Hey, great video... First of its kind. Searching from long time... No one talked so far about dividend paid by the companies in which fund has invested.
Qualified Dividends (Stock/Options held longer then 60 days) fit into capital gains tax and have a 0% tax rate if you make under $120.000. There are no taxes on dividends.
1. Qualified dividends are taxed either 0%, 15%, 0r 20% depending in your taxable income. www.nerdwallet.com/blog/taxes/dividend-tax-rate/ 2. Not all dividends are qualified dividends. There are some requirements other than the holding period, too. www.irs.gov/publications/p550#en_US_2020_publink100010075 3. Yes, there are taxes on dividends. Both Ordinary and Qualified
Everyone talks about dividend payout and reinvest, how does it get paid out and how do we reinvest? Or is that all automatically done for us as long as we own them?
Good that you point out that dividends may not be tax efficient and that it may be better to hold shares in an index fund that is an ‘accumulation’ fund instead of a ‘distribution’ fund. Also, ignoring taxes, from an investor’s pov, one should be agnostic re dividends as the price of a share drops by the exactly the amount of the dividend on the ex-div date.
Exactly, also It generally better for younger investors to look at it that way. Older investors that may want more stability may want more income producing stability vs growth producing volatility.
Thanks for your great content, I am VERY new to this and trying to take in as much as possible so it is extremely helpful! What happens to your dividends when markets crash (ie if you receive dividends when things are going well does this mean that you owe money when crashes happen)? Also, I hear a lot about people automatically reinvesting their dividends, is this the standard/are you penalized for not doing this and simply taking the money? Thanks again!!
Hello Juliet! If the market happens to be not doing so well, it is up to the individual companies to decide if they want to pay dividends or not, usually through a vote from the board of directors. As a public shareholder you are NEVER responsible for a companies debt or other obligations. Dividend reinvestment is usually the default setting within your account/fund, you are not penalized for taking dividends, but your investment return will likely suffer of you don't reinvest them. I hope this helps answer you questions! I'm happy to help anytime!
I believe that individual investors typically cannon participate in IPO in most cases, and we have to wait for the stock to hit the stock exchange. However, I would personally caution against investing in brand new companies, as it can be very risky (just my personal investment philosophy). I think this article from Bank Rate will help you: www.bankrate.com/investing/getting-in-on-an-initial-public-offering/
Honestly doesn't matter much. FXAIX in retirement account, IVV in taxable brokerage account. If account is with Fidelity then FXAIX, otherwise, probably IVV. That's my $0.02. I prefer ETFs in taxable accounts. I prefer being able to transfer assets to different brokerages (easier with ETFs).
@OCF, would have enjoyed a brief comment on the choice an account holder has to either reinvest, or retain in a cash fund, those periodic fund dividend distributions that you covered in this episode, and how that choice feeds the realized return of your index fund holding.
Oh okay sorry about that, I just assume that distributions are always reinvested and that is built into that expected return before inflation. I suppose its one of those things that I always assume other people think the same, it may be a flaw when I am trying to explain things, thanks for pointing it out
Tax basis with index funds is definitely something on my radar especially tax gain/loss harvesting but I think that it might be too in-depth as a topic for RUclips. However, if you are interested then surely there are more people interested in the topic and something that would be fun to explore.
If you sell them then yes. Otherwise, maybe if there is a change to the index, but it's rare to see much capital gains without you physically selling shares.
Dude you are a gem man. Thank you, I have a question regarding capital gains. How do you live off that when you invest in index fund. Yes dividends are a great source of income but is there a way to make capital gains as a source of income? How to make use of capital gains? Love to hear from you dude take care.
I really appreciate the positive feedback, it helps keep me going, so thank you. The way you live off of capital gains is by selling shares of the index fund :)
If you are referring to the dividend then I believe it was the YTD yield, I'm sorry that I didn't specify. SP 500 dividend yield data is available online and it changes every month. Then at the end of the year the average is taken.
Love the video, best one i’ve found on this topic, Question: what apps or websites do you recommend and do dividends go straight into my bank account? thanks man 😄
I have some of my best recommendations at oncashflow.com/resources such as financial tracking tools, investing platform, and even bank accounts. :) I would also recommend that you automatically have your dividends reinvested so your wealth grows much faster!
Yes so if an index fund were to realize a capital gain then that capital gain would be distributed to shareholders in a similar way to dividends. Remember that if you are investing in a tax advantaged retirement account then none of this will affect your taxes though.
I’m investing $500 a month for the next twenty years in the S&P 500. I’m doing it through an app with no broker fees. I’m not looking for financial advise. But is this wise as opposed to leaving $500 a month in my bank ?
