mutual funds – Invest Some Money

Video transcript 00:00 so what are the advantages of monthly 00:03 dividends over quarterly dividends are 00:05 they even advantages at all well let's 00:08 take a look at some of the advantages 00:10 and disadvantages and see if they hold 00:13 up so the first advantage is and by the 00:21 way a link to my post here will be down 00:24 in the description the first advantage 00:27 is steadier income so to speak and 00:30 that's probably not the best terminology 00:34 to say steady because paying quarterly 00:36 is steady just as monthly or weekly or 00:39 annually would be probably a better word 00:44 would be more frequent okay so obviously 00:48 month monthly comes around more 00:51 frequently than quarterly and the appeal 00:54 of monthly dividends is that in large 00:58 part because it coincides with expenses 01:01 things like rent mortgage utilities 01:05 vehicle payments so from an income 01:09 standpoint it coincides better with 01:13 expenses now the quarterly dividend 01:18 paying whether it be stocks ETFs mutual 01:21 funds or that well okay not necessarily 01:25 ETFs or mutual funds the stocks in 01:28 particular paying there are plenty that 01:31 pay dividends in the off months okay 01:34 what I mean by that is your your typical 01:36 months for quarter end are going to be 01:39 March June September and December okay 01:41 but there are other stocks with 01:45 different fiscal year ends and 01:47 accordingly pay dividends in the off 01:52 months we'll call them 01:53 so you can invest in a typical dividend 01:57 paying stock that paid in March June 01:58 September December ok then you can also 02:01 pay 02:02 sorry invest in another stock that paid 02:05 a dividend in February May August and 02:07 November finally see where I'm going 02:09 here is you could invest in a stock that 02:12 pays in January April July and October 02:15 yeah be staggering months and therefore 02:19 you would have monthly dividend payments 02:22 now of course all that is going to 02:25 depend on how much you invest in the 02:28 stock what it pays in terms of a 02:31 dividend what its yield is and so forth 02:34 and so on so it's not going to be as 02:39 from a dollar amount standpoint probably 02:42 as as consistent but the point is that 02:46 you could achieve a similar sort of 02:51 thing as investing in a monthly dividend 02:53 paying stock with quarterly dividend 02:56 paying stocks so you know the one of the 03:00 problems here is that's going to take 03:04 three times to research you know whereas 03:06 you could research one monthly dividend 03:10 paying stock you know in order to do the 03:14 staggering thing you would have to 03:16 research three stocks now one site you 03:22 might take a look at to get an idea of 03:24 when dividends are paid is the Nasdaq 03:29 dividend calendar there might be a 03:31 better reference out there but this 03:35 allows you to go forward and back in 03:37 time I forget how far back but at least 03:43 the ways in order to see the exact 03:45 payment date for different dividend 03:49 stocks and ETFs are included on here so 03:53 the benefit there being if this is what 03:57 you want to do to stagger your quarterly 03:59 dividend payments you could even if you 04:02 wanted to you're gonna kind of 04:05 handcuff yourself a little bit but you 04:08 could narrow it down to the the middle 04:10 of the month versus the end of the month 04:12 or the beginning of the month you know 04:14 if you just chose to research particular 04:16 companies so you know there's probably a 04:23 better resource for like I said for 04:25 narrowing down I can find anywhere that 04:27 you can necessarily screen companies 04:29 based on when they paid a dividend or 04:32 more specifically if they paid in those 04:34 off months but certainly not to say one 04:38 doesn't exist now as far as mutual funds 04:41 go I couldn't find a neutral in calendar 04:47 most mutual funds that that I found just 04:52 a small sampling there are a lot of 04:53 mutual funds but most of them the paid 04:56 quarterly as opposed to monthly there is 04:59 a good amount that do pay monthly and my 05:03 previous video was on that so check that 05:05 out and that's also there's also a post 05:07 on the site invest some money calm most 05:13 of them paid in a typical March June 05:14 September December 05:16 mutual funds did so there might exist 05:19 those that pay in the off months but in 05:24 order to find them you're probably gonna 05:26 have to dig around they're probably the 05:29 exception not the rule 05:30 so like I mentioned earlier the nasdaq 05:33 dividend