Key insights
- The author discusses VYM as a potential hedge against a tech or AI bubble, suggesting dividend-paying stocks might offer more stability than growth-oriented indices like VTI or VOO. While VYM has historically underperformed, the argument is that its dividend focus could lead to outperformance in the next decade if current market trends reverse. Tax implications of qualified dividends are also considered.
Historically, VYM does considerably worse than VTI or VOO, but if someone is really worried about an AI bubble, a P/E bubble, or the malign affects of IPO fast-tracking, maybe they should be betting that the overperformance of those indices will not hold for the next decade...
And, yeah, tax drag, but I know the similar but more concentrated SCHD pays virtually all of its dividends as "qualified," so the tax rate is lower than marginal income. I can't find the fraction of qualified dividends from VYM instantly, so I'm going to have to simply guess it is also pretty high (hopefully well over 90%).