Correct if I'm wrong. Let's say someone invested $1 million on index fund with 8% annual return. So the value of this stock after 1 year will be $1.08 mil. My question is - if the index fund pays quarterly dividend, how much would it be? ( $1 mil investment )
The 8% annual return would include reinvested dividends AND appreciation. So yes, if you invested $1m and 1 year later you had 1.08m then that would be an 8% annual return. But there are the two different types of returns you can receive from the mutual fund; it pays you dividends and it appreciates in value. The 8% return would have to include reinvested dividends. If you didn't reinvest those dividends that they paid out quarterly, your annual return could have still been 8% but the value of the portfolio wouldn't be $1.08m depending on what the dividend payout rate was. For example, if the fund paid out a 2% annual dividend rate and appreciated by 6% then your total annual return (before inflation) would be 2% + 6% = 8%. But if you took those dividends and didn't reinvest them then the $1m initial investment would be $1.06m (from the 6% appreciation) I hope this helps explain it a bit better!
Follow up. How then can you live off that 6% every year? What’s the actual process to convert that 6% into actual money you can spend? And what are the tax implications? Thank you!
@@thanos3839 You can either purchase or sell shares of the entire index fund. The index fund itself holds the stocks and other assets. You can not buy/sell individual stocks within the index fund, only the entire fund itself. I hope this answers your question.
I don't think any index funds pay dividends at that high of a rate. I believe the highest dividend paying funds are REITs (real estate investment trusts)
Thanks for this info!! But I’m confused, when the companies pay Dividends, where are they paid? In the investment account? Or does it get deposited in money market (settlement) account?
It gets paid into your investment account and is held in cash, or sometimes you can elect to have it held in a money market fund to earn a tiny amount of interest. The easiest and best thing for most people is to simple have dividends auto-reinvest.
If I’m 18 and looking to invest for the future, but not sure if I want to keep my money in the index until retirement, can I take it out before then if I have a regular/Roth ira? If so, what kind of tax would there be on it? I’m very new to this stuff and getting used to how the stock market works, thank you for your videos! They’ve been a big help
Hi Brian! If you put money in a Roth IRA then you can always withdrawal your Contributions tax and penalty-free (after the Roth IRA is 5 years old). At age 18, most likely a Roth IRA is going to be the best choice because your earnings are probably lower and your tax bill is lower at this time. I'm really glad that my videos are helpful! Please consider watching these videos to best answer your question further: Roth IRA Explained: ruclips.net/video/qDa00JZhgHE/видео.html Traditional IRA Explained: ruclips.net/video/I9L680olbsM/видео.html IRA contributions Explained: ruclips.net/video/LRIJlV7v_y4/видео.html
@@OnCashFlow thank you so much! I’ll finish watching all your videos on retirement accounts. I find your explanations very helpful and much easier to understand than others out there!
Hey there , I’m an 18 year old looking to one day live off my passive Income or at least have it cover most of my costs. I’m in no need of money right now and don’t mind investing over the long run . Which would you say would be better for me . Investing in the s&p or individual dividents stocks . Also you said you get taxed on dividends . How much is this tax like if I earned £1000 per month in dividends how much would I lose to tax, thanks 😊
Hello! If you are investing for the long run and want to take a passive approach then you usually can't go wrong with broad based index fund investing (such as the S&P 500). I can't estimate how much you would pay in taxes on dividends for £. I only know about US dividend tax rates, I have another great video on that as well that I think would help you. Id I can help more, please let me know!
Thank you very much for the positive feedback! I really do appreciate it! Most index funds are already very tax efficient for being in a taxable account. For example, the S&P 500 usually hovers around a 2% or less dividend rate, and most of those dividends are "qualified". Even more tax efficient would be an equivalent Exchange Traded Fund (ETF). You can't go wrong with an S&P 500 ETF or Total U.S. Stock Fund in a taxable account because of the low turnover rate and low dividend yield. I hope this helps!
I think they are set up to reinvest automatically. I believe you would have to change this setting with your broker. It could possibly be different with different brokers. I use Fidelity and I believe they reinvest dividends automatically for me.
Just wondering how you know if you're getting the right amount of 'distribution Reinvestment' and if you should switch funds? I have about £8000 in stocks and shares ISA invested in S&P Index fund. It's about £1,000 up on the year from when I started and each month it says about £0.40 reinvested? Just a bit confusing as there's no details other than the figure. Thanks
Good content! I dont undesrtand how i calculate how much i am going to earn from dividends. Where can I find this information? Here in Brazil we have a long term dividends data from some assets, like dividends go up or down in a line of 0,70$. Do we have this kind of information of us etfs? Thanks!
I'm not sure if it works differently in Brazil, but in the U.S. we receive Form 1099-DIV from our brokerage company at the end of the tax year. Meanwhile, most brokerage companies have a "tax info year-to-date" tab on their website that says how much dividends, capital gains, etc. We have received so far this year.
Absolutely, I'm glad that I could be helpful! By the way, may you please help me out by letting me know what made this video particularly helpful for you? (So that I can try to replicate this helpfulness going forward) Thank you!
