Stupid 20-Year Investment Plan? Investor Questions $200,000 Dividend Strategy

Dividend shares and high-yield funds are among the most popular investment vehicles people choose to rely on for a consistent payout or to grow their money.

One of the most talked about dividend-oriented ETFs is Schwab U.S. Dividend Equity ETF (NYSE:SCHD), which tracks the Dow Jones U.S. Dividend 100 Index.

SCHD is known for its focus on high-quality, dividend-paying U.S. companies, making it a go-to fund among investors seeking reliable income. But is it a smart move to allocate a considerable portion of your portfolio to SCHD? This question lies at the heart of a recent Reddit post that sparked a lively debate among the board’s users.

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The poster is an investor who has already allocated $100,000 to SCHD, another $100,000 to Vanguard S&P 500 ETF (NYSE:VOO), and has also bought some individual stocks. His end goal is to build a portfolio that generates dependable income in the long run without taking risks.

“Is it stupid to put in that much into SCHD instead of spreading it, or? I just want a safe place to keep it that is better than a money market account or [high-yield savings account],” the poster wrote.

He also mentioned he’s a bit concerned about the long-term performance of SCHD since he’s planning on investing for 20 more years and is also considering diversifying into other assets like real estate investment trusts or other dividend-focused stocks but isn’t sure this is necessary.

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The Reddit community offered the poster insights in the comments, so let’s dive right in.

20-Year Investment Plan? Reddit Debates As Investor Pours $100,000 Into SCHD

SCHD is a Solid Choice for Long-Term Dividend Growth

Many Redditors praised SCHD as a reliable ETF for long-term dividend growth, especially for investors not willing to make risky moves.

“Putting $100,000 into SCHD and letting it go to work for 20 years–that is the epitome of smart investing,” a comment reads.

“Seems like you are seeking low-risk monthly income. SCHD is fine,” another Reddit user said.

One commenter agreed with the poster’s approach and shared that he would sleep well at night if he had the same allocation.

“Not stupid at all. It’s a fine investment and will pay you to wait during market downturns. Personally, I have about 30% of my portfolio in bond ETFs for diversification, but I could sleep well at night with an allocation like yours too,” he said.

Another Redditor echoed the above comment but also mentioned that the fund should double the dividends every few years with a dividend reinvestment plan.

“Yeah, it's a solid place to park $100,000. My portfolio looks really similar, I have no trouble sleeping at night. SCHD dividend growth should allow your dividend to double every 6 to 7 years with DRIP,” he wrote.

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Consider Diversifying to Mitigate Risk

While most commenters were on board with the poster’s allocation to SCHD, some Reddit investors suggested he diversify a bit further to mitigate risk.

“It is not stupid. However, I might suggest you consider 50% in SCHD and 50% in [Schwab U.S. Large-Cap Growth ETF (NYSE: SCHG)],” a comment reads.

One Reddit user recommended the investor allocate a part of his portfolio to non-U.S. assets to hedge against any rotations of U.S. stocks.

“I guess the only obvious downside, besides being all in stocks, is that it’s very U.S.-centric. While U.S. stocks have been the place to be for 20+ years, there are no guarantees that this will continue. I have some money in [Vanguard Total International Stock ETF (NYSE: VXUS)] as a hedge against any rotations out of U.S. stocks. Not a lot–maybe 5-7% of my portfolio,” the user said.

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Another Redditor touched on international exposure, implying that such an allocation would enhance his portfolio resilience.

“I agree you should put the $100,000 and let it sit. You can let that sit and anything you invest outside of that, start to diversify. Someone said SCHG as well. That would be another good goal to set, just to get some international holdings. I would mix an international ETF and some dividend stocks in there. When you're older you could shift into bonds, higher dividend yield stocks, and keep SCHD if the dividend payout is significant enough,” his comment reads.

“It’s not stupid at all. I would suggest diversification in your portfolio though, so don’t make that 100% of your investment strategy,” another Redditor wrote.

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