Which is better - buying for dividend payout or buying for gain

[abbby]

Since share prices usually falls after dividend ex-date, isn't it better to buy after the ex-date (rather than buying for the dividends)?

[Wd40]

Since share prices usually falls after dividend ex-date, isn't it better to buy after the ex-date (rather than buying for the dividends)?

There is no difference unless if there is dividend withholding tax, which is case for foreign stocks. For Singapore stocks there is no difference.

BTW, dividend investing is an antiquated strategy. Usually high divided paying companies are in mature sectors without much growth and hence they return the profits to shareholders.

Also picking good dividend yield stocks which are not a trap is extremely tough.

You are better off doing index investing. Choose the global stock index or S&P500 and you are good to go.

[malcontent]

WD40 is exactly right - chasing dividends is not a good strategy. While it might feel good when you receive the dividend cheque, it comes at a price. In fact, companies that pay high dividends are basically saying that they see limited opportunities to invest that money into the business to grow. The best strategy is to look only at the total return of your investments over time — even if you are in retirement.

[Max Headroom]

No lah, it's not as binary as that.

Mature companies just don't have the need to grow as fast as during their earlier years. So as they spend a lot less on expansion activities, they end up with an abundance of money each quarter, which they're happy to share with their holders, typically investors keen on a steady drip-drip of income, rather than just capital gains only when they sell.

Own enough dividend-paying stock and you can live very generously on the pay-outs, though there's always the risk of them getting cut when recession or some scandal hits.

Own both types of investments, growth and dividend-paying, and you get the best of both worlds. Or, alternatively, hit the jackpot by owning companies that give you both.

: )

[malcontent]

I agree - dividends aren’t a bad thing, but I would not recommend tiling a portfolio toward high dividend stocks anymore than I would suggest tilting toward low or no dividend stocks. What matters is the total return, the combination of dividends and gains. Broad diversification provides the best balance.

[smoulder]

Dividends being paid out at the expense of the company reinvesting it's cash for more growth and subsequently, the share price growth.... That's what you want to avoid while picking dividend paying stocks.

In simple terms, look for companies with not only a stable or growing share price, but also growing dividend payouts. Typically dividend yields of over 5 or 6 percent are not sustainable and you should probably avoid these companies.

[abbby]

Thanks for the wonderful advice - @smoulder , @malcontent , @Max Headroom , @Wd40

Glad I asked here..after your advice I've been reading up and watching youtube videos which also helped a lot understanding the index funds. And yes i think my investment method is kinda of outdated cos I realised my stock price come down immediately after div dates. So that's not a good method.

I'll be exploring Index Funds from now on, please share any more tips if you do have...

Maybe next question: What are your preferred choices of ETF - SPY, QQQ...? Or which one, and why..?

[malcontent]

Thanks for the wonderful advice - @smoulder , @malcontent , @Max Headroom , @Wd40

Glad I asked here..after your advice I've been reading up and watching youtube videos which also helped a lot understanding the index funds. And yes i think my investment method is kinda of outdated cos I realised my stock price come down immediately after div dates. So that's not a good method.

I'll be exploring Index Funds from now on, please share any more tips if you do have...

Maybe next question: What are your preferred choices of ETF - SPY, QQQ...? Or which one, and why..?

In general, SPY & QQQ are only appropriate for US persons because they are taxed punitively to foreigners.

The equivalent ETF to SPY that is appropriate for non-US persons is CSPX traded in London.

However, the ETF that is most recommended is ISAC which covers what is included in CSPX and the rest of the world, all in one, simple, tax and fee efficient investment vehicle. It’s just an easy way to get maximum diversification with minimum hassle.

Back when we lived in Singapore, I left instructions for my wife (if anything happened to me) to invest our entire equity portfolio in the following ETFs:

70% CSPX: iShares S&P 500 Accumulating
15% ISP6: iShares S&P Small Cap 600
15% EIMI: iShares Emerging Markets Index

It depends what kind of exposure you want. But I would say the basic Bogleheads 3-fund portfolio is the most universal guideline to follow (which covers stocks and bonds). But it can be simplified further into 2 funds with ISAC plus a SGX listed SGD bond ETF. It’s important to understand the risks and volatility so you don’t panic during market drop.

