@@rick.austin Yes, please. Could you explain the growth mechanism of ETF investments? For example, I don’t understand the difference between YTD returns and Dividend Yield. I read that ETFs don’t have compound interest, so does that mean the growth of my investments, such as in VOO, is driven only by the following formula: [My previous investment + My monthly investment + ETF price growth + Reinvested Dividends]? If that’s the case, does it mean that if I stop making monthly investments and start living off the monthly dividends, my principal would begin to decrease, with the only factor of growth being the price increase of VOO itself? Also, what exactly do VOO's YTD returns and Dividend Yield represent? For instance, VOO shows a 1.28% Dividend Yield and 18.7% YTD returns, but I’m unclear on what these percentages actually mean. Does the 18.7% YTD return include reinvested dividends, or is it calculated differently? If it's not related to compound interest, as I've read on Reddit, could you explain how these returns are generated and how they affect my overall investment? I’d appreciate a breakdown of how this works. Thank you very much for your time!
Sure, let me explain it here. 1) YTD Returns are "Year-To-Date Returns" and represent the total growth of the ETF or Stock in the last 12 months including appreciation (growth of the etf price) AND dividends. So the dividend Yield is going to be only a part of it. For example if you have an ETF that gave you 2% dividends in the last 12 months and also grew with its price 3%, your YTD return will be 5%, while the dividend yield 2%. 2) ETFs have compound growth just like any other investment. Let me give you an example: You invest in an ETF that costs you $100. The ETF gives you 2% dividends ($2) and grows 50% in one year. Now its valued around $150. Next year it gives you again 2% (which now is 2% of 150, not 100), therefore $3, and grows again 50%. This 50% is now applied to $150, which means it grows +$75. All of this, the effect on accelerating growth of the price AND of the dividends, is the compounding interest effect. 3) If you start living off your monthly dividends, the price won't go down. It will either go up, if the ETF price appreciation is higher than the dividend yield (it usually is), or in an extreme case it will stay the same if the ETF price appreciation is lower than the dividend yield. 4) The 18.7% YTD return includes reinvested dividends. When you look at return data on the internet, it usually includes reinvested dividends because the goal is to give a "TOTAL" return. Can you give me the link of the reddit conversation? I honestly don't understand what it's meant with " not related to compound interest". it doesn't make sense to me.
Hey Rick. Very informative video. It would be very beneficial if you create a similar video between mid and small cap ETFs. Then we could potentially supplement VOO/VTI with value and/or growth stocks
Hey there, yes that's a good idea. I talked often about small and mid cap but never really made a video for them. I'll keep it in consideration for future videos!
Hey there, first of all congratulation on starting your journey! All great ETFs but my personal suggestion is to overweigh on VTI. Say VTI (50%), QQQM (25%) and SCHD (25%). You'll see after gaining experience that VTI will be your best friend ;)
it's always a questiom of time frame. The Vanguard Total Market Index fund (VTSMX), introduced on April 27, 1992, earned an average return of 8.10% annually through January 15, 2010. In the same time frame, the Vanguard S&P 500 Index fund (VFINX) gave 7.98%. When comparing from 1928 on, S&P 500 gave 10.4% while Total Stock Market 10.2%, but it's also true tgat the S&P 500 became what it is today only in 1957. So it's not so easy only because in the last 15 years large cap outperformed. But i'll tell you this: the difference, whatever it will be in the future and in whatever direction, will always be small. So better stick to one, being it VOO or VTI. Not much wrong about any of these choices. I hope my video gave interesting insides on small vs large cap!
I’m new to investing, just opened an account with sofi and bought some VTI!!!
Welcome to the journey!!
Love this channel. Very valuable information and easy to digest performance style
Thank you!
If you have any wish for a video or something you'd like me to talk about, let me know!
@@rick.austin Yes, please. Could you explain the growth mechanism of ETF investments? For example, I don’t understand the difference between YTD returns and Dividend Yield. I read that ETFs don’t have compound interest, so does that mean the growth of my investments, such as in VOO, is driven only by the following formula: [My previous investment + My monthly investment + ETF price growth + Reinvested Dividends]?
