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Regarding investing, some people lean toward solid stocks that promise stable growth and minimal risk, while others go for high-risk, high-reward picks.
For many, the controversy between safety and risk in the stock market is an ongoing debate and for one Redditor, it's a key question at the start of a 20-year investment span.
The 30-year-old is new to investing and has shared his plan to build a dividend-focused portfolio, initially kicking it off with $5K but planning to contribute $100 to $150 weekly for the next 20 years. He mentioned that he wants to split the investment equally among multiple stocks.
“I will always divide the investment equally. What do you guys think? Idk anything about investments except to diversify, but I did want to have a dividend-driven portfolio,” he wrote in the r/dividends community on Reddit.
The young investor's chosen portfolio includes well-known dividend payers and niche stocks, including $SPHD, $DHS, $AGNC, $ORC, $IEP, $JEPQ, $JEPI, $SQY, $SDIV, $MRNY, $WES, $IWMI, $SPYI, $RDIV, $SDOG, $SPYD, $HRZN, $DX and $ARR.
Seeking honest feedback from Reddit's r/dividends community, the 30-year-old asked whether his picks are a good strategy for a long-term, dividend-focused portfolio and whether he should pursue stability or embrace risk for higher rewards.
Reddit has offered plenty of advice to young investors. We'll examine the comments and pick the most common suggestions.
Several commenters indicated that the 30-year-old investor's portfolio is too diversified, weakening possible returns and making it harder to manage. One Reddit member suggested the investor focus on five to seven dividends and choose the stocks based on quality, not quantity.
“Looks like you're aiming for dividends, which is solid, but you've got way too many tickers for $5K. I'd focus on 5-7 max to start. Build positions over time and prioritize quality over quantity,” his comment says.
Another commenter in the thread agreed that the portfolio is too diversified, pointing out that some underperforming assets could affect overall return.
“You might be diversifying a little TOO much. Gains from well-performing assets might be diluted by the underperformance of others, reducing potential returns; on top of that, fees or transaction costs associated with frequent adjustments could start to eat your profits,” the Reddit member wrote.
Many commenters suggested shifting from individual stocks to broad-market index funds because they provide steady growth and lower management effort. One Redditor recommended one to three broad-market index funds to keep it basic, adding that focusing on growth at a young age is a better strategy than prioritizing dividends.
“You're spreading your $400-600/month way too thin. Consolidate into 1-3 broad-market index funds and keep it simple. You're still young, so I'd focus more on growth vs. dividends," the Redditor wrote.
A comment pointed the investor to a couple of options, mentioning that they would allow him to “turn his brain off.”
“Just buy SCHD and one index that tracks the S&P 500, ideally VOO. You can turn your brain off and just invest here forever and see everything grow over the years,” the comment says.
Another Redditor suggested narrowing down choices to three: an S&P 500 ETF, a Whole Market ETF and a REIT ETF.
“Way TOO MANY, cut it down to three of the best, a good S&P 500 ETF, a good Whole Market ETF and a good REIT ETF,” the board member recommended.
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