How often do you get paid? I know some companies give 1 per year or once per month it varies. My question is lets say you put in 500 and you get 4% return do you get the return once per month or once per year to make it simple do i get the 4% once per year or per month?
Hello, When referring to returns, it is typically an annual return, regardless of how often you receive the payment. For example, if you had $500 and received a 4% dividend, then your total dividends for the year would be $20, regardless of if they were paid out monthly, quarterly, semi-annually, or annually. Typically, if you are investing in index funds, they will pay out dividends either annually or semi-annually. However, different funds could have different rules. So usually you will receive 2% twice per year or 4% once per year (assuming a 4% dividend payout). Also remember that total return includes not only what is paid to you (dividends, interest, etc.) but also the appreciation of the asset. I hope this answers your question! please let me know if you need any more help.
You still didn't say if the companies in the fund do that pay divendens how the pay...for example if 400 companies of the S and p will the share holder get a divendens from each of the 400 companies..?
I believe that the mutual fund owns the shares and therefore the dividends are paid to the mutual fund. Then the mutual fund distributes the dividends accordingly to shareholders of the mutual fund. You as the owner of the mutual fund technically get the funds from the mutual fund itself. I hope this helps clarify! :)
When there’s a negative year in the S&P 500, are there no dividends paid out? If so, then why do people say to hold and ride out the bear market? I don’t understand that part
You can choose either or. I prefer ETFs in a taxable account, and for simplicity I kept all of my investments as the ETF version. Related video I made: ruclips.net/video/zWqwR3em5NY/видео.html
The dividends can either accumulate into the account held in cash or be automatically reinvested. You won't realize any taxable amount from the dividends because the Roth IRA grows tax free. I hope this helps!
You can buy and sell index funds which contain stocks. I'm not sure what an annual fund is. However, google search seems to suggest that it refers to non-profit organizations raising donations.
@@thanos3839 Annual returns are the amount of investment return you receive from an investment on an annual basis. if you invest $100 and receive $10 that year then your annual return was 10% ($10 / $100).
@@OnCashFlow in the video you states that the median is 4%,for example, does that mean when u bought 100$ worth of index fund, will u get 4$ dividend annually?
@@hafidzrazman5365 Yes, theoretically it would be the value of one share when the dividends were paid out. Dividend Yield = Annual Dividends Paid Per Share / Price Per Share 4% = $4 /$100 Keep in mind that the yield is much lower today (1.38%) according to a search that I just performed.
@@OnCashFlow whenever I research a companies dividend yield it shows me their annual yield percentage and their quarterly. Is this because the company offers both annual and quarterly dividend? If so how do you know if a company you invest in will decide to pay quarterly or annual for that year?
Thanks for the video! Very informative. I am about to ask you a dumb question, is the goal when long term investing for retirement into index funds, the compound interest, or if the stock might go up and in let’s say 40 years when I want to retire sell it than for a profit? I watched a lot of videos about index funds but no one ever mentioned the end goal of investing in index funds other than dividends. Are dividends just a bonus while you should hope it is worth more later?
The compounding comes from both dividends and appreciation (becoming worth more over time). Compounding happens because the same average return is placed on a larger and larger principal amount. The end goal is generally to sell some of the assets in retirement and live off dividend payments and the sales of some of the shares. Trust me, keep learning and it will click over time I promise! :)
If I buy an individual stock that pays dividend when the stock price is low (during a crash) the dividend can be quite high percentage right? Does that work for index funds too? Buy a fund during a crash and dividends will be higher?
I cannot definitively say for sure. however, I personally believe that it is still a good long term investment. the SP 500 is invested in Asia. plus you could allocate more to an international fund it you wanted to. what matters more is growth of profits in the long run.
When they say 10% they usually mean on average over a long period of time, the Dividend Rate + Growth is around 10%. They do not mean just the dividend.
One more note: a large proportion of stock and stock fund dividends and distributions do enjoy the same “qualified” favorable tax treatment as do long term capital gains. Believe you have mentioned that in a past episode, but didn’t make the cut on this episode. 😎
Oh yes qualified dividends are certainly on my radar of topics in the future, it's so easy to forget to mention them, thanks for pointing that out. It's difficult to go over everything sometimes because there is so much to go over, but at the same time I never want to complicate things for the average person.
Your brokerage company reports all of your dividends on your tax forms. Hypothetically you would take the value of your investment and multiply it by the dividend rate. You can find the sp 500 dividend rate easily online. If the annual dividend rate was 1.8% then you should receive. $333 of dividends on $18,500. However, it's more complicated then that because the dividend yield is dependent on the current valuation of the index, which is constantly changing.