calendar does include ETFs but 05:37 again just from my my little bit of 05:40 poking around sampling I couldn't find 05:44 any dad ETFs that paid in those off 05:47 months either so that the whole 05:49 staggering dividend thing is probably 05:51 going to be best executed with stocks 05:54 not so much with ETFs mutual funds but 05:57 like I said ETFs and mutual funds is a 05:59 kind of cover in my previous video and 06:02 previous post there are a lot of options 06:05 there in terms of those that do pay 06:08 monthly so the one of the biggest 06:16 strengths advantages pros whatever you 06:19 want to call it of monthly dividends is 06:24 the notion that de compound quicker okay 06:28 and if you've spent any time looking at 06:34 this subject on other YouTube videos on 06:36 other blog posts you've no doubt come 06:40 across that so intuitively that makes 06:43 sense all right you know the notion that 06:47 a dollar today is worth more than a 06:49 dollar tomorrow is what finance is built 06:53 on okay but that's you know that's what 07:02 we're assuming in theory but I wanted to 07:04 run a little experiment to see if it 07:06 applied in practice okay you know for 07:10 sure if all investments increased in a 07:13 linear fashion and hopefully I'm 07:15 pointing the right way it's kind of like 07:17 a mirror image thing but went up 07:19 straight like that over time you know 07:22 you'd always be buying in at a lower 07:24 amount and therefore buying more a lot 07:27 like dollar cost averaging okay works 07:31 great if the investments going up not so 07:34 great if it's going down you know if 07:35 it's going up your average costs can be 07:37 lower it's going down average costs 07:39 going to be higher same thing applies to 07:43 dividend reinvesting through a drip okay 07:48 so probably if you're watching this you 07:52 haven't been to my site yet and it's 07:54 still in its infancy but what I like to 07:59 do with any investing principle is try 08:06 to create a model for it 08:08 and test things out you know that create 08:13 as an accurate the model I can and see 08:16 how what what I might assume or what the 08:20 conventional wisdom might be how it 08:23 plays out when we test it against things 08:26 I've actually 08:27 past okay so I did the same with this 08:31 particular notion that monthly stocks 08:35 dividend-paying stocks compound more 08:39 favorably than quarterly dividend paying 08:41 stocks so I looked at it from two 08:44 different angles I chose three quarterly 08:46 dividend paying stocks caterpillar 08:48 Archer Daniels Midland ADM and Abbott 08:51 Labs and then I chose three monthly 08:55 dividend paying stocks Gladstone 08:59 Investment Corporation Realty income 09:02 corporation and solar senior capital 09:05 okay so the quarterly dividend paying 09:07 stocks I looked at theoretically what 09:12 the compounding effect would be if they 09:14 paid monthly for the monthly paying 09:17 monthly dividend paying stocks I look 09:19 tia retic lee what the compounding 09:21 effect would be if they pay quarterly 09:23 okay it's kind of both sides of the coin 09:25 there with any model you have to make 09:28 certain assumptions and acknowledge that 09:31 there's certain shortcomings of it so I 09:34 went back in time five years with this 09:36 model okay from I forget what the exact 09:39 date was but it's April 24 something 09:41 like that and so if you've ever done 09:48 anything similar or any look today in my 09:50 other post you know a big part of the 09:53 results your model are gonna be when did 09:55 you start it when did you end it you you 09:58 could change that by shift that by a 10:00 week and get completely different 10:02 results okay that's just the nature of 10:06 the market you know it's it's all about 10:10 the price you you bought in at all about 10:13 the price you sold that and depending on 10:15 the volatility of the investment you 10:18 know whether you're looking at something 10:19 like this or something from a technical 10:22 analysis standpoint so you know it 10:26 matters that I can swing wildly your buy 10:28 price and your sell price and therefore 10:30 and your results particularly over the 10:33 five year period between luckily so you 10:36 know 10:37 maybe the model should have been 10 10:39 years 20 years 6 years 2 years 5 or 5 10:43 and a half years 4 years and a month I 10:46 mean you know who's the say okay 10:48 I picked five years it's a nice round 10:50 number I feel like five years gives an 10:52 investment an opportunity to kind of 10:54 show it stuff you know it's it's not so 10:58 short that it doesn't include kind of 11:02 