Hey everyone,
So I have multiple accounts that make up my portfolio, pretty typical stuff. A work 401k, a Roth IRA and a taxable brokerage account.
I contribute enough for my full company match, max my Roth every year, and the rest goes to my taxable account which is extra fun money to try and grow and produce income.
A lot of people like the dividend ETFs to produce income which is taxed at the qualified level, same as LTCG taxes rather than ordinary income. I’ve been researching mutual funds and have done some math and backtesting and see that a lot of these funds I have been looking at have similar total returns (or above average) as the SP but produce way more income through LTCG distributions twice a year. Backtesting FBGRX, FCNTX, FGRIX, and FMAGX at 25% each slightly outperforms the SP but in all the metrics that show, a good amount of the return is through these distributions. Throughout a 10 year back test the distribution yield has ranged from 3.8%-9% as LTCG.
Am I crazy for looking at this kind of yield potential and preferring to go the mutual funds route for an income based portfolio if that’s the goal? The taxes are the same really. Qualified dividends are taxed the same as LTCG too. I don’t care about the expense ratios that much either.
Thoughts?