Dividend investing is NOT just for retirees
"Dividend investing is... boring."
I get it.
Unlike most investing styles, dividend investing is often not exciting - and hence loved by retirees.
For them, it's about investing in stocks or funds that pay regular dividends, typically 4% - 6% (though I tend to receive more). Share price increase is great, though what matters most is the stable dividends from their portfolio.
The dividends become a source of cashflow to support their daily expenses.
That said, a reliable dividend portfolio (a.k.a. Freedom Fund) can benefit you way before retirement:
#1 Become a cashflow machine for 'mini' retirements
Why wait until your 60s to enjoy the world, when long-haul flights strain your back and your legs aren’t what they used to be?
Introducing 'mini' retirement:
Instead of delaying life until your 60s, more people in their 30s and 40s are taking intentional breaks - whether it’s a month to recover from burnout, three months to explore Europe, or a year to pursue a passion project.
Here’s where your Freedom Fund shines: it turns into your personal cashflow machine.
- It provides recurring dividends to partially or fully fund your time off, without selling your investments.
- It reduces the stress of draining your savings, so you can focus on rest, travel, or projects.
- It gives you a “trial run” of living off dividends - a glimpse into full financial independence.
Most importantly, mini-retirements reshape your relationship with work. Even if dividends only cover half your expenses, you know you can step away without everything collapsing.
Knowing you have a choice to live a different life makes a dividend portfolio your strongest financial backbone.
#2 Buffer against uncertainties in life
"Risk is what's left after you've thought of everything."
- Morgan Housel
When my dad fainted while jogging last year, and had to undergo a heart procedure, I was reminded of a hard truth:
- Life is full of uncertainties
- In difficult times, I want to be present with my loved ones.
- I do not want to worry about money (to be specific, cashflow) if I choose not to work and dedicate time to my loved ones.
Having 6 to 12 months of emergency cash is a crucial foundation.
But beyond that, a Freedom Fund that generates steady dividends provides a deeper layer of security. It cushions the impact of life’s uncertainties, allowing you to step back, focus on family, and navigate tough seasons without the constant fear of running out of cashflow.
#3 Freedom to make better career decisions
In the early days of my self-employment, I often took up projects that I knew I wouldn't enjoy doing because I had to survive.
And that left an impact on me. Most days, I had to drag myself to work - and it sucked.
As my Freedom Fund grew, things started to change.
With my monthly dividends today, I know I wouldn't die of hunger. That created a breathing room for me so:
- I can afford to say 'No' to uninspiring work.
- I can pursue projects that I enjoy doing without worrying about short-term cashflow (like my upcoming free dividend mini-course, and pursuing my CFP qualification).
Dividends free me from making decisions out of desperation and allow me to focus on fulfillment.
The reward of 'boring' is Freedom of Choice
'Boring' is often seen as a negative word.
But so far, my boring dividend investing style has brought me freedom and peace of mind.
And to me, that’s the ultimate reward of investing - not chasing constant excitement, but the option of building a life where I get to choose how I spend my attention and time.
Hope that resonates with you!
--
p.s. Feel free to share your thoughts with me too! I read all replies!
Ryt Bank Review: When AI meets banking for everyday Malaysians
AI + Banking. Have you ever wondered what this combo would look like in real life?
Launched in August 2025, Ryt Bank is a new digital bank that combines AI to make everyday banking services simpler and smarter for Malaysians.
As a digital bank established by YTL Digital Capital and Sea Limited, Ryt Bank is built by Malaysians with features and solutions designed specifically for Malaysians (#ProudUser).
After using Ryt Bank for the past month, I think Ryt Bank is the best showcase of what a combination of banking and AI could look like in Malaysia.
So, what makes Ryt Bank my new favourite digital bank? Let’s find out:
Highlights - Why Ryt Bank is my new favourite digital banking app:
- Eligibility: Who can open a Ryt Bank savings account?
- Malaysian
- Individual aged 18 years and above
- Does not hold any savings account with Ryt Bank at the time of application
- Have a Malaysian-registered mobile number
- Get paid daily up to 4% p.a.. No lock-in, so you have the flexibility to deposit and withdraw anytime.
- 3% p.a. daily in your main account
- 1% Bonus Rate on your first RM20,000 across Save Pockets.
- Safety and security: Your funds in Ryt Bank are protected by Perbadanan Insurans Deposit Malaysia (PIDM), up to RM250,000 for each depositor. Since Ryt Bank is licensed by Bank Negara Malaysia (BNM) and a member of PIDM (protected by PIDM (up to RM250,000 for each depositor)), it is as safe as traditional banks like Maybank and CIMB.
- Manage savings and goals easily with multiple Save Pockets
- Use Ryt AI to manage your everyday banking - from transfers, payments, to savings
- Get 1.2% unlimited cashback for in-store overseas payment with Ryt Card.
In the next section, let me walk you through the features on Ryt Bank that'll transform your finances:
#1: Earn high interest, paid daily. No lock-in. Plan your savings easily.
With Ryt Bank, there are 2 main ways to manage your money, namely:
- Main Account (3% p.a.): Earns you 3% p.a. interest on your money, where interest is paid daily.
