Author Topic: VHDYX?  (Read 8734 times)

I'm a red panda

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VHDYX?
« on: February 10, 2016, 08:06:02 AM »
So, I'm the kind of person financial advisers dream about. I just really don't know what strategy to take.  The idea of index investing seems sound, so we have VTSAX, VTIAX, VTIBX, and VBTLX in our taxable accounts. (We use target funds in our 401k/Roth 401k, 403b, and Roth IRAs)

However, market returns don't seem to be cutting it, and it seems that dividends are really where gains come from.  (The account is really setting up for mid-term, not long-term gains; we'd like to see growth over 10-15 years, not 30-40.)  So I'd like to look more into dividend investing.

Does it make sense to buy 10 strong dividend companies (but how do I decide?) or to invest in a dividend fund like VHDYX ?



nereo

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Re: VHDYX?
« Reply #1 on: February 10, 2016, 08:14:30 AM »
What does your Asset Allocation say?

If the idea of index investing is sound to you, why are you steering away from that?  Reading your post I hear alarm bells ringing, signaling that you are trying to chase returns instead of sticking to a clear strategy.  Think carefully about what your goals are, what your time-frame is, and invest accordingly.  Don't violate your own IPS.

I'm a red panda

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Re: VHDYX?
« Reply #2 on: February 10, 2016, 08:23:04 AM »
Of course I'm trying to chase returns. If I wasn't I'd keep cash under a tree in the yard instead of gambling in the market. The only purpose of investing is to get a return as far as I'm concerned.

I don't day trade (and actually thus far I've never sold anything I've bought, I've just shifted future purchases), but I do change my strategy to try to maximize my returns.  Which is why I switched from managed funds to indexes.  But (unless I am totally wrong) VHDYX is still an index, it just isn't VTSAX.  I think everything in VHDYX is in VTSAX actually.

My only allocation is stock : bond ratio, and this wouldn't change that.

GGNoob

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Re: VHDYX?
« Reply #3 on: February 10, 2016, 09:59:29 AM »
My idea of chasing returns was to compare asset classes at https://www.portfoliovisualizer.com/. By holding all asset classes equally instead of just holding total stock market and total bond funds, historical performance is much better. Then, to increase returns even more, you could drop underperforming asset classes like bonds, and if you are really determined, drop US large cap stocks and international developed Stocks as well.

See the charts here. This approach won't be for everyone.

Retire in CO

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Re: VHDYX?
« Reply #4 on: February 11, 2016, 09:20:31 AM »
I own large dividend stocks in my brokerage account and they have performed very well. It is time consuming, to say the least, unless you enjoy spending your time following global news...which I do. The problem, at this point, is that everyone has jumped on the dividend train so it is difficult to find companies that are not overvalued. Although, valuations have come down over the past month. I like to own these big guys because the constant dividend stream helps me weather corrections.

My risk tolerance with my Roth is much lower so I currently contribute to a similar ETF/Index fund...VDC/VCSAX. It includes 101 strong dividend companies excluding oil, tech, financials and industrials (all the sectors currently stressing the market, so I lucked out). I have significant exposure to these sectors in my brokerage account hence VCSAX. When the market turns, you will want exposure to these beaten down sectors, so VHDYX might be a great choice! But if the market really turns, with VCSAX/VHDYX as opposed to VTSAX, you miss out on growth giants such as Apple, Alphabet, Amazon. 




tj

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Re: VHDYX?
« Reply #5 on: February 11, 2016, 09:58:37 AM »
I don't like VHDYX. It's too rigid. If a company no logner meets the criteria for the index, it has to be sold.

VEIRX is a similar fund with lower cost and follows the same strategy. You basically get high quality management for free....You can't find a broad American stock fund cheaper than VTSAX, that isn't the case here. The philosophy is not that managers are idiots, it's that management is generally expensive.


To me, indexing only makes sense if you are going for the broad market (e.g. VTSAX, VTIAX, VTWSX).

Eric

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Re: VHDYX?
« Reply #6 on: February 11, 2016, 10:10:29 AM »
Of course I'm trying to chase returns. If I wasn't I'd keep cash under a tree in the yard instead of gambling in the market. The only purpose of investing is to get a return as far as I'm concerned.

That's not what chasing returns means in this context.  Chasing returns means jumping around from investment to investment based on what had a good return lately.  However, it's nearly impossible to predict which classes will do well in the future, so continually jumping to what perfomed well in the past would leave you underperforming.  It's essentially Buy High, Sell Low.