If the dividends are in a regular investment account then yes. If they are in a retirement account or tax sheltered account then no. I have a related video that I think might help you out :) ruclips.net/video/51Qusolkhus/видео.html
@@OnCashFlow You're wrong! Qualified Dividends (Stock/Options held longer then 60 days) fit into capital gains tax and have a 0% tax rate if you make under $120.000. There are no taxes on dividends.
@@ZeginMakesMusic Qualified dividends are taxed at the long-term capital gains tax rate, yes. But they are still taxed. The 0% tax rate ends well before 120k. Please see IRS Pub 550 www.irs.gov/publications/p550#en_US_2020_publink100010066
So if I invest $100 initially in sp500 and pay monthly $100 for 3 years...every year I would receive all I invested plus more which is what I gained? This is an example but I am trying to find a strategy for saving money and pay off my $300,000 student loan debt that I will have to pay off once I graduate, plus having some passive income since as a medical student all my time is dedicated to school like a full-time job...I thought about buying a house and renting it but I want to see if this will be a good strategy too...
No, that's not how it works. Your $100 becomes shares of a mutual fund/ETF. Those shares will fluctuate in price daily. You will get paid dividends probably on a quarterly basis. The value of your shares may be worth more or less than you bought them for each year (Volatility).
Hey, great video... First of its kind. Searching from long time... No one talked so far about dividend paid by the companies in which fund has invested.
Thank you for the kind words! I'm trying to seek out the answers to many questions that still need answering! :)
Qualified Dividends (Stock/Options held longer then 60 days) fit into capital gains tax and have a 0% tax rate if you make under $120.000. There are no taxes on dividends.
1. Qualified dividends are taxed either 0%, 15%, 0r 20% depending in your taxable income.
www.nerdwallet.com/blog/taxes/dividend-tax-rate/
2. Not all dividends are qualified dividends. There are some requirements other than the holding period, too.
www.irs.gov/publications/p550#en_US_2020_publink100010075
3. Yes, there are taxes on dividends. Both Ordinary and Qualified
Everyone talks about dividend payout and reinvest, how does it get paid out and how do we reinvest? Or is that all automatically done for us as long as we own them?
This is my question also, surprised he didn’t answer it but liked it
@@savingsoulsforchrist6185 lol no one ever talks about this, they just say invest and reinvest? It's all jargon to a beginner like me
You basically put more money into the fund over time. Do a little research on dollar cost averaging.
loved this, thank you for the tips. new sub here ❤️
Thank you very much for watching and welcome!
Good that you point out that dividends may not be tax efficient and that it may be better to hold shares in an index fund that is an ‘accumulation’ fund instead of a ‘distribution’ fund. Also, ignoring taxes, from an investor’s pov, one should be agnostic re dividends as the price of a share drops by the exactly the amount of the dividend on the ex-div date.
Exactly, also It generally better for younger investors to look at it that way. Older investors that may want more stability may want more income producing stability vs growth producing volatility.
Thanks for your great content, I am VERY new to this and trying to take in as much as possible so it is extremely helpful! What happens to your dividends when markets crash (ie if you receive dividends when things are going well does this mean that you owe money when crashes happen)? Also, I hear a lot about people automatically reinvesting their dividends, is this the standard/are you penalized for not doing this and simply taking the money? Thanks again!!
Hello Juliet! If the market happens to be not doing so well, it is up to the individual companies to decide if they want to pay dividends or not, usually through a vote from the board of directors. As a public shareholder you are NEVER responsible for a companies debt or other obligations. Dividend reinvestment is usually the default setting within your account/fund, you are not penalized for taking dividends, but your investment return will likely suffer of you don't reinvest them. I hope this helps answer you questions! I'm happy to help anytime!
@@OnCashFlow very helpful, thanks so much! 🙏
Thank you👍 keep up the great work. Your page will blow up soon just keep going.
Thank you so much! I really appreciate your kind words! :)
2:22 Thank You Thank You Thank You
Absolutely! I am more than happy to help, and I am glad that you found it useful! :)
@@OnCashFlow Absolutely Thank You again
how to find the company's ipos and apply ?
I believe that individual investors typically cannon participate in IPO in most cases, and we have to wait for the stock to hit the stock exchange. However, I would personally caution against investing in brand new companies, as it can be very risky (just my personal investment philosophy). I think this article from Bank Rate will help you:
www.bankrate.com/investing/getting-in-on-an-initial-public-offering/
@@OnCashFlow thanks mate cheers
Fxaix or ivv?
Honestly doesn't matter much. FXAIX in retirement account, IVV in taxable brokerage account. If account is with Fidelity then FXAIX, otherwise, probably IVV. That's my $0.02. I prefer ETFs in taxable accounts. I prefer being able to transfer assets to different brokerages (easier with ETFs).
I am really worried about the plant in the corner , please move it to a safer place :P. Excellent video, thanks for explaining :)
I only put it there temporarily while filming so it looks good in the shot! lol Thank you!
