Investor With $40,000 Portfolio Wonders If He Should Pick Dividend Investing Or Growth First – 'Would You Prioritize Dividends Or Growth? - ProShares UltraPro QQQ (NASDAQ:TQQQ)

For many people, the idea of passive income is beyond charming, and it is what drives countless individuals to explore different investment approaches.

Still, one of the most common challenges investors face, especially those at the beginning of their journey, is whether to prioritize growth assets or dividend investing. Both methods have their benefits, but choosing the right course can be difficult, especially when balancing short-term financial needs with long-term wealth expansion.

Let’s dive into the story of a 33-year-old investor with a $40,000 portfolio who is faced with this very challenge. The Reddit user has $30,000 of the total amount invested in dividend-focused assets, generating approximately $190 per month in passive income after taxes.

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His goal is to build a portfolio that will earn him enough dividends that he can live off them and to achieve this, he plans on investing 80% to 100% of his active income into dividend shares, ETFs, and funds.

“For now, I’m thinking maybe investing up to 20% of my portfolio to “growth” like [ProShares UltraPro QQQ TQQQ] and [ProShares UltraPro S&P 500 UPRO], only on big corrections, and 80% of my portfolio continue to hold/reinvest in dividend assets. Or maybe focus only on growth, sell all dividend assets, and invest 80% now only in Index ETFs ([SPDR S&P 500 ETF Trust SPY], [Invesco QQQ Trust QQQ]) and 20% in leverage ETFs… There is a psychological aspect too, when I see passive income every month–it’s very motivating to continue investing more, to grow dividend income. So, dilemma… What do you think?” the young investor wrote.

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The Reddit community took the comments by storm, sharing advice, insights, and suggestions, so let’s dive deep into these.

Invest $40,000 in Growth-Focused Assets or Dividends? Reddit Responds

Prioritize Growth Assets Now, Transition to Dividends Later

Many Reddit users advised the poster to focus on growth while he’s young as this strategy typically yields higher returns over the long run.

“If you’re young, I’d stick the money in a growth fund and let it ride. If you love dividends you can drop or reinvest the dividends into growth. There’s no wrong answer… but if you’re young, you’ll end up with more money investing in “growth” now. I’m 57 and started building my dividend portfolio about 15 years ago… I live on them now,” a Redditor said.

One commenter suggested a phased approach and mentioned several funds he advised the poster to invest in.

“When younger, just try and match the market. Meaning, just buy [Vanguard S&P 500 ETF VOO] or [Vanguard Total Stock Market ETF VTI]. Averaging 10% annually, or whatever the market is doing for 30 years, is guaranteed millionaire-making based on history. If you get crazy, follow Professor G's 3-fund approach and add in [Invesco QQQ Trust QQQ] and [Schwab U.S. Dividend Equity ETF SCHD]. SCHD will be your doorway to dividends. Then, as you start nearing retirement, start pivoting more of your portfolio to high-quality income and dividend stuff. For me, that was [JPMorgan Equity Premium Income ETF JEPI], [JPMorgan Nasdaq Equity Premium Income ETF JEPQ], [iShares Preferred & Income Securities ETF PFF], and about 15 other income investments and stocks,” his comment reads.

“Obviously, wealth building should be your first goal. You could use value stocks or bonds that pay dividends for diversification, but diversification doesn’t speed up wealth building, it just softens market drawdowns (and restricts bull markets),” another Redditor suggested.

A user also recommended the investor focus on growth first and later transition to dividend-paying assets.

“Focus on growth assets first, build a larger capital base, and transition into dividend investing later. In my opinion. This is my plan. Dividends are great until you have to start eating into the balance to pay large expenses,” he said.

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Psychological Motivation Vs. Financial Logic

Commenters also admitted the psychological benefits of dividend investing the poster mentioned, especially the motivation that comes from seeing regular income, but they also warned against letting feelings override a good financial plan.

“Many people spend their whole lives chasing an imaginary number. First, define for yourself what “enough” is and keep doing what you’re doing, you’re probably better off than you realize. Also, the “fastest” way is very rarely the most “logical” way, but the biggest thing you can do after cutting back spending is increase your income,” a commenter said.

A user cautioned against investing in too many assets and ending up having too many tickers to handle, suggesting a few ETFs instead.

“One thing I would caution against though, regardless of which way you go, is having too many tickers and positions to monitor. Once you get into individual stocks, managing more than 15-20 becomes basically a full-time job; at least to do it properly. So my personal recommendation would be to move into a few ETFs that align with your investment thesis unless you feel you can manage that many individual positions,” the Redditor advised.

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