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I'm considering putting most of my savings (about 55,000 €) in an ETF with focus on dividend payments as I want some of the returns accessible to me without having to sell. I'm planning to go with Vanguard High Dividend Yield ETF there.

My intention is to build up wealth, preferably to that point where the dividend payments are of a significant amount. To my current understanding with the amount I have I'd get something around 100 € on average per month.

I don't plan making bigger spendings in the next ten year range, except when I inevitable will need a new car.

I currently have about 800 € per month that I don't spend which I then would also intent to put in that ETF instead of into my savings account.

I'll keep at least 7,000 € in my savings account as my emergency fund.

I've been thinking if I want to buy something bigger I can temporarily stop putting the 800 a month in the fund and start saving it up again.

Given my situation would it be reasonable to just put the remaining 48,000 € into an ETF? Or is it too risky/making me too illiquid? Should I diversify more?

EDIT Information about Austrian taxes on capital gains:

  • Both dividends and gains in value are taxed at 27,5 %
  • Dividend payments are taxed fully when they happen
  • Gains in value are taxed partially every year, the remaining gain is taxed when the asset is sold. The amount which is taxed yearly depends on a few things like whether it's foreign, registered for gain notification (?), ... which I don't fully understand the rules of
  • In some cases dividends that are reinvested may be taxed less but I'm not sure on the rules here either
Jimmy R.T.
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VTI has historically outperformed VYM and gives you much more exposure. If you have an extra 800 to invest every month, it doesn't sound like you really need the extra dividends right now. You'd also have to pay more taxes on those dividends.

My recommendation would be a 3-fund portfolio [1]. I would wait until you actually need the passive income before you invest in VYM. Otherwise you're (probably) sacrificing performance and paying more taxes for no reason.

[1] https://www.bogleheads.org/wiki/Three-fund_portfolio

james
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From your post, it sounds like you're only putting your money into a single ETF. My opinion is that it's always too risky to place all of your money in one fund, even if it's an ETF. I think diversification is always wise, and that you'd do well to split that money among a few different funds/ETFs.

After all-- what happens if that particular ETF takes a sharp nose-dive around when you're ready to withdraw from it? You'd be in a crummy situation as you now have to take money out of an under-performing account. If you diversify into a few other funds, you can withdraw based on what you want to withdraw from at the time (IE tax implications, or if you think that one fund will see a large amount of growth in the near future, but another one will start to decline, etc.)

NegativeFriction
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Most of my equity investments are in High Dividend funds (both mutual and ETF), because -- in addition to the consistent healthy dividends -- they show good capital gains growth, and did not fall as far during, and recovered quicker after, the 2008 crash.

(This is the US, though, and they're in tax-advantaged accounts. YMMV; in fact it certainly will.)

EDIT: companies that pay consistent dividends for decades are -- almost by definition consistently profitable. They tend to be large, well-run, and in industries that are (relatively) immune to recession -- you need toilet paper and toothpaste no matter what, and that stuff needs to be transported from wherever it's manufactured to wherever you live, and someone needs to sell it to you.

RonJohn
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