certain cyclical on aspects of the 11:06 market if such a thing exists it you 11:10 know it's not so long that it's 11:12 impractical I mean yeah we'd all love to 11:14 say that we bought in at Amazon or you 11:20 know Microsoft or you know whatever 11:24 whatever whenever you're watching this 11:26 is 10 years from now whatever the you 11:28 know stock that we all wish would have 11:30 got in you know at the ground floor on 11:33 you know five years is is a long-term 11:39 investment 11:40 you know maybe not warm up it long but 11:42 it is long-term okay so anyways into the 11:46 model so what have we do let's take a 11:48 look at okay so day one of the model all 11:51 right we had five thousand dollars okay 11:54 there are two different scenarios and 11:57 what we did is bought as many shares as 12:00 possible of each stock and the rest went 12:04 into cash because we're assuming that no 12:07 fractional shares were bought initially 12:10 but going forward when the dividends 12:13 paid you know for that instance this 12:16 right here is 60 cent dividend paid on 12:21 what was 49 shares said in most the 12:25 dividend reinvestment plans particularly 12:27 those directly with the company if I 12:28 understand right you can buy fractional 12:31 shares so the entire dividend was put 12:33 towards shares it was not added to cash 12:35 you'll see these quarterly cash amounts 12:37 monthly cash amounts they're going to be 12:38 the same throughout the entire model 12:41 here 12:42 like for Caterpillar here it's 2895 the 12:44 whole whole time but you see these every 12:47 time a dividend is paid whether it be 12:49 monthly whether it be quarterly a 12:52 fractional amount of shares is added 12:54 okay I see no taxes or commissions for 13:01 taken into consideration some of my 13:03 other models on investing money comm I 13:05 do particularly the technical analysis 13:08 models I do take those into 13:09 consideration because of the frequency 13:11 of trading but in this case like I said 13:14 it was just basically the shares the 13:16 initial shares bought once it's dividend 13:18 reinvestment plan you know so we just 13:23 took those out of consideration for 13:25 simplicity sake okay so we've got okay 13:34 here's the monthly I'm site the 13:35 quarterly dividend stocks give 13:37 Caterpillar idiom Abbott Labs here's the 13:40 monthly ones and it just switched around 13:42 one thing of note real quick in the 13:45 model okay so the actual dividend date 13:49 yeah so like here's all the quarterly 13:52 dates here and the amount of the 13:53 dividend for this particular stock I had 13:57 to of course assume what the monthly 13:59 dividend date would be because they 14:02 didn't pay monthly dividends so I had to 14:03 assume and what I did in essence is you 14:08 know look that if quarterly date was 14:11 April 11th I just went back two months 14:13 okay and divided dividends into thirds 14:16 you know so between like February 11th 14:20 March 11th and in April 11th of course 14:23 the actual date if one of these days 14:26 fell on a Saturday or Sunday it was a 14:29 Saturday 14:30 I'd move it back to a Friday it was a 14:31 Sunday they move it forward to a Monday 14:33 okay again you know he's modeled when 14:36 you start and stop when you buy and sell 14:39 it matters all right so you know that 14:44 was kind of the most logical way I 14:45 figure I could go about picking a day 14:49 you know because otherwise the results 14:53 might skew one way or the other 14:57 that's another assumption that was made 14:59 in the in the model there and then I 15:07 think for the monthly it was a little 15:10 easier because we just paid rather than 15:13 this monthly amount here that was all 15:15 just group to the same day for the 15:18 quarterly the theoretical quarterly as 15:20 the last day of the month okay pretty 15:25 straightforward the you know the same 15:29 general analysis just kind of flipped on 15:33 its head between the monthly paying 15:35 stocks and the quarterly stocks so 15:36 you'll notice in these columns here I 15:38 got them for all all these different 15:41 deals here and it basically says all 15:46 these different companies and the X 15:48 basically implies when the monthly value 15:50 is greater than the quarterly value and 15:54 you'll see how that all shakes out here 16:00 actually next in this table so here are 16:02 the results 16:03 okay across the six stocks so we've got 16:06 the ending monthly total value again for 16:09 these sorry for Caterpillar ADM and 16:13 habit that's gonna be theoretical the 16:16 ending monthly total value sir game oh 16:18 and