@OCF, would have enjoyed a brief comment on the choice an account holder has to either reinvest, or retain in a cash fund, those periodic fund dividend distributions that you covered in this episode, and how that choice feeds the realized return of your index fund holding.
Oh okay sorry about that, I just assume that distributions are always reinvested and that is built into that expected return before inflation. I suppose its one of those things that I always assume other people think the same, it may be a flaw when I am trying to explain things, thanks for pointing it out
can you sell stocks on an index fund???
Could have benefitted from discussion of how/whether fund distributions increase the tax cost basis of the given security.
Tax basis with index funds is definitely something on my radar especially tax gain/loss harvesting but I think that it might be too in-depth as a topic for RUclips. However, if you are interested then surely there are more people interested in the topic and something that would be fun to explore.
Great video, I was looking for the answer to that question.
Awesome! So glad I could help!
Be also awesome if you did live feed on potential high yield stocks, giving people up to date scope and model portfolios.
Hmm, that's not really my investment style, sorry! I'm a boring index fund investor ;)
@@OnCashFlow Nothing boring about finance at all, ray dalio style.
Do index funds usually pay capital gains? Thanks.
If you sell them then yes. Otherwise, maybe if there is a change to the index, but it's rare to see much capital gains without you physically selling shares.
Dude you are a gem man. Thank you, I have a question regarding capital gains. How do you live off that when you invest in index fund. Yes dividends are a great source of income but is there a way to make capital gains as a source of income? How to make use of capital gains?
Love to hear from you dude take care.
I really appreciate the positive feedback, it helps keep me going, so thank you. The way you live off of capital gains is by selling shares of the index fund :)
@@OnCashFlow Stay safe man. Thank you.
great video mate
Thank you so much!
so etf's are not paying dividends?
Yes they do, I apologize if I made it seem otherwise.
2% of what? daily? monthly or annually?
If you are referring to the dividend then I believe it was the YTD yield, I'm sorry that I didn't specify. SP 500 dividend yield data is available online and it changes every month. Then at the end of the year the average is taken.
What are the top 5 index funds & top 5 trust funds in USA?
That depends on what you mean by "top" best performing (for what time period)? most assets under management? My favorite?
@@OnCashFlow top 5 in dividends & capital appreciation?
@@TheByzmal I would check out a website like Morningstar because they evaluate all the funds and develop lists like what you are looking for :)
Love the video, best one i’ve found on this topic, Question: what apps or websites do you recommend and do dividends go straight into my bank account? thanks man 😄
I have some of my best recommendations at oncashflow.com/resources such as financial tracking tools, investing platform, and even bank accounts. :) I would also recommend that you automatically have your dividends reinvested so your wealth grows much faster!
What about capital gain distribution? Is that the same as dividends when it comes to an index fund?
Yes so if an index fund were to realize a capital gain then that capital gain would be distributed to shareholders in a similar way to dividends. Remember that if you are investing in a tax advantaged retirement account then none of this will affect your taxes though.
dividends coming from S&P 500 are montly or annual?
Usually they are quarterly
I’m investing $500 a month for the next twenty years in the S&P 500. I’m doing it through an app with no broker fees. I’m not looking for financial advise. But is this wise as opposed to leaving $500 a month in my bank ?
I think it is very wise as it will most likely grow much more exponentially beyond inflation.
Buy AMC shares to hedge against your SPY. A market crash and AMC squeeze are coming 4th quarter. Not financial advice
And what’s the name of that app you are using if you don’t mind? I want to do the same.
@@wisequotes9917 Stake. Also I don’t invest in stock market anymore. App is called Stake. It’s Australian
How do dividend yields compare between S&P 500 and total Stock market index funds?
VERY similar. 2022 numbers:
Vanguard S&P 500: 1.37%
Vanguard Total U.S. Stock Market: 1.33%
www.lazyportfolioetf.com/etf/vanguard-total-stock-market-vti-dividend-yield/
www.lazyportfolioetf.com/etf/vanguard-sp-500-voo-dividend-yield/
@@OnCashFlow Interesting. Thanks
so if i buy a index fund do i get the divines from all the companies that give dividends in the index fund
Yes, basically the dividends get passed through to you proportionally.
In 9 minutes you get 9 hour info, so cool,
Awesome! I'm glad it was useful! Thank you! :)
Does the S&P 500 dividends come yearly, monthly, quarterly or weekly?
It depends on the mutual fund/ETF but typically it is quarterly, or sometimes annually. :)
Correct if I'm wrong.
Let's say someone invested $1 million on index fund with 8% annual return. So the value of this stock after 1 year will be $1.08 mil.
My question is - if the index fund pays quarterly dividend, how much would it be? ( $1 mil investment )
The 8% annual return would include reinvested dividends AND appreciation. So yes, if you invested $1m and 1 year later you had 1.08m then that would be an 8% annual return.