- Save Pockets (3% p.a. + 1% p.a. Bonus Interest Rate): Saving for different goals? Create up to 10 Save Pockets to track your progress!
- Similar to Main Account, Save Pockets pays 3% p.a. interest with an additional of 1% p.a. Bonus Interest Rate on your first RM20,000 deposit across Save Pockets. This Bonus Interest Rate will run from 18/8/2025 to 30/11/2025.
The best thing?
- Unlike traditional Fixed Deposits (FD), there’s no lock-in period for the money in your Main account and Save Pockets - you are free to deposit and withdraw anytime and keep your returns.
- You can start saving from as low as RM1. This makes saving truly easy and flexible.
- Save Pockets allow you to track your goals easily.
#2 Security: Is my money safe?
i. PIDM Coverage up to RM250,000
Ryt Banks also ticks all the boxes when it comes to the safety of your funds.
To start with, the funds deposited in Ryt Bank are covered by Perbadanan Insurans Deposit Malaysia (PIDM) for up to RM250,000 for each depositor.
This covers the risk of an unforeseen event of bank failure.
ii. One account, one device
To add on, transactions via Ryt Bank are restricted to one mobile or secure device per account holder.
This ensures that only your linked device can access the Ryt Bank app and perform transactions.
iii. Multi-factor authentication
As an additional layer of security, Ryt Bank employs a multi-factor authentication process that includes facial verification technology and passcode authentication to protect you against unauthorized access and fraudulent activities.
My experience:
When I try to log in to my Ryt Bank account from another device, I will be required to key in my passcode AND go through face recognition. There will also be a 12-hour cooling-off period before I can make transactions from my new device.
#3 Ryt AI makes everyday transactions simpler and more convenient
Ryt AI, Ryt Bank’s smart banking assistant, is designed to provide practical AI features to everyday banking.
Example use cases of Ryt AI:
- Extract text on transfer and payment details from a screenshot
- Assist you with bill payments
- Check recent transactions
- Move money between Save Pockets
My personal favourite? Taking a screenshot of the account details with the transfer amount, then use Ryt AI to help me with the transfer:
Limited-Time Reward (ending 30/9/2025)
Now, enjoy RM1 cashback when you use Ryt AI to transfer for spend a minimum of RM10.
You can get up to RM5 for 5 transactions - give it a try, it's REALLY cool!
Side note on AI features in banking apps:
As convenient as AI can be, it is always important to double-check the transaction details before confirming your transactions. Mistakes can happen, so please use AI tools mindfully.
#4: Use Ryt Card and enjoy convenience and exciting rewards while spending:
If you like what you are reading so far, you’ll love the Ryt Card. Ryt Card is a debit card that comes with exciting perks and features.
At the same time, you get to enjoy the convenience of banking via a virtual debit card, coupled with complimentary issuance of a physical card.
The best thing? No branch visit is required to apply for Ryt Card!
Ryt Card Perks:
- Get 1.2% unlimited cashback for all your in-store overseas spending. (until 30/11/2025)
- Enjoy zero foreign exchange (FX) fee for your transactions (until 30/11/2025)
- Get RM8 Shopee Voucher (no minimum spend) when you pay with Ryt Card while shopping in Shopee (26/8/2025 - 25/8/2026)
- No ATM withdrawal fees nationwide
- p.s. You'll usually be charged a RM1 fee for an interbank cash withdrawal at an ATM of another bank.
- With Ryt Card, you'll still be charged RM1 during the withdrawal - BUT it'll be waived by Ryt Bank via the app thereafter.
- 20% off at selected YTL Hotels’ premium restaurants
The Ryt Card also comes with a suite of safety features, where you can:
- Freeze and unfreeze card anytime
- Manage your spending limits and preferences in-app
#5 Ryt PayLater: Buy Now, Pay Later
Ryt PayLater is Ryt Bank’s Buy Now, Pay Later (BNPL) feature that offers users the convenience to split eligible purchases into easy monthly payments.
The key features of Ryt PayLater include:
- Get a credit limit of up to RM1,499 with instant approval and no minimum income required.
- Earn 1.2% cashback for QR payments (capped at RM5/month) (26/8/2025 - 30/11/2025)
- No late fees
- 0% interest when paid fully within the first month
- Ability to split purchases into 3, 6, 9, or 12 months
- Who is eligible? Malaysian citizens aged 21 and above
My suggestion?
Use Ryt PayLater responsibly, and every successful payment will help you build your credit score.
Verdict: My favourite digital bank with practical AI features to manage my finances
Personally, I think the AI implementation in Ryt Bank is a great leap in banking app.
Ryt Bank makes it simple and convenient for me to plan and manage my finances - such as savings, transfers, and payments. Ryt AI helped solve my biggest pain point - when my friends WhatsApp me their bank account details, I can make my transfer with just a screenshot.
My verdict? Give Ryt Bank and its exciting suite of features a try - I'm sure you'll like it!
