Investment BS Thread - Stocks/Futures/Mutual Funds/Bonds/Commodities/Options/ETFs/401ks/Etc

From what I am reading he should be getting those dividends tax free as long as he stays under the 77k/yr tax limit and holds the stocks past the 60 day holding period in order to be under "qualified dividends" vs ordinary.

 

Most of the politics topics would and do end up being a bit of an echo chamber after a page or two. Mostly everyone here is on the same page so far or at least similar

 

Even if impeachment happens, pharmaceuticals n all that could start boomin so the market might balance okay. Not sure about the economy, though

 

I have held most of my stocks for over a year. That gets you into “long term” for capital gains if you sell. As for dividends, they’re still ordinary and get taxed as income.

 

hmm interesting, I was just referencing this motley fool article https://www.fool.com/knowledge-center/qualified-dividends-vs-ordinary-dividends.aspx. When trying to find the factors that make them qualified. also used this article for this tidbit "The most significant difference between the two is that nonqualified dividends are taxed at ordinary income rates, while qualified dividends receive more favorable tax treatment by being taxed at capital gains rates." https://kahnlitwin.com/insights/deciphering-qualified-vs-nonqualified-dividends

After doing further digging in my fidelity acct it shows that most of my dividends are qualified in my YTD tax breakdown sheet. A surprising non-qualified stock dividend of mine was Toyota, dafuq lol

 

It depends if they’re qualified or not for tax purposes. All of my holdings are non-qualified, that’s all I know. I have pay as income. You’ll find out when taxes are due.

 

I just rechecked my 2018 year end statements from both TD Ameritrade and Fidelity show all my dividends as qualified. (F and T ) . I did find it interesting from the link provided by @travel_taco that most REITS do not qualify though. it will definitely be something I make sure of for future stocks I buy. right now I am looking at ABBV and DOW .

 

I think I have confused myself more than when we started talking about this. All I know is that they’re taxed, the whole ordinary vs. qualified is out of our hands because the brokerage figures that out on the tax statement. I really don’t see any way for dividends to not be taxed unless in a retirement account. I am going to do some more reading on this and look closer at tax time.

 

As will I . The biggest worry is that if we see a administration change , all may be mute .

 

Another thing to make this all the more confusing come tax time is you can can invest in a municipal bond with a true tax-free dividend regardless of how much income you claim. Muni bonds are exempt from federal income tax due to a 1913 exemption law. NMZ is the ticker I have, has a yield of 5% and is paid out monthly. So it'd be a great spot to park your cash if you're looking for a relative safe spot(bonds vs stocks). Essentially if you had 1mil in this bond you'd get 50k/yr from dividends that are tax free.

 

Thank you for that! I have been wanting to look into this. My plan was to walk into random government buildings asking people until I found where to buy muni bonds. This way is much easier. How is the beta on that? Does the price move a lot?

Edit: It has a 1.27% expense ratio?! Do you know if that is taken from the 5% yield, or if it’s more like 6.27% and you actually get the 5%?

 

Ive only had this bond for a few months so cant speak to how it moves a lot other than just looking at the yearly graphs. Which surprising it does move quite a bit YTY percentage wise. But overall price its stayed from 12-15/share for the past 5 years so not a whole lot of volatility or growth.

I believe it is 6.2 then they take out the expense ratio. you get a true 5% yearly distribution (based off the 2 months worth of dividends I have received already).

 

here is the article I found that turned me on to that muni bond. https://www.forbes.com/sites/michae...vidend-is-hiding-in-plain-sight/#5d4c4c932cb0

 

Did you do a lot of research, look at other funds, etc? I’d like to start a position in something like this, just add periodically and forget it. This one looks awesome.

 

Sorta, I looked around on fidelity at other municipal bonds. Most of them seem to be of managed/bond fund class A's that required a minimal initial investment and had a bunch of more confusing info that I would have really needed to sit down and research(ORNAX, NHMAX).

The NMZ fund really ticked all the boxes that I was looking for at the moment: tax free, monthly dividend, decent yield, 5% being pretty good compared to most of my other dividend stocks(minus the growth potential). I do plan to research the muni bond market more but its kinda on the back burner at the moment as I think I can get more gains in stocks in the short term vs having my money in the bond market.

 

That’s what’s tough for me. I could put money into T or ABBV and get a better yield with some growth, or at least decent capital preservation. I like the idea of a stable price and 5% though. I might dedicate 10% of my portfolio to this.

 

Very true but I also looked at it as a good way to diversify my portfolio and have a decent exposure to the bond market. I'm relatively young (30) and have really only been investing during the bull market so my bond exposure is pretty low. Figured this was a good way to move money around so I'm not completely screwed if we hit a random downturn in the short term.

Once the fed announced they were going to cut rates I moved some money out of my high yield money market acct(was 2% now probably going to 1.6%) to this fund that way I could capture the higher yields and still be able to let that nest egg grow and if an emergency happened I could sell and get it somewhat quick. Much better than a CD in that regard.

 

Have you guys thought about preferred stock dividend funds? Lower risk with a pretty consistent dividend and not too much of a price variation. I have some of my IRA in SPFF and it was paying closer to 8% but is now down to around 6%. I'll have to see if it continues to lower the dividend in the near future but preferred stock holders get paid out first if anything happens to the underlying company so that keeps risk down.

 

The only problem is the dividend is lower on preferred shares. I usually decide to take the extra risk and more volatility in exchange for the higher dividend yield. We’ll see how that works in the next recession, I do worry about some of my REITs.

 

Actually, it's usually the opposite. Preferred stock dividends are usually higher than regular stock. The regular stock price will have more movement which is where you can make out well or lose badly.

From one web sites I have looked at:

Pros of Preferred Stock ETFs
Preferred Stock ETFs have many benefits that keep investors interested over common stock trading:

• Less risk than common stock: Preferred shares are less volatile than common shares and dividend payments are fixed, making them the least risky of the two share classes.
• Higher dividend yield: Because the dividend paid by preferred stock is set, it’s paid more frequently than common stock dividends and the yield is almost always higher. U.S. Bancorp common shares have a 2.8% dividend yield, but they also have several series of preferred shares with yields over 6%.
• Pre-defined dividend not influenced by company profits: When you buy preferred shares, you have a pretty good idea what the investment returns will be. If the company has a bad quarter and lowers guidance, preferred shareholders will still get their agreed-upon dividends.
• Receive payments before common stockholders: Preferred shareholders are higher up on the food chain than common shareholders, so not only do they receive dividends first, but they get taken care of before common shareholders in a liquidation event.

Just found another interesting piece of information on the web:

Preferential Tax Treatment
Preferred securities may also provide an income advantage. Income from preferred stocks may be treated as qualified dividends (QDI), rather than as regular interest income.