75k vacation fund to invest

[mmwannabe]

I have 75k that I'd like to invest for vacations.  I was thinking Vanguard Total Market Index ETF.  I don't need this money, so if the market does poorly, I can leave it invested for a long period of time.  If it does well, I'll put the interest toward vacations.  I'm not a fully fledged musatchian (just a teacher that plans to retire at 50, in a few years). Thanks!

[mmwannabe]

Thanks Bender.  I don't know anything about dividends.  What's the advantage of that over taking the interest?  Can you give me a quick education or should I spend a bit of time googling it?  Many thanks from mmwannabe!

[mjr]

You're not going to get any "interest" from VTI.  VTI will pay ~2% p.a. in distributions, most of which will be dividends paid by the companies over the course of a year.

Interest infers a deposit with an institution, or arguably coupon payments from a bond.  Investing in VTI is neither of these.

[mmwannabe]

Thanks MJR.  So when I transfer funds from my VTI ETF, to my bank account, the money that it has gained/lost is already in the form of dividends?  And, withdrawing it 4 times a year, instead of 12, is better because it has more time to earn?  Sorry I'm so clueless on this part.  I'm just used to my 401k growing, I've never used an ETF before.

[aspiringnomad]

So when I transfer funds from my VTI ETF, to my bank account, the money that it has gained/lost is already in the form of dividends?

Yes, plus or minus capital gains which tend to outweigh dividends in either direction. 

And, withdrawing it 4 times a year, instead of 12, is better because it has more time to earn? 

Yes, but I've never done the math on this to assess how much of an impact it will make. Most people in the distribution phase set up an annual, twice-yearly, or quarterly withdrawal as I understand it, but it probably doesn't matter much.

Also, you should never withdraw more than 3k annually for vacations (and quarantine it for only that) if you want that money to last according to the 4% SWR. It's an odd way of approaching vacation expenditures, but if you're rigid in not spending more in any year, and flexible if markets are crap, it just might work.

[MustacheAndaHalf]

I think VTI distributes quarterly in March, June, Sept, Dec.. I could be wrong, though.  That makes it more convenient to take all the cash from dividends, and then sell any you need for additional vacation funding.

Would it make sense to have a mix of bonds?  If the market drops, you don't want to take a cheaper vacation (using 4% rule, 4% of the total drops when VTI drops).  If you mix in some bonds, you dilute market impact (but also get slower growth).