If that’s the case, does it mean that if I stop making monthly investments and start living off the monthly dividends, my principal would begin to decrease, with the only factor of growth being the price increase of VOO itself?
Also, what exactly do VOO's YTD returns and Dividend Yield represent? For instance, VOO shows a 1.28% Dividend Yield and 18.7% YTD returns, but I’m unclear on what these percentages actually mean. Does the 18.7% YTD return include reinvested dividends, or is it calculated differently? If it's not related to compound interest, as I've read on Reddit, could you explain how these returns are generated and how they affect my overall investment? I’d appreciate a breakdown of how this works. Thank you very much for your time!
Sure, let me explain it here.
1) YTD Returns are "Year-To-Date Returns" and represent the total growth of the ETF or Stock in the last 12 months including appreciation (growth of the etf price) AND dividends. So the dividend Yield is going to be only a part of it.
For example if you have an ETF that gave you 2% dividends in the last 12 months and also grew with its price 3%, your YTD return will be 5%, while the dividend yield 2%.
2) ETFs have compound growth just like any other investment. Let me give you an example:
You invest in an ETF that costs you $100. The ETF gives you 2% dividends ($2) and grows 50% in one year. Now its valued around $150. Next year it gives you again 2% (which now is 2% of 150, not 100), therefore $3, and grows again 50%. This 50% is now applied to $150, which means it grows +$75. All of this, the effect on accelerating growth of the price AND of the dividends, is the compounding interest effect.
3) If you start living off your monthly dividends, the price won't go down. It will either go up, if the ETF price appreciation is higher than the dividend yield (it usually is), or in an extreme case it will stay the same if the ETF price appreciation is lower than the dividend yield.
4) The 18.7% YTD return includes reinvested dividends. When you look at return data on the internet, it usually includes reinvested dividends because the goal is to give a "TOTAL" return.
Can you give me the link of the reddit conversation? I honestly don't understand what it's meant with " not related to compound interest". it doesn't make sense to me.
starting investing in VTSAX in the early part of the covid pandemic when the markets crashed and pleased with the results. Very good video
Hi Jason, you did the right thing and picked probably the best time in the last 10 years. Well done.
i love investing in VTI to long term im 39, thanks for all the information!
That's a great choice, my friend!
Hey Rick. Very informative video. It would be very beneficial if you create a similar video between mid and small cap ETFs. Then we could potentially supplement VOO/VTI with value and/or growth stocks
Hey there, yes that's a good idea. I talked often about small and mid cap but never really made a video for them. I'll keep it in consideration for future videos!
I have a 6month old and a 4 year old and i want to start buying them stocks im strongly looking at vti for the long-term
That's the best choice!
Hey Rick! I'm 28 Years old and just starting to invest. I plan to go with: VTI (33%), QQQM (33%), and SCHD (33%).
What do you think about my plan?
Hey there, first of all congratulation on starting your journey!
All great ETFs but my personal suggestion is to overweigh on VTI. Say VTI (50%), QQQM (25%) and SCHD (25%).
You'll see after gaining experience that VTI will be your best friend ;)
@@rick.austin I will remember that!
Thank you 😌🙏
Brown Melissa Hall Donald Young Kimberly
VTI shows that adding small cap does not nothing for your investment. Better sticking with VOO.
it's always a questiom of time frame.
The Vanguard Total Market Index fund (VTSMX), introduced on April 27, 1992, earned an average return of 8.10% annually through January 15, 2010. In the same time frame, the Vanguard S&P 500 Index fund (VFINX) gave 7.98%.
When comparing from 1928 on, S&P 500 gave 10.4% while Total Stock Market 10.2%, but it's also true tgat the S&P 500 became what it is today only in 1957.
So it's not so easy only because in the last 15 years large cap outperformed.
But i'll tell you this: the difference, whatever it will be in the future and in whatever direction, will always be small. So better stick to one, being it VOO or VTI. Not much wrong about any of these choices.
I hope my video gave interesting insides on small vs large cap!
Can I receive your free calculator Please!
Of course man! Just click on the links in the description!