I'd highly encourage reading The Four Pillars of Investing by William Bernstein.  A Random Walk Down Wall Street would also be a good one.

nereo

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Re: VHDYX?
« Reply #7 on: February 11, 2016, 10:46:02 AM »
Of course I'm trying to chase returns. If I wasn't I'd keep cash under a tree in the yard instead of gambling in the market. The only purpose of investing is to get a return as far as I'm concerned.

Eric has already summarized what I meant by my earlier post.  I'm not suggesting that you keep cash under a tree (or in a checking account).  I'm saying that you should first look at what your ISP and AA are, and then invest accordingly.  Doing the reverse has been shown repeatedly to result in sub-par performance. What worried me in particular was this statement (emphasis added):
Quote
However, market returns don't seem to be cutting it, and it seems that dividends are really where gains come from.
Many of the analyses of the top dividend stocks beating out the broader market are flawed by survivorship bias (in short, they take the 'most stable' or 'best' dividend stocks and compare how they did to a broad market index like the SP500; this approach automatically eliminates lesser preforming dividend stocks, and is something an investor cannot know in advance).
Your question about whether you should invest in 10 dividend paying stocks is a fine one to ask, but it gets back to what your IPS and AA are.  What percentage of your portfolio do you want in individual stocks and individual sectors?  Buying more stocks will shift your AA, which may (or may not) violate your IPS.

Looking specifically at VHDYX vs. VTSMX - there's no clear historical answer.  Over the last 5 years VTSMX has done slightly better, and over the last 10 it's been VHDYX.  With the obligatory "past results are not indicative of future performance" statement, I see no inherent reason why one will necessarily out preform the other over the 10-15 year time frame you are looking at.

MustacheAndaHalf

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Re: VHDYX?
« Reply #8 on: February 11, 2016, 09:51:15 PM »
Dividend stocks tend to be value stocks, so adding a dividend fund (or stocks) tilts your portfolio a little bit towards value stocks.  I'd recommend you read an investing book that relies on academic studies and data.  Academics aren't perfect, but at least their motive is uncovering knowledge rather than uncovering your wallet.  I like Larry Swedroe's and William Bernstein's books.

If you switch what you buy based on gut feel and circumstances, you can wind up with a dozen funds that make no sense together.  That's why it's good to form a strategy that explains why you invested in each fund you own.

mrpercentage

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Re: VHDYX?
« Reply #9 on: February 11, 2016, 10:22:54 PM »
Honestly, ignorance is bliss. A lot of people are sweating it right now especially if they are in growth. If you have several years pick one that fits your flavor-- growth, balanced, traditional S&P500, or dividends. Then when it comes to that dont look for 5 years.

Personally I think dividends are the best long term bet. In the end it will be what you are comfortable with. If you don't need to look you are good.

Conviction and a steady hand is the best move in the market.

mrpercentage

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Re: VHDYX?
« Reply #10 on: February 12, 2016, 01:04:14 AM »

To me, indexing only makes sense if you are going for the broad market (e.g. VTSAX, VTIAX, VTWSX).

How about VINIX, or do you like more than the S&P500?

tj

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Re: VHDYX?
« Reply #11 on: February 12, 2016, 09:03:39 AM »

To me, indexing only makes sense if you are going for the broad market (e.g. VTSAX, VTIAX, VTWSX).

How about VINIX, or do you like more than the S&P500?

VINIX is certainly a reasonable choice. Assume this is in a 401k plan since you have access to institutional class. I don't see a whole lot of  difference between The S&P 500 and VTSAX . You could add the Extended Market to duplicate the Total Stock Market, but you could also not...completely your choice.
« Last Edit: February 12, 2016, 09:05:49 AM by tj »

mrpercentage

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Re: VHDYX?
« Reply #12 on: February 12, 2016, 09:18:39 AM »
I have been thinking about it. I am in mid and small caps in my 457. They do have some premium managed funds. But the market return wisdom has been knocking on the door since I play heavy with individual stocks in other accounts. I figure maybe it should be my safety belt just incase my bright ideas are hubris

They don't have any good dividend options

PhysicianOnFIRE

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Re: VHDYX?
« Reply #13 on: February 12, 2016, 09:52:04 AM »
I have been thinking about it. I am in mid and small caps in my 457. They do have some premium managed funds. But the market return wisdom has been knocking on the door since I play heavy with individual stocks in other accounts. I figure maybe it should be my safety belt just incase my bright ideas are hubris

They don't have any good dividend options

My 457 has 2 funds, Vanguard mid-cap index and Vanguard small-cap index.  2 reasons.
1. It keeps me exposed to those stocks when I have S&P 500 in my taxable account. 
2.  Not having Total Market or S&P 500 in 457b / 401k allows me to tax loss harvests between the 2 funds in taxable.  No worry of a wash sale from the tax deferred accounts.

