JEPI QYLD SCHD DIVO VYM

about 6 months ago I rebalanced and loaded into the following:

JEPI 25%

QYLD 25%

SCHD 15%

SCHX 15%

DIVO 11%

VYM 9%

This is outside of my family emergency savings (a true 6-9 months' worth of expenses), other misc savings, home equity, etc. I save 25% of my net household income and am debt free minus my house (500k home, owe 350)

I hold individual stocks as well, but the majority is in these index funds. I've charted the performance and APY yields of some of these covered call strategies, and with assuming 0 increase in share price, 0 increase in dividend yield, and just adding and D.R.I.P, I'll have about 10 years until the portfolio produces about $120,000 in annual dividend income. 

I HAVE experienced some share price increase in principle and love sitting back and collecting a HUGE dividend payment.  anyone else have any opinions of these ETFs given the current pulse of the market?

@steponaduck

 Good luck to you.  Way to plan ahead and keep an eye on things.  Always good to see folks planning for retirement. 

Work on getting the house paid off early. 

VYM is a sure fire winner.  I've been with its Vanguard mutual-fund counterpart since after the financial crisis in 08.  It is an excellent dividend paying fund that is comprised of steady winners.. stick w this one for sure,  and its paltry expense fee .  

To counter what Raiders has said, I'm not a big believer in paying off the house early,  particularly when you've got likely a very low interest rate; 

Think about it this way.  Instead of using the "extra" money to pay down the mortgage,  use that "extra" money every month to buy the stock market,  particularly a dividend fund as referenced earlier.   You will get close to a 3% dividend yield just by holding the VYM.  And that doesn't include any price appreciation. 

Too many people make the mistake of paying off the house early ( yes, you want it paid off before retirement), but time is your greatest ally in compounding your wealth,  so don't let it slip away by solely funneling it into the house. 

Yes, the math is there ¡ª but with a lot of assumptions.  For example, that the markets will return what is the longterm average over what can be a short-term time frame in the overall picture ¡ª there have been times where the market has underperformed for a long period.  Imagine if we really do go into a recession or a bear market for a few years.

Another assumption is that the person will be disciplined enough to stick with the ¡®investment¡¯ plan and do what they should with the extra money.  Some people will ¡®waste¡¯ the extra money and not totally invest it or pay down the mortgage.

Another assumption is that a person keeps that job or a very similar paying job, or better ¡ª and that they are happy at that job.  This is not always the case.

What is generally accepted is a difference of 1.4% between your interest rate and your lowest expected return percentage.  I usually tell most folks just to round up to 1.5%.

But this, to me, assumes a 15-year loan at a low rate.

Paying it off early versus the extra you should earn by investing the extra does not take into account some of the things that affect most people.  This amount will almost always be too low to matter as much to a person¡¯s ease of mind.

The psychological reasons for paying your mortgage off early are numerous to me:  less stress, less risk, more flexibility, more confidence in your financial future, more self-esteem in knowing you can handle a goal.

Yes, I always tell folks to make sure to get the company match in their 401K.  I always recommend that they are investing in aggressive-growth type funds with at least 15% of their salary.

If a person drags out paying their house off until just before they retire, they will not have the advantages of someone that has paid their house off 15-20 years before retirement.

This person does not have the worry of what the markets will do now.  They will not have to worry about job security.  They will not have to worry about saving for their retirement.  They will have more flexibility to do other things in life at an earlier age ¡ª when they are more likely to be healthier ¡ª such as travel.  They can take a job with a lesser salary but more happiness ¡ª if they like.  If they are married, one spouse can now stay home or start a business and/or spend more time with their kids.  They can now start other investments, like rental houses or flipping houses ¡ª again, at a younger age where they are healthier and more willing and able to do this sort of thing.

The only true advantages to keeping a low-rate mortgage is that you will have a little more money in retirement when you are finally able to retire.

Money is not everything to everyone in life.  There is a lot to be said with an easier or less stressful life.

The best choice is to have a mix.  You need to live life and enjoy it as you go.  

Certainly, it is a case-by-case individual basis.  

But overall the person that saves as they go and aggressively pays off their mortgage early will be happier longterm than the person that will just barely get it paid off at 65 before retirement but has some extra money.

Suppose a person is 30 years old and has $200,000 left on their mortgage.

If they were to be given $200,000 with the stipulation that they could ONLY do one of two things with it:  pay off the mortgage NOW ¡ª OR invest the money and NOT be able to touch it until they are, say, 65 years old.

