In my taxable account, I invested in individual dividend growth stocks for about two years. Last September, I sold everything and put it into Vanguard’s Total Stock Market Index fund (Admiral shares) at the advice of many here. But I continue to read up on this debate, and think about the pluses and minuses on each side.
I’m in the 15% marginal tax bracket, so taxes due to dividends and long term capital gains comes out to 0% in both cases. The difference comes from expenses. VTSAX, as many of us know, charges an anemic .04%. For the two years that I followed DG investing in my taxable account, I averaged 6 trades/year at $7/trade. Of course, VTSAX has me beat in that case since the most I had in my taxable account was about $20K. But things start getting interesting over the long haul. Assuming a similar trading rate going forward, it would take only $105,000 for the DG investing to become cheaper ($105,000 x .0004 = $7 x 6). And the value of the holdings would be much larger than that for most of the life of the taxable account. Additionally, there are brokerages that charge only $5/trade, so it could be only $75,000 before breaking even.
Am I missing something?