Disclaimer
This article is part of a paid collaboration with Ryt Bank. All views, opinions, and insights expressed in this post are based on my honest experience and understanding at the time of writing. While care has been taken to ensure the accuracy of information, you are encouraged to verify details directly with Ryt Bank and consider your own financial circumstances before making any decisions. This content does not constitute financial advice.
Watch out for this hidden trap before buying a house with your partner
Are you thinking of buying a house with your partner in Malaysia?
If yes, watch out for this hidden trap before taking a Joint Loan:
Here's a quiz on Joint Loan:
If you pass away, does your partner inherit your share of the home automatically?
Here's the surprising answer:
In my Certified Financial Planner (CFP) class last week, I learned that most co-owned properties in Malaysia (including for couples) are held under Tenancy in Common.
Meaning, you and your partner will own the property equally. (👨: 50%, 👩: 50%)
But here’s the catch:
If one of you passes away, the surviving partner does NOT automatically inherit the other’s share.
Without a will, your share will be split based on the Distribution Act 1958 (for Peninsular & Sarawak):
Example:
Let's say when you pass away, your parents, spouse, and child are still alive.
Your share of the property will be distributed as follow:
- 👩 Spouse → gets 1/4
- 👶 Child → gets 1/2
- 👵 Parents → get 1/4
Your partner may suddenly co-own the property with your parents and child.
This may lead to potential conflict in the future:
Let’s say in the near future, your partner wants to sell the house, but your parents want to keep it.
The property becomes legally stuck — creating emotional and financial strain.
💡 The solution? Write a will - both you and your partner.
You and your partner should have a will stating who inherits their share of the property.
Writing a will can avoid complications and ensures your wishes are honoured.
TLDR:
- 🛑 Joint loan ≠ automatic inheritance
- 📜 Write a will
- 💬 Talk about this before buying a house with your partner
I hope this post is helpful!
--
p.s. Want to learn more about will-writing? I wrote my will when I was 28 - check out my experience HERE.
Disclaimer
Not financial advice. Do your own due diligence before making any financial decision.
Rule 78: The car loan secret banks won't tell you
Ever wonder WHY most people who are good with money will not pay off their car loan early?
Instead, they'll use the extra money to invest or pay off a house loan.
This is because they understand this secret rule on how banks calculate interest on car loans:
This secret rule is called the Rule of 78
It's a practice banks use to calculate interest, usually in car and personal loans.
Rule of 78 *front-loads* the interest, meaning you pay more interest in the early months and less toward the end.
Example: You take a 5-year (60 months), RM50,000 car loan at 3% p.a. interest.
How most people think interest is being charged:
In reality, the Rule of 78 ensures maximum interest is paid at the start:
This reduces savings from the early loan repayment for borrowers.
Try this: How much interest you'll save from early repayment:
So, let's say you are considering paying off your car loan early, how much interest do you actually save?
Scenario: You take a 5-year (60 months), RM50,000 car loan at 3% p.a. interest.
➡️ Step 1: Calculate the total interest charged for your car loan
- RM50000 x 3% p.a. x 5 years = RM7500
➡️ Step 2: Calculate your monthly installment
Car loan + Total Interest ➗ Loan Tenure = Monthly Installment
- (RM50000 + RM7500) ➗ 60 months (ie. 5 years) = RM958.33/month
➡️ Step 3: Calculate your Outstanding Loan after 36 months
Car loan + Total Interest - Total installment = Outstanding Loan
- RM57500 - (36 x RM958.33) = RM23,000
➡️ Step 4: Now, let's find out how much interest you'll save from this early repayment
This is also called a 'Rebate'.
Let’s calculate how much rebate you will get:
n = Periods of tenure left, N = Total tenure period, TC = Total interest charged
- [(24 x 25) ➗ (60 x 61)] x RM7500 = RM1,229 saved ✅
➡️ Step 5: What's the FINAL amount you need to pay for early repayment?
Outstanding loan - Rebate = Amount required for repayment
- RM23,000 - RM1,229 = RM21,771
➡️ Step 6: Finally, let's see how much interest you have paid by the end of Year 3 (Month 36):
Total Interest - Total Rebate = Interest Paid
- RM7500 - RM1229 = RM6271
By Year 3, you’d have paid 84% (RM6271) of your interest.
This means your savings (RM1,229) from early repayment is not as significant as you may think:
What'd be a better choice? Settling a car loan early or investing the cash?
For this, we'll compare 2 things:
(A) The 'cost' of keeping a RM23,000 car loan:
Not settling my car loan early means I'll have to pay a total of RM1,229 in interest over the next 2 years.
As long as my investment generates a return that is larger than RM1,229 - it makes sense to invest rather than pay off the car loan early.
Let's take a look:
(B) Keep the car loan. Instead, invest RM23,000 in a fund that generates 6% p.a.:
- Investment by the end of Year 2: RM25,842
- Year 1: RM23,000 x 6% = RM1,380
- Year 2: (RM23,000 + RM1380) x 6% = RM1,462.80
- Total return: RM23,000 + RM1,380 + RM1,462.80 = RM25,842
- Total Gain: RM25,842 - RM23,000 = RM2,842
Since the gain from investing (RM2,842) > the cost of keeping the car loan (RM1,229), then using the money to invest is a more effective use of capital.
