Disclaimer: No investment advice or recommendation, this article is for information purposes only. Before you decide on an ETF, take a closer look at it in terms of positions

take a closer look at positions, sampling, regions, etc. I can't describe all of this

I can't describe everything, as it would go beyond the scope of this article

Part 1 (definition, categories & Z-score and quality factor): https://getqu.in/RCSY4a/

Part 2 (Value ETF): https://getqu.in/Nfnhqb/

Part 3 (Low Volatility ETF): https://getqu.in/Ub7KpG/

Part 4 (Momentum ETF): https://getqu.in/CNMgGw/

Part 5 (Small and Growth ETF): https://getqu.in/0NoqmW/

What are dividend ETFs?

Abbreviated what dividends are, since everyone here probably knows this: distributions by a company to its shareholders, the amount is usually voted on at the annual general meeting and is usually paid out of profits, but does not have to be (if it is paid out of the substance, this is often counted as a bad indicator).

Dividend ETFs are therefore primarily ETFs that distribute the dividends paid by companies to the ETF holders; they are also referred to as distributing ETFs (Dist.). In contrast, an accumulating (Acc.) ETF uses the dividends to buy more shares, i.e. it reinvests.

Because the dividend ETF distributes money, I get cash flows back from my investments, usually on a quarterly basis. These ETFs are celebrated - especially on social media - as a form of passive income and have their advantages but also disadvantages, which we will examine in more detail below.

Dividends as a value premium (CAPM /French Fama model)

Short recap (in more detail in part 5): French Fama's 3 factor model raises beta (volatility), size- and value-premium as factors to determine the expected return of an investment. Dividends are not explicitly mentioned as a factor, but they are indirectly included in the value and beta factors, as a company must first be able to afford to pay dividends.

must first afford to pay dividends. Growth and small-cap companies

often do not yet pay dividends, as the revenue generated is used for more growth

growth or the balance sheets are not yet as sustainable. Dividend payers often have a stronger balance sheet, which makes them less volatile to changes in interest rates, for example (although this reduces the expected return according to the CAPM). Exceptions are high dividend payers, which are often riskier and reward investors with a high dividend for holding the share.

The fact that dividends also count as a quality factor can be clearly seen in the dividend aristocrats. These are companies that have been paying dividends continuously for 25 years and increase them annually. This makes them particularly attractive, which is why they can also be invested in via individual products such as the $SPYD (+0,13%) are investable.

Dividends are also included as a valuation factor in the Quality ETF as a positive valuation criterion (see also Index Methodology Part 1)

Historically, several studies for the US market show an outperformance of dividend stocks, especially even high dividend payers:

https://www.hartfordfunds.com/insights/market-perspectives/strategic-beta-etfs/what-drives-dividend-stock-performance.html

https://www.globalxetfs.com/content/files/High-Dividend-Stocks-In-Rising-Interest-Rate-Environments.pdf

In the recent past, however

However, high-dividend stocks have underperformed in the recent past, with the ACWI High

Dividend has significantly underperformed the MSCI ACWI over the last 10 years (- 100 %).

Classes of dividend ETF?

In my view, dividend ETFs can be roughly divided into 3 categories:

- Dividend as a windfall: The focus of the ETF is not on dividends, but some companies are included in the index that pay dividends and these are then distributed to the holder. A classic example is the dividend-paying $VWRL.

- Quality dividend: The focus is on achieving dividends, but these are accompanied by quality factors such as dividend aristocrats or quality dividend ETFs

- High Dividend: The highest dividend yields are targeted here, whereby quality factors may play less of a role.

Why high dividend yields can be a problem

Unfortunately, I have often overheard conversations that sound like: "VW is so cheap, you get a 10% dividend yield, you can't go wrong". But that brings us to the problem of high dividend yields, because these are often a signal of structural weakness in the company and/or a sharp fall in the share price. If the dividend yield remains at this level, this could seriously jeopardize the company's long-term financial strength. If the dividend yield remains

and is even reduced, the original investment case is invalidated.

So even if the unsystemic individual risk in ETFs often "diversifies away", it is important to take another look at the largest positions and check whether this is not a structurally weakening company.

Advantages of dividends

In addition to the potential value premium mentioned above, dividends fulfill a different purpose at an individual level, depending on the stage of life: for most people reading this, this purpose is likely to be psychological, as they are not dependent on the cash flow from dividends.

cash flow from dividends. The dividends are then a nice motivational effect and

offer the "peace of mind" of a steady income even in the event of market setbacks

and therefore less worry about declining book profits.

Once you have reached an advanced age, the dividend offers a high comfort factor. This means that there is often no need for rebalancing or a withdrawal plan, as would be the case with accumulating ETFs. The dividends are then used as additional income for retirement; of course, withdrawals can also be made, but not to the same extent as would be necessary with accumulating ETFs.

would be necessary.