But there are the two different types of returns you can receive from the mutual fund; it pays you dividends and it appreciates in value. The 8% return would have to include reinvested dividends.
If you didn't reinvest those dividends that they paid out quarterly, your annual return could have still been 8% but the value of the portfolio wouldn't be $1.08m depending on what the dividend payout rate was.
For example, if the fund paid out a 2% annual dividend rate and appreciated by 6% then your total annual return (before inflation) would be 2% + 6% = 8%. But if you took those dividends and didn't reinvest them then the $1m initial investment would be $1.06m (from the 6% appreciation)
I hope this helps explain it a bit better!
@@OnCashFlow yes! You just cleared all my doubts. Thanks a lot!
@@shamsiftikar8083 No Problem! I'm so glad I could help!
Follow up. How then can you live off that 6% every year? What’s the actual process to convert that 6% into actual money you can spend? And what are the tax implications? Thank you!
Great video man, liked and subscribed!
Awesome! Thank you, I'm glad it was helpful!
can you sell stocks on an index fund???
@@thanos3839 You can either purchase or sell shares of the entire index fund. The index fund itself holds the stocks and other assets. You can not buy/sell individual stocks within the index fund, only the entire fund itself. I hope this answers your question.
@@OnCashFlow oohhh ok so its for the long term compared to other types of mutual fund
What is the highest index funds dividend rate i need like at least 8 or 9 percent dividends can I get that with index funds or no
I don't think any index funds pay dividends at that high of a rate. I believe the highest dividend paying funds are REITs (real estate investment trusts)
@@OnCashFlow thx i think etf pays more right .
@@hamdan_godisgreat7940 If it's an ETF and a mutual fund that tracks the same index then the payout will be almost exactly the same.
kbwd i found this etf pays almost 9 percent dividend
Thanks for this info!! But I’m confused, when the companies pay Dividends, where are they paid? In the investment account? Or does it get deposited in money market (settlement) account?
It gets paid into your investment account and is held in cash, or sometimes you can elect to have it held in a money market fund to earn a tiny amount of interest. The easiest and best thing for most people is to simple have dividends auto-reinvest.
If I’m 18 and looking to invest for the future, but not sure if I want to keep my money in the index until retirement, can I take it out before then if I have a regular/Roth ira? If so, what kind of tax would there be on it? I’m very new to this stuff and getting used to how the stock market works, thank you for your videos! They’ve been a big help
Hi Brian! If you put money in a Roth IRA then you can always withdrawal your Contributions tax and penalty-free (after the Roth IRA is 5 years old). At age 18, most likely a Roth IRA is going to be the best choice because your earnings are probably lower and your tax bill is lower at this time.
I'm really glad that my videos are helpful! Please consider watching these videos to best answer your question further:
Roth IRA Explained:
ruclips.net/video/qDa00JZhgHE/видео.html
Traditional IRA Explained:
ruclips.net/video/I9L680olbsM/видео.html
IRA contributions Explained:
ruclips.net/video/LRIJlV7v_y4/видео.html
@@OnCashFlow thank you so much! I’ll finish watching all your videos on retirement accounts. I find your explanations very helpful and much easier to understand than others out there!
Hey there , I’m an 18 year old looking to one day live off my passive Income or at least have it cover most of my costs. I’m in no need of money right now and don’t mind investing over the long run . Which would you say would be better for me . Investing in the s&p or individual dividents stocks . Also you said you get taxed on dividends . How much is this tax like if I earned £1000 per month in dividends how much would I lose to tax, thanks 😊
Hello! If you are investing for the long run and want to take a passive approach then you usually can't go wrong with broad based index fund investing (such as the S&P 500). I can't estimate how much you would pay in taxes on dividends for £. I only know about US dividend tax rates, I have another great video on that as well that I think would help you. Id I can help more, please let me know!
Great video, what index funds should I put in my taxable account that will be beneficial with my taxes. Thank you for your help.
Thank you very much for the positive feedback! I really do appreciate it! Most index funds are already very tax efficient for being in a taxable account. For example, the S&P 500 usually hovers around a 2% or less dividend rate, and most of those dividends are "qualified". Even more tax efficient would be an equivalent Exchange Traded Fund (ETF). You can't go wrong with an S&P 500 ETF or Total U.S. Stock Fund in a taxable account because of the low turnover rate and low dividend yield. I hope this helps!
are dividends for the most part in index funds automatically reinvested back into the fund?
I think they are set up to reinvest automatically. I believe you would have to change this setting with your broker. It could possibly be different with different brokers. I use Fidelity and I believe they reinvest dividends automatically for me.
Just wondering how you know if you're getting the right amount of 'distribution Reinvestment' and if you should switch funds? I have about £8000 in stocks and shares ISA invested in S&P Index fund. It's about £1,000 up on the year from when I started and each month it says about £0.40 reinvested? Just a bit confusing as there's no details other than the figure. Thanks
Hard to say, but you would have to read the reports that the fund publishes, they are usually sent out quarterly IIRC.
