Investor With Surprise $1M Windfall Sparks Heated Debate: 'Why Not Park It All In SCHD For Dividend Income?' – Reddit Weighs In

Many investors find the benefits of dividends, such as money working for you and steady payouts, incredibly appealing. In fact, for many, dividends are the closest thing to financial freedom: they don’t need to sell assets, do not need to time the market, and get reliable income.

That’s why ETFs like Schwab U.S. Dividend Equity ETF SCHD have become so popular. They offer investors a diversified blend of dividend-paying stocks, stable growth potential, and a tax-efficient income stream.

But is parking $1 million into SCHD only the best move? This is what a Redditor recently asked on the online discussion board, sparking a heated debate in the comments.

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The investor has a portfolio already in place but is contemplating how to invest an unexpected $1 million windfall. His goal is to generate passive income to cover basic expenses like taxes and insurance without risking the principal, so he’s considering going all in SCHD.

Some in the r/Dividends community agreed wholeheartedly with the poster, while others suggested different strategies. Let’s see their insights.

$1 Million Windfall in SCHD? Redditors Showed Mixed Feelings

SCHD Offers a Balanced Mix of Income and Growth

Many commenters agreed with the poster, saying that SCHD is a good choice and not only does it pay out dividends but it also provides capital appreciation, which makes it a great long-term hold.

“There’s nothing wrong with that hypo. Great diversification, growth, and income. All while being conservative. There are alternatives that give the same if not better options, but for a basic answer, yes, it would be fine,” a Redditor said.

“In a taxable account, living off the SCHD-qualified dividends and then supplementing that with 401(k) distributions is the way to go in my opinion,” a commenter wrote.

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One Redditor mentioned a dividend reinvestment plan into SCHD is a good strategy, especially if the poster isn’t close to retirement.

“If you are still younger and pre-retirement, and the SCHD is in a retirement account, I say [dividend reinvestment plan] and forget it until closer to retirement,” he said.

“SCHD has a relatively high turnover rate, which means that the underlying holdings of the ETF are bought and sold more frequently than the average ETF,” a Redditor advocated.

Diversify Beyond SCHD

While most comments centered around SCHD, some Redditors suggested mixing in several other stocks or ETFs for higher income and/or better risk-adjusted returns.

“I like my [JPMorgan Equity Premium Income ETF JEPI]/[JPMorgan Nasdaq Equity Premium Income ETF JEPQ]. Yields about $110,000 on $1 million and pays monthly,” a user said.

A commenter shared that he balances SCHD with broad-market growth, ensuring he doesn’t miss out on appreciation.

“That’s my plan. Except I do 70% SCHD, 30% [Schwab U.S. Broad Market ETF SCHB]. The SCHB is to participate in the S&P 500 growth. In case my bet on SCHD isn’t as good as I hope, I can do a variation of stock sales that Bogleheads view as the answer to life.”

“My portfolio at age 50 will be about 75% SCHD, 25% [Vanguard Total Stock Market ETF VTI],” a commenter said.

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One Redditor pointed out that the poster’s plan is his retirement plan also, but he’s balancing his portfolio with other assets as well.

“Nothing wrong with this. This is essentially my retirement plan. $2 million in [SPDR Portfolio S&P 500 ETF SPLG] + $2 million in SCHD + $500,000 in [Invesco QQQ Trust QQQ] = retirement,” he wrote.

Sharing a list of stocks he would invest in if he were in the poster’s situation, this Reddit investor splits them into buckets that either focus on dividends or growth.

“If you’re looking to create $38,000 from $1 million, you could also put ~$800,000 in Treasuries and $200,000 in pure-growth or dividend-growth stocks to get income and growth. Or you could do a high-low strategy that averages out to 3.8%; high for current income and low for growth. In the high bucket, you can include a combo of stocks like [Altria Group MO], [Energy Transfer LP ET], [Realty Income Corp. O], [Dow DOW], [Verizon Communications VZ]. In the dividend-growth bucket, you can include names like [Broadcom AVGO], [Microsoft MSFT], [Apple AAPL], [Texas Instruments TXN], and [Target TGT],” he wrote.

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