Reddit In Chaos As Investor With $50K Faces Huge ETF Dilemma – 'I Prefer A Nice Dividend With Overall Steady Growth,' But Is VOO The Answer? - Vanguard Information Tech ETF (ARCA:VGT)

Investing can feel like walking a tightrope for some, especially if they are not enjoying high-risk bets. For many investors, the dream is to grow their money steadily and reliably so they won’t be kept at night worrying about market crashes.

That’s why so many risk-averse investors turn to dividend assets, be it stocks or ETFs. Dividend-focused holdings offer a tangible return while still providing possible growth in the long run. Still, even within this safer zone of investing, choices can be daunting.

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That is exactly what a Reddit user is faced with. The investor has done his homework, comparing two popular ETFs, Vanguard S&P 500 ETF VOO and Schwab U.S. Dividend Equity ETF SCHD, and found that their performance is 97% correlated.

“After carefully doing a correlation function against SCHD, the results were 97% correlation (same market directions) for the last 5 years. Buying SCHD will double my quarterly income by almost 2x more than VOO. But then again, 3+ years has a higher percentage gain for VOO over SCHD. I know the underlying assets are different between these ETFs and the fee is lower in favor of VOO. What would you do?” he wrote.

He aims to generate $1,000 per month in dividend income and he's also cautious about locking the funds away in tax-deferred accounts, preferring to have control over his investments. The investor is also holding Global X NASDAQ 100 Covered Call ETF QYLD but says it doesn’t have great growth, so he’s wondering which of the two ETFs he should go with.

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The Reddit community has shared insights and advice in the comments, so let’s analyze them.

VOO Vs. SCHD: Where to Invest $50,000?

Why Not Both?

Many Redditors argued that since both ETFs are highly correlated but serve slightly different purposes, splitting the investment between the two makes sense.

“Split the total investment between both and just enjoy the gains and that you aren’t putting everything into just one ETF,” a Reddit user suggested.

A commenter pointed out that investing in both ETFs will secure the poster’s portfolio because, if one ETF goes down, he has the other as backup.

“If one sector of the market does poorly, you can rely on the other for growth. If done right, both would still pay in dividends, you’ll just have good growth overall. Plus, if for whatever reason you need to liquidate the asset in the poor-performing market sector, you’ll have the backup,” he said.

SCHD All The Way

Most commenters in the thread pushed for SCHD as the better choice, especially since the investor mentioned he's focused on generating dividend income.

“Just go with SCHD. There are YouTube videos out there that cover the long-term results of all these different funds and even compare them. SCHD blows the others away,” a user wrote.

“SCHD over VOO any day,” another suggestion reads.

A Redditor recommended the poster go with VOO if he’s looking at the total returns, but if he’s focused on dividends, he should choose SCHD.

“If the goal is total return, I’d go with VOO; if the goal is dividend income, I’d go with SCHD,” he said.

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Consider Alternative Holdings

While most comments revolved around SCHD and VOO, several Redditors mentioned alternative assets, both high-yield plays and growth-oriented holdings.

“Have you considered [AG Mortgage Investment Trust (NYSE: MITT] or QYLD? Both these stocks have double-digit dividends,” a commenter asked.

“I'd do like 30/40 in VOO or SCHD and the rest in [Vanguard Information Technology ETF VGT] or [Vanguard Growth ETF VUG],” a piece of advice reads.

A Redditor suggested selling covered calls rather than investing in VOO and SCHD.

“I am all in [Microsoft MSFT] and I have no problems with it. I sell MSFT calls monthly. You’d probably get better yield going all in on [SPDR S&P 500 ETF Trust SPY] and writing calls there rather than splitting between VOO and SCHD,” he said.

Sharing his favorite assets to buy, this commenter highlighted the dividend income he receives from his holdings.

“I have $50,000 in QYLD. The monthly dividend is over $500 every single month. The bulk and rest of my s–t is in [Vanguard Total Stock Market ETF VTI]. Then, I'm buying [Realty Income Corporation O], [Invesco QQQ Trust QQQ], VUG, [JPMorgan Equity Premium Income ETF JEPI], [iShares MSCI USA Momentum Factor ETF MTUM], [Financial Select Sector SPDR Fund XLF], [Kinder Morgan KMI] (since it dropped so much, how could I not?), [Advanced Micro Devices AMD], and [Apple AAPL],” he wrote.

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