I hope this guide has been helpful!
Disclaimer:
Not financial advice. Do your own due diligence before making any financial decisions.
3 things I'd regret if I don't build my dividend income today (+My CFP journey!)
When my dad fainted while jogging in the park last year, and had to undergo a heart procedure - I made a decision:
I'm committing myself to grow my Freedom Fund (dividend portfolio) so one day, I can be by the side of my loved ones when they need me the most.
My dividends, in this case, will be able to cover my monthly expenses - despite taking time off from work for an extended period.
If you can't figure out what you want in life, focus on future 'regrets':
I find that considering future 'regrets' is a powerful way to make important decisions.
In crucial crossroads in life, I like to ask myself:
"Would my decision today fill me with fewer regrets (and more gratitude) in the next 10, 20 years?"
In investing, if I do not commit to building my dividend income today, I'll regret it because:
- I'd be anxiety AF with cashflow when my loved ones require my attention/care in the future.
- As a self-employed, I'd be unable to go all out in my business without a stable base of dividend income to cover the worst-case scenarios in life.
- I do not like leaving my Freedom of Choice to the mercy of the ever-changing job/career market.
I know from experience: We never appreciate the value of consistent cashflow until shit happens in life.
June and July 2025 dividend update
[Side note] This newsletter is now 3,300 readers strong! To new friends and readers:
From zero, my goal is to build low-maintenance dividend income through my Freedom Fund - and you'll get all my investing progress & lessons in this weekly newsletter!
In June and July 2025, my Freedom Fund paid me a combined total of RM1320.77:
- June: RM740.72
- July: RM580.05
Growth compared to past years:
- June + July 2024: RM908.57 (+45%)
- June + July 2023: RM543.54 (+143%)
- June + July 2022: RM159.58 (+727%)
Progress takes time and patience - and dividend investing is a testament to that.
p.s. My dividend workshop, where I share the main strategy I use to build my Freedom Fund, has just ended in May!
If you are keen to join my future workshop (Q4 2025), do register your interest on the waitlist HERE.
I will be sure to keep you posted (with special waitlist perks) when it is happening!
[Update] I am taking up my Certified Financial Planner (CFP) qualification!
After 8 years of creating finance content, I am finally taking up CFP!
What's a 'CFP'?
CFP is a professional qualification in financial planning, where I'll learn the knowledge and best practices in things like:
- Investment
- Insurance
- Tax planning
- Estate planning (eg. Will writing)
- And more!
With CFP, my goal is to create higher-quality content for all of you.
From August to December, my weekends will be filled with classes - where I learn from the practitioners.
What's in it for you?
Every week, I'll be sharing 3 practical takeaways from my CFP class:
Click HERE to check out what I learned in my first class last weekend!
p.s. Do you have any questions regarding CFP or financial planning? Let me know by replying to this email!
My investing strategies as I turn 30
"What's your investment strategy?"
This is a question I am often asked when talking to like-minded readers or friends in the investing community.
My answer? It depends on when you ask me this question.
In my early 20s when I first started investing, I did not have a specific style. It was an exploration phase for me, as I dabbled with different things (IPO, individual stocks) and was often influenced by my peers' opinions.
As I turn 30 this year, I have managed to structure an investing strategy that fits my goals and lifestyle.
Simply put, going through several life-changing events and figuring out my priorities have inspired me to reflect on the investing strategy that suits me the most.
Read on as I'll cover this topic in detail.
Overview: My journey in discovering my 2 investing strategies
Before coming to my present style, I have tried different things. Here are 2 things that I have either cut down, or stopped doing entirely:
- Investing in individual stocks & REITs: I still do so right now, BUT I have reduced my holding on individual stocks or REITs as I do not have time to research individual companies.
- Shorter-term stock trading: I've stopped mixing short-term stock trading with my long-term investing strategy. Rather, to explore my interest in trading, I joined a proprietary trading firm last year (2023) to develop my trading career in the futures market (instead of the stock market). For me, short-term trading is a career, investing is a routine - they have to be done separately.
With that, I have come to 2 of my current investing strategies: Dividend and growth investing.
My investing strategy #1: Dividend investing
Long-time reader would know that I share my dividend portfolio (ie. My Freedom Fund) and dividend income on this blog.
Why dividend investing?
There are a few life-changing events in my 20s that led me to commit to dividend investing eventually:
- Cashflow as a self-employed:
- In the early years of my career, without a consistent cashflow, planning long-term business & life decisions were difficult as I would be forced into survival mode. As a self-employed, building a steady cashflow is my most important financial measure in business and life.
- Aging parents:
- A key incident in my 20s was my late grandmother being bedridden. In this incident, my family & relatives were caught off guard by the expenses & energy required to take care of her. As such, I've learned about the importance of having a low-maintenance passive income so I can focus on people/things that matter without the money anxieties when the time comes.
How do I do dividend investing?
Generally, my Freedom Fund involves investing in Exchange-Traded Funds (ETFs) that pay dividends.