Sons it's gonna be theoretical for 16:23 ending quarterly value okay so here we 16:27 are in nearly every instance except 16:30 Archer Daniels Midland got the total 16:33 ending value of the investment for for 16:36 the monthly reinvesting was higher but 16:39 we're talking by just marginal amounts 16:42 okay so here's the dollar amount and a 16:46 percentage difference okay so the 16:48 biggest one was sons over five years a 16:53 whopping 0.54% difference in return so 16:59 the other one thing sorry real quick on 17:01 a point out is the days that the month 17:03 was great in the quarter that says 17:05 axes okay just shows because again it 17:07 depends on what day the analysis ended 17:10 not every single analysis had monthly 17:15 always higher than quarterly okay you 17:18 can see sons mostly 99% of the days the 17:22 monthly total value was higher than then 17:24 quarterly total value but not every 17:26 single day so again depends when the 17:27 analysis ended can't emphasize that 17:30 enough it always depends you know but 17:35 anyhow you can see in again in most of 17:38 these cases with the exception of 17:40 Caterpillar 17:40 only 28% of the days was monthly higher 17:44 than quarterly about half an alkyl ADM 17:47 but the rest of them predominantly the 17:50 monthly balance was always higher than 17:51 quarterly okay so I kind of covered all 17:57 that and you know the conclusion I would 18:00 draw there is that monthly has the 18:04 potential to compound more favorably 18:07 just by its very very nature but you 18:12 know the my little sample there there 18:16 are plenty of other monthly paying 18:19 stocks out there besides the three that 18:21 I look to have but just based on this 18:24 little sample I wouldn't choose a 18:27 monthly dividend paying stocks solely on 18:30 the premise that it's gonna compound 18:32 more favorably if you want to choose it 18:34 because it gives you more frequent 18:36 income coincides with your expenses 18:39 better great but the you know the whole 18:44 compounding thing as far as I can tell 18:46 from my little bit of research is 18:50 negligible it's just a tiny advantage 18:52 okay so with the advantages outweigh 18:54 let's talk about the disadvantages real 18:56 quick here being the disadvantages for a 19:00 monthly dividends are the same as a 19:01 disadvantages for quarterly they're just 19:04 kind of compounded a little bit because 19:08 obviously it's paid more often and the 19:13 one of the knocks on dividends has 19:15 always been that it implies that 19:18 there the company paying a dividend 19:21 doesn't have attractive investment 19:22 options itself so it's just giving the 19:25 cash to the shareholders okay that 19:28 basically you shouldn't expect much in a 19:31 way of capital gains because there's not 19:35 attractive investments to be made within 19:39 for the company to make it itself so you 19:47 know a lot of that comes down to 19:49 management in your faith in their 19:52 ability to earn above average returns 19:56 you know it's a matter of can you know 20:00 if you don't don't need the income if 20:03 you need to income the income okay but 20:06 if you're indifferent then again this is 20:10 just one of the knocks kind of dividends 20:13 then you know you would want you would 20:19 want whatever is more favorable them to 20:21 reinvest it or for they to give it to 20:24 you so you can reinvestment or pay your 20:25 bills or whatever it may be I think that 20:29 there's kind of a parallel though you 20:32 know I and as a rule of thumb I like the 20:34 but in stocks because it you know it's 20:36 it's all about that you know kicking out 20:41 that cash there's something tangible 20:43 about it because paper gains are great 20:47 you know we all feel good and we look at 20:52 our investments and they've gone up X 20:55 percent and they're worth more today 20:57 than they were yesterday that's fine and 20:58 good but until it's cashed out those 21:02 gains aren't locked in so you know I 21:06 draw the parallel between you know a 21:08 company that pays dividends versus 21:12 reinvesting in itself and a company 21:15 itself receding cash versus making a 21:17 sale you know if a company makes a sale 21:19 that's fine I'm good but until they 21:21 actually get that cash flow and and pay 21:23 their own bills with it you know it's 21:25 it's just a paper game it's it's 21:28 intangible and 21:30 it's fine and good but it's not cash all 21:34 right now one of the other knocks on 21:35 dividends in general not necessarily 21:37 monthly is taxes and I think it's a 21:40 little more legitimate because dividends 21:44 