Also, I don't want high dividends in taxable, so the dividend funds above would not be good for me (due to high marginal tax bracket in working years). 

Telecaster

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Re: VHDYX?
« Reply #14 on: February 13, 2016, 03:44:25 PM »
Honestly, ignorance is bliss. A lot of people are sweating it right now especially if they are in growth. If you have several years pick one that fits your flavor-- growth, balanced, traditional S&P500, or dividends. Then when it comes to that dont look for 5 years.


Terrible strategy.   That's exactly how you don't want to invest.    I second Eric's advice about the Four Pillars of Investing.   

Scandium

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Re: VHDYX?
« Reply #15 on: February 13, 2016, 04:14:09 PM »



However, market returns don't seem to be cutting it, and it seems that dividends are really where gains come from.

What do you base this on? I've read Bogle's research that showed that half the return come from dividends and half from sales/profit growth.

mrpercentage

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Re: VHDYX?
« Reply #16 on: February 13, 2016, 04:47:53 PM »
Honestly, ignorance is bliss. A lot of people are sweating it right now especially if they are in growth. If you have several years pick one that fits your flavor-- growth, balanced, traditional S&P500, or dividends. Then when it comes to that dont look for 5 years.


Terrible strategy.   That's exactly how you don't want to invest.    I second Eric's advice about the Four Pillars of Investing.

I have read both books. If you don't like volitility stay out of growth. I'm sticking to my strategy now, but the prevailing collective wisdom here is buy VTI.

I remember not long ago everyone telling me that the income fund of America was crap and I should be exposed to more growth for the long term. Guess what? It's out performing the 500 right now

MustacheAndaHalf

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Re: VHDYX?
« Reply #17 on: February 14, 2016, 11:34:24 AM »
I remember not long ago everyone telling me that the income fund of America was crap and I should be exposed to more growth for the long term. Guess what? It's out performing the 500 right now
You measure in sub-year timeframes?  Because looking at 3 years, 5 years or 10 years shows "American Funds The Income Fund of America" (AMECX) getting beaten by Vanguard Total Stock Market.

But in a way, both statements are misleading.  The fund you mention has 55% US stock, not 100%.  So the bond portion (22%) and international stock portion (15%) represent things that should be compared to their respective index funds rather than the S&P 500.

mrpercentage

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Re: VHDYX?
« Reply #18 on: February 14, 2016, 10:22:37 PM »
I remember not long ago everyone telling me that the income fund of America was crap and I should be exposed to more growth for the long term. Guess what? It's out performing the 500 right now
You measure in sub-year timeframes?  Because looking at 3 years, 5 years or 10 years shows "American Funds The Income Fund of America" (AMECX) getting beaten by Vanguard Total Stock Market.

But in a way, both statements are misleading.  The fund you mention has 55% US stock, not 100%.  So the bond portion (22%) and international stock portion (15%) represent things that should be compared to their respective index funds rather than the S&P 500.

Fair enough, and yes sub year because the market just took two dumps and that is where the difference is made. Just like that was the difference in 2008-2009 were it was beating the S&P500 if you look at a total return chart-- not a share price chart. I previously received an annual return rate of 13% in that fund before it was switched. Not any particular insight, I was sold on an exposure to growth. Ouch. Oh well, lets hope you are alright because It did cost me.

Also wrong ticker to reflect me. It would have been RIDFX -1% YTD with a 0.32 expense ratio
the Growth -13% YTD. Big difference.

Lets do math. It went down 13% but will need to grow 15% to get back to where it was. Meanwhile RIDFX is down 1%. If you are investing monthly this makes a huge difference.
« Last Edit: February 15, 2016, 12:53:57 AM by mrpercentage »

mrpercentage

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Re: VHDYX?
« Reply #19 on: February 14, 2016, 11:06:48 PM »
So I guess what Im saying is that I seem to do much better when I follow my own intuition.
1. God likes loyalty so don't pass funds around
2. If you got a good thing leave it alone. It might be better than you think.
3. Funds are not stocks. Somebody is managing it and it aint you. If you want to do that, pick stocks. Now that I can do.

Finally its a roth. Lets see what it is in 30 years. We are thinking long right?

Hope you are all having a great V-day. Took the wife and kids to Denny's by request. Moderately busy. Great shakes