To expand further, there are 4 types of dividend-paying instruments in my Freedom Fund:
- Dividend growth ETF: ETFs that grow their distribution consistently. So I get paid more each year as I hold these ETFs for the long term.
- Covered call ETF: ETFs that employ covered call options strategy in all or part of its underlying asset. This allows covered call ETFs to generate extra premiums in addition to the dividends from the underlying stocks - resulting in higher distribution.
- Individual REIT or REIT ETF: Exposure to commercial real estate which generally pays decent dividends.
- Individual dividend stocks: Individual stocks that pay attractive dividends. This is a smaller part of my portfolio as I do not enjoy researching individual stocks.
Check out what's in my Freedom Fund below, or click HERE for more detailed breakdown.
What is my goal for dividend investing?
With dividend investing, steady cashflow is my primary goal. I have a pretty clear timeline of about 15 - 20 years. By this time, I'd be in my mid or late 40s, where I foresee the need for steady dividend income (ie. cashflow) in scenarios where my parents may require additional care, or if I have my own family of which I'd like to spend more time together.
Moreover, having a steady dividend income that can pay for my expenses also means more choices and authority to do whatever I want, be it a short break from work, or a long vacation.
Simply put, my dividend income will give me the freedom of choice to focus on things that matter.
My investing strategy #2: Growth investing
Growth investing is also another investing style that I do in parallel to dividend investing.
Generally, investments in growth assets pay little to no dividends. Rather, most returns of growth investing come from the appreciation in value of the assets.
Why growth investing?
My goal for growth investing is to prepare for my older days. If I were to put a rough timeline, it'd be about 30 years, of which I'd turn 60.
As such, with about 30 years in mind, my goal is to invest in assets with a strong tendency to grow in value over a long time frame.
How I do growth investing:
There are many ways to do growth investing. Some may prefer to research and pick individual stocks with growth potential.
For me, I do not prefer picking individual stocks. As such, investing in Exchange-Traded Funds (ETFs) is my go-to alternative.
Every month, I will do a routine Dollar Cost Average (DCA) on my growth portfolio regardless of market condition, as I believe my entry price will average out over time.
READ: Click HERE to check out my guide to Exchange-Traded Funds (ETFs)
What's in my growth investing portfolio?
Briefly, the main investments in my growth portfolio are:
#1 S&P500 ETFs (CSPX, VUAA):
At ~12.5% annualized return for the past 10 years, ETFs like CSPX and VUAA are Ireland-domiciled ETFs that track the performance of the S&P500 index, representing the largest 500 listed companies in the US.
This is also the largest holding in my growth portfolio.
Check out my full guide on how to invest in S&P500 HERE.
#2 Tech sector ETFs (QQQ, XLK):
At ~18% annualized return for the past decade, QQQ and XLK are ETFs that track, or with exposure to the overall US tech sector.
Generally, tech-focused QQQ and XLK tend to outperform the S&P500, but also experience more volatility and larger drawdown during a downturn. This is the 2nd largest holding in my growth portfolio.
#3 Semiconductor ETF (SMH):
At ~27% annualized return for the past 10 years, the VanEck Semiconductor ETF (SMH) is an ETF that tracks the overall performance of companies involved in semiconductor production & equipment.
In other words, by investing in SMH, you'll get exposure to companies like Nvidia (NVDA), Advanced Micro Devices (AMD), and Intel.
Since I think AI development is going to be the focus for the coming decades, investing in SMH will give me the extra boost I need to grow my wealth.
#4 Crypto: Bitcoin and Ethereum
The next in my growth portfolio would be major cryptocurrencies like Bitcoin and Ethereum.
As a whole, I'd like to keep things simple when it comes to investing. As such, I adopt a hands-off approach by consistently investing a specific amount to my growth portfolio every month.
Other investing vehicles
Aside from my main portfolios, I also invest & contribute to things like:
- EPF & PRS to maximize tax relief
- ASNB
- Gold
- Robo-advisors like StashAway, Syfe, Wahed, and Versa Invest.
My investing timeline
The timeline for both my investing strategies are different and fulfill a specific role:
What to consider while designing your investing strategy/style
How you should invest depends largely on your personal circumstances and goals in life - there is simply no one-size-fits-all investing strategy.
4 things to consider while determining how you should invest:
Factor #1: Career and income stability
The state of your career and income can be a factor to consider.
For instance, being a self-employed, I am aware that my income may not always be steady. Hence, I have chosen to commit to dividend investing to build consistent cashflow as a financial measure in the future.
Meanwhile, one with a more stable job and income (eg. you work in the government sector) may consider focusing purely on investing in growth assets to maximize their wealth.
Factor #2: Lifestyle & goals
The lifestyle and goals you are looking to pursue are important factors to consider as well.
Some invest to live a rich life one day (eg. expensive cars, luxury bags). I invest to live a financially free life.
To live a rich life means you will need a lot of money to do so. But to live a financially-free life can be done even without a lot of money.
For instance, if I only need RM5,000/month to live comfortably, then I am financially free to moment my passive income from dividends reaches or exceeds RM5,000.
