2Mon·

High-dividend distributing ETF or rather without distribution

I am considering investing 1/3 of my equity exposure in the $FLXD (-5.77%) in the European high-dividend stocks. 2/3 are in an MSCI World Quality ETF, i.e. USA-heavy.

Better diversification because Europe? And simply taking the dividend of almost 4% is not bad either? But I don't always need the money from the distribution immediately, so I reinvest it...

Or would I rather invest in a non-distributing ETF?

9 Comments

Stulle 🥪@Stullen-Portfolio

2Mon

Focusing on dividends is not the highest-yielding idea you can have as an investor anyway. 💔

And in general, accumulating ETFs have a built-in yield turbo compared to their distributing siblings. 🚀

Greetings
🥪

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TomTurboInvest@TomTurboInvest

2Mon

@Stullen-Portfolio I have an old post to read, apparently the fairy tale of the advantages of accumulation cannot be put to rest.

https://getqu.in/xOiGFw/ https://getqu.in/xOiGFw/

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Stulle 🥪@Stullen-Portfolio

2Mon

@TomTurboInvest
Hmmm, that creates a certain imbalance.
I can't say anything about the one link in the post because it's dead. And the linked video from Finanztip only focuses on the utilization of the tax-free amount - and in my opinion this is not the main aspect of the general question of the advantages and disadvantages of accumulators or distributors.

...and the idea that dividends received could be invested in a completely different way, as was commented on in the post, is probably not what you are getting at...

Greetings
🥪

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TomTurboInvest@TomTurboInvest

2Mon

@Stullen-Portfolio hmm, the link to the post works for me as well as watching the finanztip video 4 scenarios, distributors vs accumulators, and the whole thing once with/without allowance included.
Key messages - there is no difference in the net return between ACC and Dist, as long as you also reinvest the divi.
It is often written that accumulators are better in terms of total return, and this is not the case.

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Stulle 🥪@Stullen-Portfolio

2Mon

@TomTurboInvest
The return advantages of the accumulator compared to the distributor have decreased due to the change in tax legislation, but are still there.

A.
If interest rates are low, the advance tax for the accumulator is zero; tax is payable on the dividends distributed.

B.
If there is no price appreciation in a year, there is no advance tax for the accumulator; tax is due on the dividends distributed.

Greetings
🥪

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TomTurboInvest@TomTurboInvest

2Mon

@Stullen-Portfolio Be that as it may, this is precisely the question that Finanztip discussed in the video, and many were surprised by the result that there is hardly any difference in the net return. A long period of time was considered.

And the advance lump sum has little or no effect on the overall net return anyway, as it only takes away the tax deferral in advance, so you pay less tax afterwards. It's just a postponement of the period when you pay the tax. But that's why everyone can do what they want - ACC or Dist 🤷🏽‍♂️

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Saschko@WarrenamBuffet

2Mon

I would rather take the $EXSA, which has a slightly lower divi yield but is also better diversified in terms of sectors; the fund mentioned above has 32% financials at the start. You just have to be aware that it also has a fund volume of less than 100 million...

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TomTurboInvest@TomTurboInvest

2Mon

As long as you reinvest the dividends, there is hardly any difference between these two forms.
As an Austrian, the disadvantage of accumulators is that you have to pay tax on the distribution-equivalent income from the accumulation every year, i.e. you have to hold cash for larger positions and performance tracking becomes difficult because your cost value and the tax-relevant cost value diverge.
For me, this is a reason to avoid accumulators.

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Joris@JorisInvests

2Mon

I have FLXD as well. I think it has 52 decent companies in it, which will give ok growth and dividend growt in the future. Taxes on dividends are often viewed as negative, but I think the cash flow outweighs it by far. It is the fee you pay to get a part of your invested money back without needing to sell and I'm willing to pay for that. I'm also half-way in my career, so accumulators aren't for me any more. You have to think of many things as an investor and for me I don't want to think about selling accumulating etfs later in life, so all my etfs are distributing 😉😎😉.

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