The answer is no, DIVIDENDS ARE GOD...
Just Kidding, the answer is obviously it depends. It depends on your goals and how you plan to achieve those goals. Although I expect some people will just say dividends are are ways bester, I would say that's not correct so let's think this out.
Let's start with a goal of obtaining good cash flow while preserving the capital. The purpose of the investment is to make passive money with as little activity as possible (so no day trading). This money will be used to pay our bills, so we can not liquidate it it must stay invested. Luckily that is exactly the goal of my Groundfloor and M1 Finance accounts.
My Groundfloor Portillo
I currently have loans ranging from 4%-19%
The average loan repays in 7 1/2 months. but 4% loans are 30 day notes and require me to login each week and buy new ones (1 minuet of work). Reviewing LRO's usually takes around 5 minutes a week, but sometime I just use automated investing and do nothing.
My M1 Finance Portfolio
My M1 portfolio tells me I should get an average of around 4.5%. Most of my holdings are dividend growers, but there are RIETs and BOND ETF's that bring the average yield up or hedge against risk. I read about the companies, there earning reports and news from there sectors. I adjust the portiflo when when needed.
If you want to sign up for either Groundfloor or M1 Finance use the links and get a bonus!
- My 2018 Groundfloor returns
- A tax free Muni Fund
- My M1 Finance Dividend portfolio
- My M1 Finance Dividend portfolio (Aged 10 years)
- NOBL a S&P 500 Dividend Aristocrats ETF
- NOBL a S&P 500 Dividend Aristocrats ETF (Aged 10 years)
As you can tell from reading the table I make more passive income in crowdfunding than in dividends right now, but in about 10 years they will have similar after tax returns and each year after that should my dividends will do so much better. So "Dividend Yield" is greater in an aged portiflo.
Stock value appreciation
The only way to unlock my stock appreciation is to sell, but if we sell we won't be able to pay our bills. As the dividend increases there will come a time where we can get the return we need while owning less stock, and at that point we could sell but that time will be very far out in the future. So "Stock Value" works in favor of a aged portiflo.Taxes
Most people don't think about taxes, "do you want to pay more in taxes or less?" you probably said "less". Paying less in taxes is not a good goal by itself. What if I said "if you paid more in taxes you would make a better return". Isn't it then ok to pay more in taxes? if you make a higher after tax income!From the table above you can see, I pay more in taxes on my Groundfloor portfolio but I make better returns than my M1 portfolio. After tax return: Groundfloor 6.96% vs 3.41% M1 portfolio.
10 years from now assuming 7% dividend growth rate I get: After tax return: Groundfloor (still) 6.96% vs 6.74% M1 Finance. Groundfloor is still returning more, but my M1 portfolio is about to hit the tipping point, each year after that my M1 portfolio will always have better returns than Groundfloor.
If I move to Nevada, my after tax dividend return would go 0.42% because I wouldn't have to pay California taxes on dividends. and believe me that extra 0.42% with compounding ends up being hundreds of thousands of dollars over 30 years.
But if I moved to Nevada my Groundfloor after tax return would go up 0.81% (Mind blown) I love taxes...
For me it's obvious that dividend tax treatment is no magic bullet (maybe a bullet on a slow timmer). If you want better cash flow now crowdfunding wins. I don't mind paying more taxes so long as I make more money. So if your goal is to make money while paying as little taxes as possible "Stock Dividends" win, but I wouldn't call it a win, I rather have more after tax income.
Risk
Stocks are risky, don't underestimate it! Most people do.Real Estate Crowdfunding, we don't know how risky it is over a long term. All we can do is make comparisons and assumptions. Private Money lending is the analog to this. we do have an asset to back these loans, some will have defaults, these are known risks. I have had loans default in Groundfloor, of those defaults 3 resulted in a loss of principle. Total of $274.87 losses of $726,770 in loans repaid, So 0.04% loss in principal over all repaid loans, it will likely go up over time or during a recession but I have over 2 1/2 years experience to judge this risk moving forward. I would say "Dividend Stocks" win this by default but over specific time periods long and short it could go either way.
Summary
I purposely invested in crowdfunding first to get my passive income up so I can have freedom in my life. Now that I have more freedom, I don't put new money into crowdfunding, let it grow from its own returns. I'm in the process of building a dividend portfolio to fund my retirement. So if you pick a specific goal or metric you can see how beneficial Real Estate Crowdfunding can be over the short and long term.My Goal is to have multiple passive income streams so I will never have to worry about income in the future. Right now I have Rentals, Crowdfunding, Stocks, and Bonds. I hope to have more in the future, hit the comments you have a suggestion!
I think Alfred Weinstein said "On the Nintendo to unlock God mode try: up, up, down, down, left, right, left, right, B, A, Start. But to unlock God mode in Dividends just start in your early 20's"
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