Good content! I dont undesrtand how i calculate how much i am going to earn from dividends. Where can I find this information? Here in Brazil we have a long term dividends data from some assets, like dividends go up or down in a line of 0,70$. Do we have this kind of information of us etfs? Thanks!
I'm not sure if it works differently in Brazil, but in the U.S. we receive Form 1099-DIV from our brokerage company at the end of the tax year. Meanwhile, most brokerage companies have a "tax info year-to-date" tab on their website that says how much dividends, capital gains, etc. We have received so far this year.
This was great. Thank you.
Absolutely, I'm glad that I could be helpful! By the way, may you please help me out by letting me know what made this video particularly helpful for you? (So that I can try to replicate this helpfulness going forward) Thank you!
Great video!
Thank you so much!
DO THE DIVIDED AUTOMATICALLY REINVEST OR IS THERE A REQUEST TO FILL OUT?
I think the default is reinvest. it could depend on the broker, so the easiest thing would be to look on your brokers website.
very helpful video!
Thank you!
How often do you get paid? I know some companies give 1 per year or once per month it varies. My question is lets say you put in 500 and you get 4% return do you get the return once per month or once per year to make it simple do i get the 4% once per year or per month?
Hello, When referring to returns, it is typically an annual return, regardless of how often you receive the payment. For example, if you had $500 and received a 4% dividend, then your total dividends for the year would be $20, regardless of if they were paid out monthly, quarterly, semi-annually, or annually.
Typically, if you are investing in index funds, they will pay out dividends either annually or semi-annually. However, different funds could have different rules. So usually you will receive 2% twice per year or 4% once per year (assuming a 4% dividend payout).
Also remember that total return includes not only what is paid to you (dividends, interest, etc.) but also the appreciation of the asset. I hope this answers your question! please let me know if you need any more help.
You still didn't say if the companies in the fund do that pay divendens how the pay...for example if 400 companies of the S and p will the share holder get a divendens from each of the 400 companies..?
I believe that the mutual fund owns the shares and therefore the dividends are paid to the mutual fund. Then the mutual fund distributes the dividends accordingly to shareholders of the mutual fund. You as the owner of the mutual fund technically get the funds from the mutual fund itself. I hope this helps clarify! :)
When there’s a negative year in the S&P 500, are there no dividends paid out? If so, then why do people say to hold and ride out the bear market? I don’t understand that part
There are still dividends paid out, but they may be smaller in absolute terms. It is the value per share that is temporarily valued at less.
Hi Can anybody tell me, when investing to s&p 500 index fund do we have to invest either mutual funds or ETF Thanks
You can choose either or. I prefer ETFs in a taxable account, and for simplicity I kept all of my investments as the ETF version.
Related video I made:
ruclips.net/video/zWqwR3em5NY/видео.html
How do dividends work within Roth IRA ?
The dividends can either accumulate into the account held in cash or be automatically reinvested. You won't realize any taxable amount from the dividends because the Roth IRA grows tax free. I hope this helps!
Is there a way to search for funds that pay mostly qualified dividends? I’ve been trying to find 1099div information from funds that I don’t own.
Not that I know of, but the vast majority of index funds will most likely pay qualified dividends because they have low turnover.
can you sell stocks on an index fund???
Also what are annual funds???
You can buy and sell index funds which contain stocks. I'm not sure what an annual fund is. However, google search seems to suggest that it refers to non-profit organizations raising donations.
sorry i meant annual return
@@thanos3839 Annual returns are the amount of investment return you receive from an investment on an annual basis.
if you invest $100 and receive $10 that year then your annual return was 10% ($10 / $100).
@@OnCashFlow in the video you states that the median is 4%,for example, does that mean when u bought 100$ worth of index fund, will u get 4$ dividend annually?
@@hafidzrazman5365 Yes, theoretically it would be the value of one share when the dividends were paid out.
Dividend Yield = Annual Dividends Paid Per Share / Price Per Share
4% = $4 /$100
Keep in mind that the yield is much lower today (1.38%) according to a search that I just performed.
Thanks for explaining.
I'm more than happy to help!
So if I had 10k in fidelity’s 500 index fund I’d get 2.08% of that depending on what their dividend percent is?
Yes, kinda, They usually pay dividends semi-annually and then the % is calculated annually.
@@OnCashFlow whenever I research a companies dividend yield it shows me their annual yield percentage and their quarterly. Is this because the company offers both annual and quarterly dividend? If so how do you know if a company you invest in will decide to pay quarterly or annual for that year?
@@THORFANG Annual is the average of all the quarterly payments. The company's financial documents usually state how often they plan to pay dividends.
Thanks for the video! Very informative.
I am about to ask you a dumb question, is the goal when long term investing for retirement into index funds, the compound interest, or if the stock might go up and in let’s say 40 years when I want to retire sell it than for a profit?