Disadvantages of dividends

Taxes! Because payments are distributed to the holder, capital gains tax, solidarity surcharge (26.375% in total) and, if applicable, church tax are also due. This tax is first deducted before I can reinvest the dividends, and reinvesting the dividends costs extra (even with neobrokers via the spread between the ask and bid price). Dividends therefore have a detrimental effect on the compound interest effect of the ETF's profits.

Although accumulating ETFs have been brought somewhat into line with dividend ETFs in terms of taxation with the advance lump sum taxation, they still offer the advantage that the tax burden is always lower than for dividend payers (if the dividend ETF has distributed less than the advance lump sum, an advance lump sum is also charged).

Another negative aspect that goes hand in hand with the above is market timing. Often not every small dividend is reinvested directly, but accumulated until, for example, EUR 1,000 is reached in the clearing account. If the market has then run away, you wait for a setback and may miss the entry or at least lose the lost performance where the money was sitting in the settlement account without earning interest.

account without interest. There is also more work involved in the savings phase due to the necessary reinvestments.

Tax comparison high-dividend vs accumulating (example 2024)

Assumption that the tax-free amount has already been exhausted

Investment amount: 100,000

ETF1: Vanguard FTSE ACWI High Dividend ($VHYL (+0,05%))

ETF2: iShares MSCI ACWI ETF ($ISAC (-0,16%) )

Tax Burden High Dividend:

Price at the beginning of the year: EUR 57

Shares: 100,000 / 57 = 1,754.39

Dividend per share: EUR 1.94

Absolute dividends: EUR 3,403.51

Partial exemption ratio: 30%

Tax (26.375 %) = EUR 628.38

Tax burden accumulating ACWI

Fund value at the beginning of the year: EUR 100,000

Prime rate 2023 (for 2024): 2.55%

Base yield (70%): EUR 1,785

Partial exemption rate: 30%

Up-front lump sum: EUR 1,249.50

Tax (26.375%) = EUR 329.56

There is a tax disadvantage of around EUR 300, which is thus withdrawn from compound interest.

For whom are dividend ETFs worthwhile?

In summary, the disadvantages of strongly dividend-oriented investing outweigh the advantages for me. Of course, there are many shades of gray between focusing on high dividends and reinvesting. Dividends as an addition - especially as they often come with a premium - make perfect sense, but the explicit focus on high dividends can be dangerous and has tax disadvantages.

Dividend ETFs are therefore primarily for investors who want to generate income regardless of the current market phase and appreciate the stability of the cash flow. If the dividends also ensure that you can sleep better at night when the market fluctuates and are not tempted to panic sell, then the small tax disadvantage is no reason not to invest.

the small tax disadvantage is no reason not to invest in dividends. Also

It also has its charm to have a less intensive withdrawal phase in old age.

withdrawal phase. So if you are emotionally affected by market fluctuations, appreciate regular income and are convinced of the dividend premium (as part of the value premium), then dividend ETFs are just right for you.

👉Dividends-ETFs:

Performance comparisons incl. dividends

$VHYL (+0,05%) (World | TER 0, % | Tracking Difference -0.04 % | DivRendite 3 %| EUR 5 bn invested volume | 3Y underperformance vs. MSCI World - 5 %pt | 5Y underperformance vs. ACWI - 30 %pt | 10Y underperformance vs. ACWI -100%pt)

• Index methodology: Based on the FTSE All-World Index, which includes large and mid-cap companies from developed and emerging markets worldwide. REITs are excluded. Companies are sorted according to the expected 12-month dividend yield and the stocks with the highest dividend yield are selected. The aim is to achieve around 50% of the market capitalization of the original index and then to weight these companies according to their size in the index.

$TDIV (-0,1%) (World | TER 0.38 % | TD 0.47 % | Div yield 4.3 % | EUR 1.2 bn invested | 3Y outperformance vs. ACWI + 18 %pt | 5Y underperformance vs. ACWI - 7 %pt | 8Y underperformance vs. ACWI - 38%pt)

• Index methodology: Screening for consistent dividend payers with ESG relevance. Weighting by dividend max. 5% per share and max. 40% per sector. Selection of 100 stocks with the highest dividend yield. Semi-annual rebalancing

$SPYD (+0,13%) (US | TER 0.35 % | TD -0.07 % | Dividend yield 1.5 % | 3.5 bn invested | 3Y underperformance vs. S&P 500 -23 %pt | 5Y underperformance vs. S&P 500 - 63 %pt. | 10Y underperformance vs. S&P 500 - 283%pt.)

• Index methodology: Includes components of the S&P Composite 1500, then selects for companies with the highest dividend yield whose dividends have been increased for the last 20 consecutive years. Furthermore, minimum requirements for market capitalization and liquidity of the share must be met. Maximum weighting per share 4%.