Why would that person not take a free house?  Just to have more money when they are 65?  You do not know what your health or your spouse¡¯s health will be then.  If you want to travel, will you be able to?  If you want to visit kids and grandkids, will you be able to as often as you really want to?  If you want to take up an active hobby, could you?

Very few people will ever regret having a paid off house at an earlier age and being debt-free earlier.

There is a lot to be said for financial security.  But at some point you are not really enjoying this security and freedom, you are just maintaining this extra money you got at a later age to pass onto your kids one day.

Ask any 70 year old would they rather have $30 million dollars or be 30 years-old again.  

There is much more to life than just saving and having a lot of money at the end of your life.

Somewhere online there is an interesting thread about whether a person at age 30 or at age 70 is better off with a $1 million ¡ª or something along those lines.  It is a very interesting read on the various views on this.

However, it, for sure, varies by person and their situation.

I just think the overwhelming evidence leads me to advise most people to pay it off early.  

They can then do what they like with the extra money, time, and freedom -- with less stress and worry.

Raiders22

 ""Yes, the math is there ¡ª but with a lot of assumptions.  For example, that the markets will return what is the longterm average over what can be a short-term time frame in the overall picture ¡ª there have been times where the market has underperformed for a long period.  Imagine if we really do go into a recession or a bear market for a few years."" 

Who cares about the recession or bear market for a few years.  We're talking long-term.  The poster said there is still $350k mortgage to be paid.  That doesn't sound like a short-term time frame remaining to pay off the mortgage.  It's not a knock on the individual, it's just  likely that at least it will take 15 years .  That's a significant amount of time to ride any expected recessions and what not in the market.   Think long-term.  Over any rolling 20-year period going back almost  100 years to the great depression, I don't believe the market has ever had a negative return.  That's pretty remarkable, and a testament to long-term investing. 

Raiders22

Another assumption is that the person will be disciplined enough to stick with the ¡®investment¡¯ plan and do what they should with the extra money.  Some people will ¡®waste¡¯ the extra money and not totally invest it or pay down the mortgage.

Dollar-cost averaging is a beautiful thing, and takes the emotion out of investing.  Instead of the "extra" monthly payment going to the mortgage, funnel that "extra" cash into a dividend paying fund or 500 index fund...the individual will likely not even miss it .... again , implementing a monthly dollar-cost averaging plan is key here. 

Raiders22

The psychological reasons for paying your mortgage off early are numerous to me:  less stress, less risk, more flexibility, more confidence in your financial future, more self-esteem in knowing you can handle a goal.

I have had numerous people (colleagues, friends) think along the lines of paying the house off early... and none of them are too knowledgeable about investing in the stock market.    I listen to them and have offered my input, but it's ultimately their decision. 

Have you heard of the expression "House Rich, Cash Poor?"    Too many people go into their retirement years having the house fully paid for (a good thing), but have very little else to show for their "wealth" w/ a puny 401k.    That is a pity.  You can't eat off your house.  All those extra payments to pay the house off early has sapped some very valuable compounded interest years in one's stock portfolio..    A diversified portfolio including stocks & bonds (and the house) is really key to  powering your wealth all throughout your working career. 

Perhaps the biggest argument to "not" pay off the house is because mortgage rates have been ridiculously low these past few years, and this poster likely has a mortgage in the 2's or 3%,  I'm guessing.  By all means, that is not much.  So, funnel that money instead in an index fund, etc.      If the poster had a mortgage at 7% (like mortgage rates offered today), then yes, pay the house off early.  Because Where else can you get a "guaranteed"  7% rate of return ?  That's how you have to look at it.  

I like the example, but keep in mind this is a much different scenario than the one earlier presented.  Previously , we're talking about funneling an "extra" monthly payment into either the mortgage payment or a stock index fund, ETF, etc.   The poster is not presented a "gift" as you have outlined in this example;  they must come up with the "extra" payment all on their own. 

Now, to your example.  Yes, let's assume the individual inherited $350k.  I would advise paying off the mortgage early,  Why ??  Because the individual can pay off the mortgage "tomorrow,"  and still have all those years in front of him to continue investing in the market ; time is not lost..That is key !       This is drastically different from our earlier discussion.  In the earlier discussion, one is "sacrificing" investing in the stock market and instead funneling that "extra" payment into the house.   That is really how one should look at it.  

