| Re 4: reinvested dividends are still taxable income. The way companies get around this (return value to shareholders without triggering a taxable event) is by repurchasing and retiring shares. For example, there are 100 public shares trading at $1/share. At the end of the quarter, the company has a spare $1. If they issue a dividend, every shareholder gets $0.01, which is taxed. Instead of issuing a dividend, they repurchase 1 share for $1. Assuming the value of the company hasn't changed, the per-share price should now be $1.01. Basically, they gave you an untaxed $0.01 increase in equity value, which you can choose to recognize on your own schedule. This might give you another idea, which is to list companies with stock repurchase programs. Also, re 3: make sure you account for the expense ratio of these funds. Since dividends are relatively volatile (lots of new entrants and exits on the margin), you might be surprised by how much these ETFs charge for their service. Sometimes, it's justifiable as a price worth paying. Other times it isn't, use your judgement and VOO as a benchmark of what bare-minimum expenses look like. As an example, USOI's expense ratio is 0.85% and VOO's is 0.05%. Over long holding periods, a 17x higher expense ratio is extremely meaningful. |
Small nitpick here - buybacks are taxed as of this year in the US. There is a 1% excise tax paid on stock buybacks (paid by the company, not the stockholder).