$SPYW (+0,47%) (Europe | TER 0.30 % | TD -0.35 % | DivRendite 3.7 % | 3Y underperformance vs.

Eurostoxx 600 - 1 %pt. | 5Y underperformance vs. Eurostoxx 600 - 24 %pt | 10Y underperformance vs. Eurostoxx 600 - 28 %pt.)

• Index methodology: Based on the S&P Europe Broad Market Index, companies must have increased or maintained stable dividends for 10 consecutive years, selection of the 40 companies with the highest dividend yield and weighting accordingly. Max. 5 % per share, 30 % per country/sector.

Conclusion - what remains: A balanced strategy with dividends as an admixture can make sense, whereby the focus should be on quality dividends rather than high payouts.

#smartbeta
#etf
#dividende

Hello dear getquin friends

I would like to expand my portfolio.

Currently my portfolio consists only of the $ISAC (-0,16%) and $BTC (-3,17%) (and a little $ETH (-2,78%) ) ... approx. 70/30.

I would like to add a distributing ETF. Yes, I would also like some dividends. I'm not currently dependent on dividends, but earning a small (or large) amount from dividends in 12 years or more is definitely interesting. So the goal is rather sustainable dividend growth with new ETFs.

If the USA share is no longer like 40%, this would not bother me either, as the share is already at the $ISAC (-0,16%) is already high.

I have the following ETFs in mind: $TDIV (-0,1%) / $VHYL (+0,05%) / $TSWE (-0,17%) / $FGEQ (-0,17%)

Whereby the USA share is again very high in the last one.

What do you think? Do you know any other good ETFs?

Hello everyone,

First of all about me:

I'm 21 years old, I'm doing a dual degree and have been investing since 07/2023. So far, my portfolio has a size of approx. 17,000€.

My plan is to invest approx. 70% in the $ISAC (-0,16%) and 30% small growth stocks such as $HIMS (+0,46%) , $SOFI (+0,25%) , $MSFT (+0,02%) etc.

The idea behind investing is mainly to supplement my pension and to ensure that the money in my current account is not gradually eaten up by inflation...; i.e. the investment horizon is 30-35 years.

Now to my actual question to you, to get one or two more experienced opinions :)

Until I was 18, my parents regularly saved in a building society savings account, which has been "lying around" with an annual interest rate of 3%.

For over a year now, I've been toying with the idea of closing the building society savings account and transferring most of it to the $ISAC (-0,16%) for the most part.

The building society savings plan was only opened to save money and therefore, after a short time, the waiver of the reduced loan for later housing construction etc. was declared.

As a result, a premium of around €2,500 would be added to the amount of around €15,200 when it was paid out.

In this respect, the idea of reallocating came to me, but I wanted to get one or two opinions from a neutral perspective beforehand in order to weigh it up again...

When I spoke to the contact person at my bank on the phone two days ago without obligation and mentioned my idea, he wasn't so convinced, as the "stock market harbors great risks".

He was also very enthusiastic about the Uniglobal investment fund $DE0008491051 (+0,06%) investment fund and that the bank would also offer this for me, although this idea didn't really appeal to me and I now prefer the $ISAC (-0,16%) prefer.

What do you think of the bank advisor's idea?

Otherwise, I would be grateful for any opinions and wish you a pleasant evening and a nice rest of the weekend :)

Your swarm intelligence desired 😉

I started my ETF investments at the end of 2021.

So far, I have invested my money in the MSCI World without a concept (only $ISAC (-0,16%) then $IWDA (-0,01%) ), $IUIT (-0,21%) and $IUHC (+0,05%) . Dips were bought later and when prices were good.

I am a bit suspicious of the Chinese stock market because the government there can manipulate the market considerably - hence the move to the $IWDA (-0,01%)

I also have the DWS funds that were set up for me as a child.

The shares are more for "playing".

As I haven't yet found a method for evaluating shares that gives me a good feeling, I'm still a bit cautious here.

$WQDS (-0,09%) , $ESIT (+0,16%) and $INGR I would describe these as missteps and will probably sell them soon.

Now I would like to go for a clean concept and invest in savings plans.

The aim is to secure my pension and build up my assets.

Now I'm just faced with the question:

What is the best way to weight my portfolio?

Core-Sattelite? - Are $IUIT (-0,21%) and $IUHC (+0,05%) Sattelites or already core?

50% MSCI World Core, 20% EM and 30% $IUIT (-0,21%) / $IUHC (+0,05%) ?

How would you proceed or what would your weighting look like in my portfolio?

I would be very happy to receive tips, suggestions and advice.

I'm a bit at a loss 😁

Thank you very much for your help

A little thought experiment:

Everyone who starts investing asks themselves what they should buy, what will go up the most!

