor Investing" the same as "Momentum Investing" and if so, I may need to review that video again. It was not clear to me and made me feel like I needed a Financial Planner to look at it. Admittedly, I'm not a Financial Planner so I'm doing this on what I've learned from reading over the past few years. It has really been tough to watch all the losses in 2022 and I don't think 2023 will be any better and it's my last year to work full time if things go as planned.

The full withholding tax , (not just the Ben 8 reduction but the whole amount) can be drawn back by your brokerage if your US dividend holding is held within a SIPP

Great video. One interesting point was evidence that dividends have made up less of the return in recent decades than in older ones. If we are saying then that there are trends or changes over the course of a century that we can't ignore, wouldn't this potentially impact the value of the Timeline data that looks back over 100+ years?

This would be true is the market were to be perfect. Well, it isn't. What you have in the stock market is the price of a stock. What he talked about was about value. Rarely one equals the other. For example, on an ex-dividend date the price should be equal to the price from the previous day plus the dividend. Well, not always. Usually it's different.

Thanks for top content as always!

As a solid dividend investor, I believe that the dividends paid out by the company, allow me to decide as a shareholder where to invest the capital returned (dividends) in the best manner possible. Great companies have made bad mistakes, Colgate Lasagna or New Coke as past history examples. AVGO is a great example of a company who pays a solid dividend and is growing over the past 10 years. Without dividends, retiring on the 4% rule does not hold up in a bear market as well as dividends.

Hi James. Don’t disagree that people should focus on total returns however your chart showing the decreasing significance of the income portion of the total return pie could look very different in 10 years time. Firstly we are at the end of 14 years of central bank constrained interest rates and minimal inflation which have worked in favour of a small number of US growth stocks. I’m sure you know that the FANGS alone have accounted for a hugely disproportionate percentage of gains in US equities. Secondly if you go back and look at the 1970’s on your chart you will see that Diividends accounted for 40% of returns. The 2020’s are shaping up much like the 1970’s with higher inflation and rising interest rates traditionally much better for dividends than capital growth ( net of inflation) . Finally. Many service sector companies ( eg Software) throw off more cash than they can effectively reinvest. If they don’t pay dividends they often resort to expensive acquisitions very few of which work out well for shareholders. So whilst I agree with the central point re Total return the argument around dividends is far more nuanced than you suggest.

I like this vid. Good insight,

I love how your videos begin by selling me on an idea then debunking the crap out of it because I know it the debunking never came I would’ve just gone for it.

You can't count on capital gains can you whereas companies that pay dividends have been doing so for years and at a % that you can actually count on for retirement. Either way I wouldn't be too invested in the stock market if I were approaching retirement or already retired.

I’m a sucker for control… I want income when I want it, not when it happens to pop out.

Isnt this a symptom of a very risky economy? Capital gains over a short time are likely to be because of some kind of hype, but if theres a company which grows 5% for 30 years (i.e. sustainably) may as well get a dividend stock? Dividend companies are surely incentivised to keep dividend good, and will therefore do stuff like fire employees, sell assets etc to make the dividend every year. Id rather be invested mostly in a company which good at long term survival rather then growth and collapse / buy out.

VUSA and VWRL are growth ETFs that pay dividends. USDV -spdr S&P US dividend aristocrats etf constitutes of stocks that have both capital growth and dividend income characteristics, as opposed to stocks that are pure yield, or pure capital oriented. The above are examples of ETFs that give you the best of both worlds. If you take the dividends your stocks still grow and if you reinvest the dividends you grow further. You can eat your cake and still have it 😎

I do see what you're saying about these dividend companies ... and you also say ( 10:21 ) that an income from an income company is decided by a policy set by some company exec who doesn't care about our objectives. I would agree with this last point, and wonder if *any* exec cares about this. As an investor, I can decide to re-invest my dividends back into the company by simply buying extra shares/units from the same stock. So it turns the dividend company into something more like a growth company. The point is that I can choose to 'bleed off' income as required with the remainder being re-invested (maybe even elsewhere to diversify the total portfolio). Growth stocks/funds cannot give that choice. The use of this idea can support another form of diversification (into growth vs income, or into other companies) within the portfolio and can provide inbuilt ability to alter the income a particular portfolio can generate (eg to accommodate changing income requirements with age).

Hi James, Hargreaves Lansdown apply 0% tax rate on US dividends held in a SIPP. ISA will attract a 15% tax. From their website: "A W-8BEN form means we can claim a US tax reduction for you on your dividends and interest from US shares. Withholding tax rates can be reduced from 30% to 15%, or to 0% if your shares are held in a SIPP."

Here's an analogy. Dividends is like sheering sheep, selling off your shares is like killing your sheep. Wool grows back, You can't bring your sheep back from the dead unless you buy a new one. You own sheep and you sell the wool. You sell the sheep, you are no longer owner of the sheep.

Hi James, Love your videos and am trying to slowly but surely get into investing as a way of making my money work. I watched a video of yours a while back on the vanguard lifestrategy funds as an invest and forget approach which to be honest is what i'm after at the moment and I wondered if you still feel this is a good move? I'm currently doing £100 per month with the intention of holding for 10+ years (Lifestrategy 80%).

I've been looking at this over Christmas (Mainly because I was bored) and came to the conclusion yet again (despite my monkey brain urging me otherwise) that I'll just leave my lifestrategy 100% investment accumulating exactly where it is as my only investment. I then decided to go out on my very fast, Italian, red motorbike... Thanks for driving the point home yet again. ;O)

My biggest issue with dividend stocks is tax. I don't know how to offset that in Luxembourg. For Americans, it sounds easy.

I think the graph at 1:00 proves everything including your comments on company types. If you want to invest in a growth stock like Vinfast then good luck. After a few setbacks I have given up on trying to pick stocks and just invest in a Tracker.