Bottom line is too many people are "not" invested enough in the stock market , and their retirements will suffer as a consequence.   Lord knows no one can manage to live off Social Security alone, but some people try because that is all they really have.  That is a travesty, and due to poor financial decisions in one's life.  

In summary,  it sounds like the OP is invested plenty in stocks,  which is great.   I just wouldn't go out of my way to pay off the house early.  

In the 20 year period ending in the late 70s the S&P returned just over 6% a year during this time frame.

So, you have to be picky where you start and stop your 20-year periods.  You will not have this advantage when blindly investing.

Bear markets can last upwards of a year-and-a-half.  What if a person hits 2 or 3 of these during this time period.

Just because we have been in an extended bull market or two during the last couple of decades does not mean it will continue.

The discipline part I am referring to is whether or not they stick with investing the extra.  Not the dollar-cost averaging part.  People tend to get side-tracked along the way.

Again, this is case by case.

But if your mortgage (which is a huge portion of a person¡¯s salary) is paid off, it does not matter as much how disciplined you are with investing the extra money.

Those very folks you are talking about that lack the investing knowledge are the EXACT ones that SHOULD be paying the house off early.  If they have not bothered to learn how to invest or find a trustworthy person to help them, then they should for sure get out of debt and plan for the future.

I have seen far too many that have maintained the 15%, or so, investing AND paid the house off early to know that the "House Rich, Cash Poor¡± is for sure case by case.  

If the person has paid the house off early enough there is plenty of time to invest even more than 15% afterwards.

I am not talking about deciding to pay it off early at 60 years old and then scrambling to invest.

I am talking about buying a house that you can TRULY afford and not buying ¡®too much¡¯ house; getting a 15-year loan and NOT a 30-year loan.  Then pay the 15 year loan off early and go from there.  

But yes, you should be investing the whole time.

IF you assume the person will appropriately invest the extra amount ABOVE the 15% the whole time to make the math work ¡ª okay.

But human nature has shown that not to be the case.  For example, give the average person an extra bonus of $20,000 and see what they do with it.  Very few will put it into their 401k, and even fewer will invest it outside of work, and fewer still will throw it at the mortgage.

It is not an either/or situation where ¡®you can¡¯t eat off your house¡¯.  Obviously, a person should be doing both things at once.  Absolutely, in a sense you can eat off of your house if it is paid off.  You will have built up equity a lot quicker.  Then that is available, should it be necessary; but it will not be.  Then should you decide to move to downsize or upsize ¡ª to another area for cheaper living or a better locale or for a freer job, etc., then all of the profit from selling your house does not go to pay off a mortgage on your current house.

You are absolutely correct that everyone should have refinanced to very, very cheap rates.  

This is a good reason to drag out your mortgage if you have no sincere urge to get out of debt and are very comfortable in your situation.

I am fine with that and even understand it.  But it is far rarer than you think to find people that are that diligent and will invest appropriately.

Think of it this way.  Even if you have a 2.5-3% interest rate and know you MIGHT likely get an 8% return in the market ¡ª is it worth it.

In other words would you go to the bank and take out a loan at a GUARANTEED 3% rate and invest it to MOST LIKELY get a 8% return.  Of course not.  That is a little crude but it shows how it amplifies the risk and burden, if not outright stress, of having such a huge guaranteed bill.

But you cannot say it is best to pay the loan off early if it is at 7%.  Why?  It does not matter one bit on the time scale.  It does not take away nor add to what else is being done with the extra money.  This process will always assume that when you buy the house for 15 years you are buying a house for a percentage of your salary, say.  If rates are high you will not afford a more expensive house; if rates are low you will afford a more expensive house.  People try like crazy to buy as much house as they can (that is a separate problem).  No matter what the interest rate is you still pay the house off in 15 years.

If a person is worried about saving the additional 3-4% by paying it off early ¡ª why not pay a 3% loan off early and save that as well.  Saving 3% is saving 3%, no matter how you do it.

The example I used is to make it on a larger scale in order to see the choices and what folks tend to do and not do.

Yes, this poster absolutely is doing fine compared to the average person.

I do think he would be diligent about investing, I really do think he would be fine.  That is why I say it is case by case.

I am simply saying that he could get that mortgage paid off very quickly with all the extra money and really have plenty of freedom to do whatever he wanted and invest even more afterwards.

Folks that pay their houses off early and are debt free very early in life just tend to have more net worth at the end than the others do.  