Therefore, it is important for you to be clear about the life you'd like to live.
Factor #3: Time to manage portfolio
Not everyone will have the time and find it fun to actively research and manage their investments.
I am one of those people, which led me to incline towards investing in ETFs which I consider low maintenance.
What do I use to invest?
Personally, I use multiple platforms to invest, as a way to diversify my funds.
#1 Global stocks & ETFs (US, London, Canada): Interactive Brokers (IBKR)
Interactive Brokers (IBKR) is my go-to platform for global stocks and ETFs as it provides access to over 150 markets in 34 countries, including the US, UK, and Canadian stock markets which I need to build my portfolio.
Furthermore, IBKR has one of the most affordable fee structure in the market.
READ: Check out my Interactive Brokers (IBKR) review HERE.
#2 US and Malaysia stocks: Moomoo MY & Rakuten Trade
Aside from that, I also use locally-regulated platforms like Moomoo MY and Rakuten Trade to access the US and local Malaysia stock market.
READ: My in-depth Moomoo MY review
READ: Rakuten Trade long-term user review
#3 Robo-advisors: StashAway, Syfe
Aside from brokers, I also use robo-advisors like StashAway and Syfe to automate a lot of my investment routine.
For instance, I have automated monthly investments to Syfe's Equity 100 ETF and REIT+ portfolio. I also use StashAway's Flexible Portfolio for my smaller investment routine (eg. Investing for long-term family fund).
READ: My StashAway review
READ: My Syfe review
#4: Crypto: Luno
When it comes to investing in crypto like Bitcoin and Ethereum, my go-to platform would be Luno, since it is regulated in Malaysia and I have been using it since 2017.
Invest in crypto via Luno - use my dedicated promo code ZKQST, and you will get RM75 worth of Bitcoin when you invest RM250 or more.
No Money Lah's Verdict:
I started dabbling with various investment instruments since my early 20s.
As I go through different life events and career progress in my 20s, I finally have a clear goal towards investing, as I discover what is important to me in life.
My biggest lesson from the past decade is there is no perfect investing style that can fulfill everyone's need. It is a journey of discovery - your goals, your risk appetite, your capital - that determines how best to invest your money.
May this post helps you to reflect on your own investment style - stay awesome!
Disclaimers
Past performance is not indicative of future performance.
This post is produced for general information purposes only. It is not intended to constitute professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.
The inclusion of Interactive Brokers’ (IBKR) name, logo or weblinks is present pursuant to an advertising arrangement only. IBKR is not a contributor, reviewer, provider or sponsor of content published on this site, and is not responsible for the accuracy of any products or services discussed.
The inclusion of Moomoo MY and Rakuten Trade's name, logo or weblinks is present pursuant to a collaboration arrangement only. Moomoo MY and Rakuten Trade is not a contributor, reviewer, provider or sponsor of content published on this site, and is not responsible for the accuracy of any products or services discussed.
SCHD Alternatives: 2 best Canadian-domiciled dividend ETFs (ZLU.U, XDU.U)
SCHD is an important dividend ETFn in my Freedom Fund portfolio thanks to its solid record of dividend growth and historical return.
However, SCHD is not perfect for non-US residents. For non-US residents from countries like Malaysia and Singapore, investing in SCHD (listed in the US) comes with a 30% dividend withholding tax (WHT). This is not ideal considering most SCHD investors are investing for dividends.
Let’s say you are receiving $100 in dividends, you’ll only end up getting $70 due to withholding tax.
Investing in Canadian-domiciled ETFs as an alternative
An alternative is to invest in dividend ETFs domiciled in Canada, specifically the Toronto Stock Exchange (TSE), as it comes with 15% dividend withholding tax (WHT) instead of 30%.
In this post, I will review 2 Canadian-domiciled dividend growth ETFs with exposure to the US stock market, and discuss if they are good alternatives to SCHD.
RELATED POSTS:
Overview: What and why invest in Canadian-domiciled ETFs?
Canadian-domiciled ETFs are ETFs registered & traded in Canada (Toronto Stock Exchange (TSE)).
Here are 2 key reasons why dividend investors can consider Canadian-domiciled ETFs over US-domiciled ETFs:
Reason #1: 15% dividend withholding tax on Canadian-domiciled ETFs
Thanks to tax treaties between Canada and Malaysia (the same goes for Singapore), the withholding tax for dividends paid out of Canada is 15% instead of the usual 25% for countries without tax treaties.
Reason #2: Availability of Canadian-domiciled ETFs that track the US market
The Canadian ETF market is also very vibrant, where investors will find many Canadian-domiciled ETFs that track the US market.
This makes it possible for us to find alternatives to SCHD.
