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Why I Dumped 115 Shares for $9...
Published about 3 hours ago • 3 min read
Here's your weekly helping of interesting investing information and insights.
Opinion
I sold all 115 shares of SCHY at $32.46 this week.
Why? This will only apply to readers in the USA, but it was in my Roth, and you can't claim the Foreign Tax Credit in a Roth. Foreign countries take ~15% off your dividends before they hit your account. In a taxable brokerage you get that back at tax time. But in a Roth you forefit clawing that money back.
Last year that was only about $9 for me. But $9 every year on a position I plan to keep growing for 20+ years adds up.
We just filed taxes a few weeks ago, and I decided I was done paying more than I had to.
What I did with the cash:
Bought 17 more SCHD at $25.36 (now 645 shares, ~$680/year in dividends). Cost basis went up and I hate that. But I own SCHD for the income, not the price appreciation, right? The growth is the cherry on top.
Bought 4 more IDVO at $42.56. Slowly building to 100 shares. Pulling ~$112/year as of this writing.
Going to rebuild SCHY in the taxable account with weekly buys.
But Uncle Russ, doesn't IDVO holds foreign stocks too?
Yep. But IDVO writes covered calls, and option premiums get taxed as ordinary income in any account. So the Roth shelter actually helps more there. Lesser of two evils.
While we're here — IDVO is my favorite international covered call fund. They actually own the underlying stocks (no derivatives), only write calls on 20-25% of the portfolio, and pick quality companies. Real growth AND income. Since inception, it's beaten VYMI by 5.5% even with the 0.65% expense ratio.
DividendChannel.com
Building SCHY in a taxable account also gives us a bridge if we retire before 59½ because there's no early withdrawal penalty.
I knew about the foreign tax thing the whole time. Just finally decided convenience wasn't worth $9+ a year for however long I hold SCHY.
Have you made any tax optimization moves recently? Do you think I did a smart thing here? Hit reply and let me hear it!
What I'm Reading
Fund manager Chris Bloomstran has a pretty lengthy annual letter that hardcore investors love to read every year. He's a successful value investor and I just started digging into this massive 80-page letter. We may not agree with everything, but it's worth listening to and considering what he has to say. You can also listen to him in the Talking Billions podcast I shared below. [Link to article]
F. Scott Fitzgerald said "The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function." Meb Faber had on author Sam Hartzmark to discuss common dividend mistakes and fallacies that drive markets and how this affects investor returns. I thought it was an interesting discussion and you might too!
If you’ve been feeling the itch to pull the trigger on Costco like I have, but the valuation makes your nose bleed, you’ve got to hear this episode. Chris Bloomstran perfectly says why being patient is the hardest—but smartest—move you can make right now. Oh, and also why he won't own the S&P 500 at these levels either. 😮
Disclaimer: This is not investment advice. Do your own research before making any investment decisions.
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