I get the work/life balance part.  You do not want to only work and eat peanut butter and jelly every day just to get the house paid early.

Yes, this poster is doing fine and has a great plan.  But I have seen many of these folks that also do even better when they are finally completely debt-free.

I do not think it would adversely affect the nest egg he has already built up enough to matter at all.

@Rush51

Now, to your example.  Yes, let's assume the individual inherited $350k.  I would advise paying off the mortgage early,  Why ??  Because the individual can pay off the mortgage "tomorrow,"  and still have all those years in front of him to continue investing in the market ; time is not lost..That is key !       This is drastically different from our earlier discussion.  In the earlier discussion, one is "sacrificing" investing in the stock market and instead funneling that "extra" payment into the house.   That is really how one should look at it.  

Bottom line is too many people are "not" invested enough in the stock market , and their retirements will suffer as a consequence.   Lord knows no one can manage to live off Social Security alone, but some people try because that is all they really have.  That is a travesty, and due to poor financial decisions in one's life.  

If you just went by the math I would even disagree with this.  I could make a very good case for investing the $350k.  Imagine that amount compounding.  If you start right away with that big of a base it will grow like crazy.  But that is solely the math.  But to me that should be your route to take.  My route would be to get that bill out of the way and then you can invest any amount you like, up to almost 100% every month, etc.

So, at some point even you seem to think the ability to clear the bill would make sense while 'sacrificing' at the whopping amount $350k could grow into.  It is just a sense of having the bill gone and a paid for house.

You are 100% correct that enough people are not investing, or doing it correctly.

But if you are debt-free and have a decent nest egg built up, it should not cost you as much as you think to get by just fine.  But that is not the way folks think.  So, yes they need to be maxing out their 401Ks in the right funds and saving and planning.

I guess the way I see it is:  as soon as you are debt free, you have even more money you can invest and add to what you have built up already.  Or to simply do what else you like to do because you do not need to pay a huge mortgage every month and may not even need to invest a larger amount.

@Rush51

Good input and I agree with a lot of what you said.  I just think it assumes a person will always do what is best for their retirement and I have seen too many that do not.  Like you said, they do not even invest — let alone correctly.

 I was looking for a quote I saw about this some time ago.  I could not find it.  But this quote here sums up some of it I think:

You may not realize it, but you’re probably sitting inside one of the most important assets in your wealth-building journey: your home!    

Remember, a millionaire is someone with a net worth of $1 million or more. That means what they own minus what they owe equals a million dollars or more. And guess what? A paid-for house is part of that equation! 

Get this, the majority of millionaires live in average-sized homes, and they pay off their mortgages in about 10 years. In fact, 67% of millionaires live in homes with paid-off mortgages. Between making extra house payments and exploring options to refinance or downsize, they made a plan to pay off their homes early and executed that plan.

This is huge. Once you don’t have a mortgage payment anymore, just imagine how much more money you could put away for retirement and other fun financial goals. We get goosebumps just thinking about the possibilities! Meanwhile, the median home sales price is around $408,000—and if it’s completely paid for, the entire value of your home counts toward your net worth.

So if you have $730,000 saved in 401(k)s and IRAs with a $400,000 paid-for home, guess what? That brings your net worth to a total of (drum roll, please) . . . $1.13 million. Congratulations, you’re a millionaire—and you did it in 20 years flat! Bust out the confetti cannons and champagne!

thanks for the dialog fellas...

my current mortgage APR is 2.875 on a 30 YR fixed...loan secured in June 2021. I do not aggressively pay down the principal nor do I have much interest because right now I have other goals for my financial independence. At worst I could invest in CD's with 0 risk and collect 4.85-5.375% APY which is nearly double return on my capital compared to interest savings on curtailing my mortgage, and further more, as you originally pointed out, I am no where near paying the mortgage off completely, so extra payment does not affect my life positively in any way at this time. Since my original post on June 30th I have stuffed $5700 in the investment accounts  and increased my family savings to 15.75 months' worth of expenses, (so If I ever quit or get fired my family is completely unaffected in lifestyle or stress/worry for 15.75 months.)

I reinvest dividends and currently my dividend income is $5,318 annually ($443.16 monthly)...long and short of it is that with my current plan (investment strategy, savings rate, Ill have a portfolio paying me $126k in annual dividend payments before I am 48 years old, there is a lot of freedom in that, house payment or not...

@steponaduck

 Very good for you.  Keep it up! 