I watched a lot of videos about index funds but no one ever mentioned the end goal of investing in index funds other than dividends. Are dividends just a bonus while you should hope it is worth more later?
The compounding comes from both dividends and appreciation (becoming worth more over time). Compounding happens because the same average return is placed on a larger and larger principal amount. The end goal is generally to sell some of the assets in retirement and live off dividend payments and the sales of some of the shares.
Trust me, keep learning and it will click over time I promise! :)
Always good info on this channel thanks!
You're very kind, thank you!
@@OnCashFlow I always enjoy the content.
If I buy an individual stock that pays dividend when the stock price is low (during a crash) the dividend can be quite high percentage right? Does that work for index funds too? Buy a fund during a crash and dividends will be higher?
Possibly as a % of the the NAV yes. Assuming the dividend paying companies keep/increase their dividend payments.
Great info man, thanks!
No problem, I'm glad you found it helpful!
Great advice, subbed, liked, and am going to check out more of your videos when I get some free time. Cheers!
Awesome! Thank you so much, it really means a lot to me! :)
Is the S&P 500 still a good long term investment? Im hesitant as the weight of world economy is shifting to Asia
I cannot definitively say for sure. however, I personally believe that it is still a good long term investment. the SP 500 is invested in Asia. plus you could allocate more to an international fund it you wanted to. what matters more is growth of profits in the long run.
So when ppl say snp500 gives 10% a year, its 10% growth? Not 10% dividend?
When they say 10% they usually mean on average over a long period of time, the Dividend Rate + Growth is around 10%. They do not mean just the dividend.
Great man, thanks!
I'm glad it was helpful!
Great info
Awesome, so glad it was helpful!
One more note: a large proportion of stock and stock fund dividends and distributions do enjoy the same “qualified” favorable tax treatment as do long term capital gains. Believe you have mentioned that in a past episode, but didn’t make the cut on this episode. 😎
Oh yes qualified dividends are certainly on my radar of topics in the future, it's so easy to forget to mention them, thanks for pointing that out. It's difficult to go over everything sometimes because there is so much to go over, but at the same time I never want to complicate things for the average person.
Great video! Thanks 😊
Glad you liked it!
thanks
Happy to help!
1932 was during the Great Depression so market price would have been close to rock bottom which I expect would have skewed the dividend %
Certainly!
I recommend that you try out M1 Finance for automating your investments (including your dividend reinvestment!!!)
www.oncashflow.com/m1
I have $18500 in the s&p 500, what would I get after a year ? I do not have to calculate it
Can you rephrase your question please, I don't understand it. Are you asking how much in dividends you would receive?
Yes asking how much dividends, been trying to figure it out for awhile now
Your brokerage company reports all of your dividends on your tax forms. Hypothetically you would take the value of your investment and multiply it by the dividend rate. You can find the sp 500 dividend rate easily online. If the annual dividend rate was 1.8% then you should receive. $333 of dividends on $18,500. However, it's more complicated then that because the dividend yield is dependent on the current valuation of the index, which is constantly changing.
This is very helpful thank you !
I have a another question, if you had a index fund for 5+ years is the yield more or the same as if I had it for a year?
Do you pay taxes on dividends?
If the dividends are in a regular investment account then yes. If they are in a retirement account or tax sheltered account then no. I have a related video that I think might help you out :)
ruclips.net/video/51Qusolkhus/видео.html
@@OnCashFlow You're wrong! Qualified Dividends (Stock/Options held longer then 60 days) fit into capital gains tax and have a 0% tax rate if you make under $120.000. There are no taxes on dividends.
@@ZeginMakesMusic Qualified dividends are taxed at the long-term capital gains tax rate, yes. But they are still taxed. The 0% tax rate ends well before 120k. Please see IRS Pub 550
www.irs.gov/publications/p550#en_US_2020_publink100010066
So if I invest $100 initially in sp500 and pay monthly $100 for 3 years...every year I would receive all I invested plus more which is what I gained? This is an example but I am trying to find a strategy for saving money and pay off my $300,000 student loan debt that I will have to pay off once I graduate, plus having some passive income since as a medical student all my time is dedicated to school like a full-time job...I thought about buying a house and renting it but I want to see if this will be a good strategy too...
No, that's not how it works. Your $100 becomes shares of a mutual fund/ETF. Those shares will fluctuate in price daily. You will get paid dividends probably on a quarterly basis. The value of your shares may be worth more or less than you bought them for each year (Volatility).
I PREDICT … you are going to knock that plant off the table. Good luck with that.
It's only in that position for the videos lol, and it has happened before! ;)
Nice bideo
Thanks
I swear one day you are going to knock over that plant 🌱
It has happened haha
Holy fuck, I love u. Thank you so much.
You are very welcome! Thank you for watching!