Many opt for individual shares

But does that make sense? Especially for small amounts / beginner portfolios

Let's take a look at this:

Assumption: 1000€ deposit

(development after 1 year)

Share 1: 200€ (50% +) = 300€

Share 2: 200€ (5% +)= 210€

Share 3: 200€ (5% +)= 210€

Share 4: 200€ (0% +/-)= 200€

Share 5: 200€ (-25%)= 150€

Total after 1 year: 1070€

1 ETF solution:

1000€ ( assumption 7% p.a.) = 1070€

Of course, I have adjusted the values so that the result for both is €1070, but what I am trying to say is:

"If you don't deal with shares full time or examine each company closely, you can lose so much return with just one bad purchase that it's not even worth the risk of a single share."

(Finanzkeks - 12.08.2024🫶🏻)

And in this example I am only talking about one bad investment + one 0% case and even one very good investment (+50%).

What if there had been more bad investments or no very good investment at all?

Beginners in particular should therefore perhaps opt for the ETF variant (even if the 7% p.a. is of course not guaranteed)

Example: $VWRL (-0,11%) or $ISAC (-0,16%)

This saves work/time and possible loss of returns. I myself have nothing against individual stocks, but if you hold them instead of an ETF, you should try to outperform it, which can go wrong with just one or two bad purchases.

Especially as individual stocks simply offer less diversification + higher volatility than a defensive ETF.

So to all beginners, take your time, get to know the stock market, start slowly, build a base and gain experience.

I myself have also bought individual shares -

and made bad purchases...🤡 Greetings $MPW (-1,17%)

Good evening,

I currently have the $ISAC (-0,16%) and the $500 (-0,02%) in my portfolio. I'm thinking about selling the $500 and putting it into the $ISAC (-0,16%) because it has the highest weighting of the same stocks anyway. That way I can reduce my USA share. The investment case for the S&P 500 was the strong US economy, which is now weakening a little. I would take the performance of the big players $ISAC (-0,16%) also take with me.

What is your opinion?

Hello GQ community!

I would like to introduce you to my portfolio today and will share regular updates.

💡 My path to building wealth:

After a long period of hesitation and due to the high inflation after the pandemic, I decided to finally invest in ETFs and individual shares. It was frightening to see how my hard-earned savings in my call money account were melting away. So I decided to actively do something about it.

🚧 Portfolio building:

- Core Satellite: The ETF core consists of the MSCI ACWI $ISAC (-0,16%) and the STOXX Europe 600 $n/a (+0,31%)

- Satellites: Focus on dividend stocks, currently limited to a maximum of 8-10 positions.

📊 Strategy:

- Buy and hold: The core remains untouched, while the satellites are bought and actively traded when valuations are favorable.

⏳ Investment horizon:

- Long-term: until retirement, i.e. around 25-30 years.

🏦 Nest egg:

- I keep 3 to 6 net monthly salaries as a safety reserve.

💰 Savings rate:

- Currently €1000 per month, 70% of which goes into the portfolio and 30% into the call money account for the nest egg. As soon as this is "filled", 100% of the savings rate is invested in the portfolio.

🎯 Goal:

- To close the pension gap and be in a better financial position.

📍 Next milestone:

✅⬜️⬜️⬜️⬜️⬜️⬜️⬜️⬜️⬜️ 100.000€

📋 Milestones achieved:

🔒 2024-XX - €20,000

🏆 2024-06 - 15.000€

🏆 2024-01 - 10.000€

🏆 2023-11 - 5.000€

🤝 I look forward to sharing my journey with you and am excited to hear your comments and suggestions!

#️⃣ #vermögensaufbau
#etfs
#aktien
#dividenden

Hello GQ community,

I am toying with the idea of investing my MSCI ACWI $ISAC (-0,16%) and my EUROPE STOXX 600 $n/a (+0,31%) ETF core with a small cap ETF.

While searching for a small cap ETF, I stumbled across the following indices and could not find satisfactory answers.

As far as I know, the ACWI and the STOXX 600 include industrialized and emerging markets but no small caps. I deliberately chose this at the beginning so that I could control the weighting of the small caps myself at a later or future date as required.

❓The MSCI World Small Cap includes the small caps from industrialized countries that had too small a market capitalization to be included in the MSCI World, right?

❓The MSCI Emerging Markets Small Cap comprises the small caps from emerging markets that had a market capitalization too small to be included in the MSCI Emerging Markets, correct?

❓I'm not really clear on the difference between MSCI World Small Cap and MSCI Emerging Markets Small Cap.

I would be very happy if you could explain this to me😁

❓Can you give me suggestions for a global small cap ETF? I would be grateful for any help.

Best regards and many thanks in advance🫶

I largely cover the $ISAC (-0,16%)

TER costs of the $FTWG (-0,22%) are 0.05% lower, however. Would it be an alternative for you, even if it is relatively new and (still) has a lower fund volume?