I added $10,000 in Energy Transfer Prefered stock, paying 7.79% divident yield. Solid excelling company with squeaky clean financials. 

I have this amount and more in their common stock also. 

Good for you ; sounds like you're killing it.

As you go forward and start collecting some good money on those dividends , you're going to want to pay attention to how " tax efficient " your investments are. 

For example,  the VYM as I earlier mentioned , is a Fantastic ETF, and quite tax efficient... in particular,  it has low portfolio turnover,  and the great majority of dividend payments are "Qualified Dividends,"  meaning you pay 20% on Qualified Dividends,  as opposed to paying your ordinary tax rate on regular dividends. 

You will get your 1099-DIV come tax time from each of your brokerage firms.  Look it over closely to see how " tax efficient " each of your ETFs, mutual funds are.. 

Good advice mate. Thanks! 

you get a k-1 in march with energy transfer precisely because it is a master limited partnership, and most of the preferred shares are in a Roth IRA so no tax obligation there. The CD interest will be taxable.  I collected (or will collect) about $4,000 in CD interest in 2023. 

my overall dividend portfolio earns me just under $8,000 annually in dividend + interest income, and with dividends reinvested that grows every month as JEPI, JEPQ, QYLD are all monthly payers. 

the ET preferred stock and common stock pays quarterly and the company is rock solid. I keep adding monthly and also save liquid cash which I turn into CDs about 2-3x a year. 

I am setting this all up so I won¡¯t have to work a day past 50, and then i will still be able to rely on $10,000 in monthly income after that. 

Good for you man.. 

Yessir!  Very good for you.  Keep it up. 

I have added some more ET Preferred stock (Currently have about 700 shares of ET preferred series C, D, E and just recently added some Wells Fargo Preferred Series AA and some AG MORTGAGE Preferred Series A. 

My current estimated annual dividend income is now sitting at $6400 annually, and with my 

JEPI 25%

QYLD 25%

SCHD 15%

SCHX 15%

DIVO 11%

VYM 9%

I am receiving many divs. monthly...

@Raiders22

 @Rush51

 @steponaduck

thoughts on ETFs vs individual stocks? ( in regards to dividends)

Does it matter which way you go just as long as you are diversified? 

@dubz4dummyz

 The main difference is two basic things:  Your knowledge and the fees associated with ETFs.

If you have decent knowledge and have the time, then you can do one for yourself and avoid some of the costs of ETFs.  There are direct costs with ETFs, of course, but there can be some indirect costs as well.

The advantage of an ETF is the ease of mind that someone has the time to watch it and make sure it is diversified and adjusted on a continuous basis.

A lot of the costs of ETFs have come way down because of competition lately.

But there is a lot to be said for trusting someone with a proven track record that knows what they are doing.  Because a lot of folks do not have the time or knowledge to do it on their own.

If you look into it and want to get started on your own, they have some stocks that are pretty dependable with their dividends.

These stocks are called "Dividend Aristocrats".  You can research them and use most of them, or all of them.  You can even add some others in the mix that you have researched and think are 'up and coming' stocks that are going to increase their dividend, etc.

Or, you can simply let an 'expert' do the work for you for a nominal fee and ease of mind.

You can simply mirror a successful ETF or Mutual Fund on your own if you like.  But the problem is being aware of adjustments they make to the funds and staying on top of those.

That is a very superficial overview but I hope it helps.

Good luck with whatever you decide.  

I do want to add a couple of things.  If you are an older person investing this can be a very dependable retirement income.

But if you are a younger investor planning for retirement this is an excellent way to build a nest egg by reinvesting the dividends.  People sometimes do not realize how important this can be when factoring in the compound interest over the years on these stocks.  

This is a very good quote that about that and also mentions one of the reasons to be wary of a stock JUST because it has a great dividend.

Dividend investing provides investors with steady cash flow over the long term. When you reinvest dividend income, the magic of compounding can turbocharge your returns. Over the last century, dividend payments accounted for about 40% of the total return of the S&P 500.

The best dividend stocks give you a great hedge against inflation, as they provide both appreciation and capital gains to offset rising costs. From 1973 to 2022, S&P 500 dividend stocks delivered twice the return of stocks that paid no dividends.

But here¡¯s the trouble: A good dividend cannot make up for an underperforming stock. Similarly, a high dividend yield could be a trap that covers up erratic payouts, poor performance or minimal growth prospects.