[abbby]

Thanks for the wonderful advice - @smoulder , @malcontent , @Max Headroom , @Wd40

Glad I asked here..after your advice I've been reading up and watching youtube videos which also helped a lot understanding the index funds. And yes i think my investment method is kinda of outdated cos I realised my stock price come down immediately after div dates. So that's not a good method.

I'll be exploring Index Funds from now on, please share any more tips if you do have...

Maybe next question: What are your preferred choices of ETF - SPY, QQQ...? Or which one, and why..?

In general, SPY & QQQ are only appropriate for US persons because they are taxed punitively to foreigners.

The equivalent ETF to SPY that is appropriate for non-US persons is CSPX traded in London.

However, the ETF that is most recommended is ISAC which covers what is included in CSPX and the rest of the world, all in one, simple, tax and fee efficient investment vehicle. It’s just an easy way to get maximum diversification with minimum hassle.

Back when we lived in Singapore, I left instructions for my wife (if anything happened to me) to invest our entire equity portfolio in the following ETFs:

70% CSPX: iShares S&P 500 Accumulating
15% ISP6: iShares S&P Small Cap 600
15% EIMI: iShares Emerging Markets Index

It depends what kind of exposure you want. But I would say the basic Bogleheads 3-fund portfolio is the most universal guideline to follow (which covers stocks and bonds). But it can be simplified further into 2 funds with ISAC plus a SGX listed SGD bond ETF. It’s important to understand the risks and volatility so you don’t panic during market drop.

Thanks for the tips @malcontent Definitely learning a lot from the pros!

Managed to start exploring US stocks and realised there's quite a lot of different on SG stocks and US stocks movements. US stocks/ETF are all so lively whilst SG stocks are pretty stagnant (mature) and not much upside. And the more volatility the more opportunity.

I bought the SG stocks for its dividends and now still stuck (cos prices are still below what I bought)...

[malcontent]

You are not stuck at all. In fact, if you don’t prune the shrubs, you may never see new growth. I was in a similar boat around 15-20 years ago, and while it took me a few years, I got rid of every single individual share that I owned (except my employer shares) and got everything into a few index ETFs, which is still the case today.

Indexes are always pruned, companies that can’t keep up get dropped, and emerging companies that deserve a spot in the index get added. It’s very methodical and mechanical process - and that is what you want… not just for managing the mix of equites, but also your regular investing in them. Discipline is the most important indicator of investor success. Things like market timing and stock picking are just the opposite, they often work more against you than for you.

[theashiera]

Both strategies have their strengths, and the better option really depends on your goals and risk tolerance. If you're after consistent income, dividend stocks can be a solid choice. They tend to be more stable and provide regular payouts, which is great if you're looking to supplement income or reduce volatility in your portfolio.

On the other hand, if you're focused on long-term wealth building and can stomach more ups and downs, growth stocks—like those in the tech sector often offer much higher capital appreciation, even though they may not pay dividends.

Personally, I like a mix of both to balance income and long-term gains, especially in uncertain markets.

[abbby]

Great advice here, so much to learn.

I started off with SG stocks and now trying US stocks and going to try ETF..

Trying to offload the SG stocks to get into ETF, looking at the SG and US market, US market seems to have more volatility and growth potential than SG stocks...

Which ETF stock do you think is a good time to buy?

[abbby]

Meta stocks looks very interesting..

[smoulder]

Are you a US citizen? If not, you probably also want to look up things like withholding tax on dividends and estate tax on US stocks held by non US citizens.

[abbby]

Are you a US citizen? If not, you probably also want to look up things like withholding tax on dividends and estate tax on US stocks held by non US citizens.

Thanks for that @smoulder
I'm not US citizen, i just checked they tax on the dividends. I'll have to be careful what I buy else 30% is being taxed.