are taxed 21:45 well the taxes income I couldn't find a 21:47 clear answer on this if I'm going to be 21:49 completely honest 21:49 their taxes income or their qualified 21:54 dividends their tax at capital gains 21:56 rates and there's just a lack of good 21:58 information on this and if I can ever 22:00 get my hands on that information I might 22:02 make a post on it because the Internet's 22:05 are obviously hungry for this sort of 22:07 information it you know I've found 22:11 plenty of posts on it you know from 22:14 reputable sites fool I think 22:16 investopedia and everything but their 22:18 answer always seem to be the same that 22:21 oh well you'll know if it's quality or 22:23 not when you get your 1099 div at the 22:25 end of the air and that's like that 22:26 doesn't allow you to make any sort of 22:29 decision you know and there's a big 22:32 difference in taxes between whether it's 22:34 ordinary dividends taxed at income rates 22:38 or qualified texted capital gains rates 22:40 so anyway the whole point of this is if 22:46 the if the company pays you dividend 22:50 you're gonna pay taxes on it that's a 22:53 given more or less and that is one of 22:57 the downfalls if the company did have 22:59 potentially attractive investment 23:01 options in and of it to reinvest in 23:04 itself it would be able to invest a 23:07 dollar so to speak but you as an 23:10 individual you're gonna get that dollar 23:12 you can owe taxes on the most you'll be 23:14 able to reinvest is eighty five cents at 23:17 a fifteen percent capital gains rate 23:20 qualified dividends rate so that's that 23:25 is a real shortfall of dividend paying 23:30 versus reinvesting company and the last 23:33 disadvantage we'll go over is just the 23:34 potential cash crunch so I have a sister 23:38 side spreadsheets for business calm 23:41 that's it there you'll notice it looks 23:44 suspiciously a lot like invested money 23:49 calm I didn't get creative with a 23:52 different theme or anything but hang on 23:55 so this site that I made for basically 24:01 finance for small businesses you know 24:04 corporate flacon so to speak for small 24:06 businesses and you know when the 24:08 recurring things and I go over there is 24:10 cash flow the importance of cash flow 24:13 touched on it just a moment ago cash 24:15 flow okay all the sales in the world 24:18 don't mean unless you get your cash 24:21 when you need it okay it's all about 24:24 when it comes in and how fast it comes 24:28 in when it goes out okay three whether 24:31 you own a small business or investing in 24:34 dividend paying stocks or futures Forex 24:40 crypto whatever okay all investments 24:44 have three main components that related 24:50 to performance three things just three 24:52 things that matter okay cash in cash out 24:56 in time okay that's it so it's the same 25:01 thing with a with a business and once a 25:06 business page you would dividend it that 25:10 money's gone they can't come back to you 25:12 you know like hey mr. an but investor 25:15 you know look we kind of overextended 25:18 ourselves can we get a little bit of 25:20 last month or last quarter was dividend 25:22 back you know I can't do that that 25:24 money's gone so you know it all comes 25:26 down to management if they are confident 25:30 and if they plan and then they in most 25:33 cases should the management board of 25:36 directors and everything before they pay 25:37 a dividend or you know have a good grasp 25:40 on their financial budgeting and the 25:43 cash flow situation they're not going to 25:45 put themselves in a situation where 25:49 paying a dividend leads them into some 25:53 sort of downward spiral 25:55 and leads to their insolvency so that's 25:59 about it for the post I probably went a 26:01 little longer than I hope to that's what 26:03 I do but yeah 26:06 okay so monthly versus quarterly 26:07 dividends I gave you a couple of things 26:10 that I saw as advantages disadvantages 26:11 of monthly dividends over quarterly if I 26:15 missed anything okay 26:18 check out the post put it down in the 26:20 comments 26:20 then down the comments on YouTube also 26:23 and you know I'd be interested to hear 26:26 what your conclusions were from the 26:31 little model a little sample I did in 26:33 terms of testing the monthly dividend 26:35 compounding versus quarterly you know if 26:38 you see something maybe that I didn't 26:39 mention or overlooked or that let me 26:42 know and finally if you know the 26:44 difference between ordinary and 26:45 qualified dividends from you know well 26:48 means let me know that too thanks for 26:50 watching see