Comparison: Canadian-domiciled ETFs vs US-domiciled ETFs
| Canadian-domiciled ETFs | US-domiciled ETFs | |
| Dividend withholding tax (WHT) for non-US residents (Malaysia/Singapore) | 15% | 30% |
| ETFs that track the US market | Yes (though lesser in choice) | Yes |
| Expense ratio | Generally low, but slightly higher than US-domiciled ETFs | Generally low |
| Currency | Mainly in CAD, with variants in USD | USD |
| Commission (Interactive Brokers Pro: Tiered Commission) | USD 0.006 (initial tier), min. USD 0.80/order | USD 0.0035 (initial tier), min. USD 0.35/order |
READ MORE: Interactive Brokers (IBKR) long-term review & pricing
My 2 selection criteria for Canadian-domiciled dividend growth ETF
To recap, SCHD is loved by many dividend investors thanks to its record of dividend growth and decent overall returns.
As such, while looking for Canadian-domiciled alternatives for SCHD, I have 2 key criteria:
#1 Consistent record of dividend growth
Firstly, the goal is to look for Canadian-domiciled ETFs with a record of dividend growth.
This is in line with SCHD which has a 12-year streak in growing its dividends.
#2 Decent overall performance (total return)
Next, it is also important to identify Canadian-domiciled ETFs that delivered a decent overall performance.
In other words, I'd be looking for those that delivered positive historical Total Return (price AND dividend growth).
READ: Introduction to dividend growth investing
#1 BMO Low Volatility US Equity ETF (USD) (ZLU.U)
i. ZLU.U Overview: Exposure to low-volatility US stocks that grow their dividends
The BMO Low Volatility US Equity ETF (ZLU.U) is an ETF that offers investors exposure to the performance of a basket of US stocks with lower sensitivity to volatile market movements.
| Ticker/Symbol | ZLU.U |
| Traded Currency | USD |
| Dividend Yield (As of 08/2024) | 2.11% |
| Expense Ratio | 0.33% p.a. |
| Asset Under Management (AUM) (as of 08/2024) | USD 68 m |
| Dividend Payout Frequency | 4 |
The technical term for 'low market sensitivity' stocks is 'low beta' stocks. Beta is usually measured with reference to a benchmark, usually the S&P500 (beta: 1.00) for the US stock market. The lower the beta of a stock (<1.00), the less it will be impacted by market movement compared to the benchmark.
As of August 2024, ZLU.U has a beta of 0.42, translating to a less volatile nature:
ii. Methodology: How are stocks selected to be part of ZLU.U?
BMO, the fund manager of ZLU.U, uses a rule-based methodology to select the 100 least market-sensitive stocks among large-cap stocks listed in the US.
While ZLU.U's methodology does not involve screening criteria for dividends, the stocks that made it to the selection tend to be dividend-distributing stocks.
In the following section, I will discuss the dividends and overall performance of ZLU.U.
iii. Top 10 holdings, geographical and sector exposure of ZLU.U
I find ZLU.U's overall portfolio to be rather balanced.
As of August 2024, the top 3 sectors of ZLU.U are consumer staples (20.42%), healthcare (17.81%), and the utility sector (17.15%) respectively.
The top 10 holdings in ZLU.U are companies like Lockheed Martin, Johnson & Johnson, and IBM.
These are relatively established companies that have increased their dividends over the years:
iv. A look at ZLU.U Dividends: Track record of stable dividend growth
As of August 2024, ZLU.U pays about 2.11% in dividend yield.
ZLU.U dividend growth has been relatively stable since 2013. It stalled a little between 2017 - 2018, but has shown a solid 3-year growth streak since 2021.
What I appreciate about ZLU.U (compared to the other ETF I discussed in this article), is a longer dividend payout record.
v. ZLU.U Overall Performance: Enjoy stable dividend growth at low volatility
As of July 2024, ZLU.U returned a Year-To-Date (YTD) performance of 9.95%, and a 5-year annualized return of 8.26%:
| Performance as of July 2024 | ZLU.U |
| Year-to-date total return (%) | 9.95% |
| 5-year annualized return (%) | 8.26% |
What's unique about ZLU.U is the fund manager's approach to selecting low-beta stocks. This should translate to a lower drawdown during a challenging market.
Let's see if this is true:
Scenario #1: 2022 Bear Market: ZLU.U vs S&P500
Scenario #2: 2020 Covid-19 Selloff: ZLU.U vs S&P500
Scenario #3: 2018 Trade War Selloff: ZLU.U vs S&P500
vi. Verdict for ZLU.U: A low volatility dividend growth ETF
From the above chart comparison between ZLU.U and the S&P500, I find ZLU.U to be a decent ETF for investors seeking a less volatile investing experience in the US stock market.
Its track record of dividend growth also means investors can enjoy growing dividend income with time.
What do you think of ZLU.U? Let me know in the comment section below!
#2 iShares Core MSCI US Quality Dividend Index ETF (USD) (XDU.U)
i. XDU.U Overview: A balanced dividend ETF
The iShares Core MSCI US Quality Dividend Index ETF (XDU.U) offers investors exposure to US stocks with above-average dividend yield and steady or increasing dividends.
Compared to ZLU.U, XDU.U has a lower expense ratio of 0.15% p.a.
| Ticker/Symbol | XDU.U |
| Traded Currency | USD |
| Dividend Yield (As of 08/2024) | 2.38% |
| Expense Ratio | 0.15% p.a. |
| Asset Under Management (AUM) (as of 08/2024) | USD 13.9m |
| Dividend Payout Frequency | 12 |
ii. Methodology: How are stocks selected to be part of XDU.U?
