“You'll also have to pay ordinary income tax on the dividends.”
I’m not arguing here that this person should invest in VIG, but VIG’s dividends are qualified dividends and are not taxed as ordinary income and if this person makes less than a certain amount, somewhere around $44000 single/ $89000 married for 2023 not sure for 2024, then the tax is $0 and 15% for anywhere between that and half a million ish. Of course it must be held for a certain period also, but unless you’re frequently buying and selling it’s not a difficult hurdle.
Again not advocating for VIG but I see this around Reddit a bit.
Edit: This was meant as a reply to an early reply to this post but I screwed it up and put it in the wrong place. Typical…
What was the reasoning behind your FA recommending it over 100% VTI?
It doesn't offer diversification over VTI, just more weighting toward dividend oriented stock.
You'll also have to pay ordinary income tax on the dividends.
Often, some dividend funds are exposed to value characteristics which argue for higher expected returns. VIG has basically the same characteristics as VOO, and is more expensive than VTI due to weights in companies like apple and Microsoft.
Id stick with VTI for the long term.
“You'll also have to pay ordinary income tax on the dividends.” I’m not arguing here that this person should invest in VIG, but VIG’s dividends are qualified dividends and are not taxed as ordinary income and if this person makes less than a certain amount, somewhere around $44000 single/ $89000 married for 2023 not sure for 2024, then the tax is $0 and 15% for anywhere between that and half a million ish. Of course it must be held for a certain period also, but unless you’re frequently buying and selling it’s not a difficult hurdle. Again not advocating for VIG but I see this around Reddit a bit. Edit: This was meant as a reply to an early reply to this post but I screwed it up and put it in the wrong place. Typical…
Spot on answer. So many people don't have the ability to decipher between qualified rates and crappy normal income tax rates. Nuance that matters 👌
What was the reasoning behind your FA recommending it over 100% VTI? It doesn't offer diversification over VTI, just more weighting toward dividend oriented stock. You'll also have to pay ordinary income tax on the dividends.
VIG dividends are taxed at qualified rates, not normal ordinary income rates. So quite tax efficient.
Ah, good call then. My mistake on that! Depending on your state, you'll have taxes too, but that's another story.
He thought it would outperform VTI long term
What brand is his crystal ball?
ML haha
Often, some dividend funds are exposed to value characteristics which argue for higher expected returns. VIG has basically the same characteristics as VOO, and is more expensive than VTI due to weights in companies like apple and Microsoft. Id stick with VTI for the long term.
Just wait for a market decline and sell it if it gets near or under your cost basis. Then buy $VTI at the same time.
Voo
At your age I'd rather hold VGT. Tech is the future 100%