XDU.U tracks the performance of the MSCI USA High Dividend Yield Index. Stocks are selected based on:
- Strong financials, including a healthy balance sheet and less volatile earnings.
- Then, stocks are screened for factors such as Return on Equity (ROE), earnings variability, Debt-to-Equity, and recent 12-month price performance.
iii. Top 10 holdings, geographical and sector exposure of XDU.U
As of August 2024, the top 3 sectors of XDU.U are consumer staples (18.44%), information technology (15.53%), and the industrial sector (14.28%) respectively.
It is a rather balanced holding with no specific sector dominating over others.
The top holdings of XDU.U include stocks like Broadcom and Procter & Gamble. These are companies that have a record of increasing dividend payout:
iv. A look at XDU.U Dividends: Relatively new dividend ETF waiting to prove itself
As of August 2024, XDU.U pays about 2.38% in dividend yield.
Since XDU.U was listed in October 2019, its dividend track record is limited compared to ZLU.U which we've discussed above. So far, it has recorded a dividend growth streak of 2 years.
What makes XDU.U unique compared to most dividend ETFs is its monthly distribution payout, compared to the typical quarterly payout.
v. XDU.U Overall Performance: Enjoy stable dividend growth at low volatility
As of July 2024, XDU.U delivered a Year-To-Date (YTD) performance of 10.88%. Since it was listed in 2019, there is no data on its 5-year annualized return yet.
| Performance as of July 2024 | XDU.U |
| Year-to-date total return (%) | 10.88% |
| 5-year annualized return (%) | N/A |
vi. Verdict for XDU.U: Not my top Canadian-domiciled dividend growth ETF
Given XDU.U lack of dividend track record, it is not my top Canadian-domiciled dividend growth ETF for the time being.
That said, it should not be overlooked and I will keep track of XDU.U's performance from time to time.
Comparison: Canadian-domiciled dividend ETFs (ZLU.U, XDU.U) vs SCHD
Before I share my concluding thoughts in the final verdict, let me lay out some side-by-side facts & features of the dividend growth ETFs that we’ve discussed in this post today:
| SCHD | ZLU.U | XDU.U | |
| Domicile | US | Canada | Canada |
| Exposure | US market | US market | US market |
| Special traits (as of 08/2024) | 12-year dividend growth streak | Less volatile stocks selection | Fewer years of dividend growth track record |
| Expense Ratio | 0.06% p.a. | 0.33% p.a. | 0.15% p.a. |
| Dividend Yield (as of 08/2024) | 3.43% | 2.11% | 2.38% |
| Dividend Growth Streak | 12 years | 3 years | 2 years |
| YTD Total Return (as of 07/2024) | 10.47% | 9.95% | 10.88% |
| 5-Year Annualized Return (as of 07/2024) | 12.78% | 8.26% | N/A |
How to invest in Canadian-domiciled ETFs
Investing in Canadian-domiciled ETFs like ZLU.U and XDU.U requires access to the Toronto Stock Exchange (TSE).
Since most brokers in Malaysia do not offer access to the Canadian market, my go-to broker to invest in Canadian-domiciled ETFs is Interactive Brokers (IBKR).
Interactive Brokers (IBKR) is one of the most reliable global brokers as it is regulated by financial authorities in over 10 countries (eg. US, UK, SG, HK, Canada, and more).
Aside from that, IBKR offers access to the USD-denominated Canadian-domiciled ETF at an affordable fee. You can check out IBKR’s fee structure HERE (under ‘Canada’ > ‘USD-denominated’)
READ: My Interactive Brokers (IBKR) long-term user review
Verdict: While not perfect, Canadian-domiciled ETFs provide a more tax-efficient way to invest for dividends in the US stock market
My search for the best SCHD alternative brought me to explore Canadian-domiciled dividend ETFs,
Just like my research on Ireland-domiciled dividend ETFs, I think there is no perfect alternative to SCHD in the Canadian stock market.
Despite Canadian ETFs being more tax efficient (15% dividend withholding tax), SCHD's 12-year dividend growth streak is difficult to beat. Furthermore, SCHD also has the lowest expense ratio of 0.06% p.a. compared to ZLU.U and XDU.U.
Ultimately, it is up to us as investors to decide what compromise to take while deciding between US or Canadian-domiciled ETFs.
What do you think?
Stay tuned as I continue my quest to search for the best SCHD alternatives (in other markets, maybe!).
Meanwhile, check out my go-to broker to invest in Canadian-domiciled ETFs below!
Disclaimers
Any of the information above is produced with my own best effort and research.
This post is produced for general information purposes only. It is not intended to constitute professional buy/sell advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.
The inclusion of Interactive Brokers’ (IBKR) name, logo or weblinks is present pursuant to an advertising arrangement only. IBKR is not a contributor, reviewer, provider or sponsor of content published on this site, and is not responsible for the accuracy of any products or services discussed.
[Strategy] Dividend growth investing: Why it works
One of the most powerful dividend investments is the one that raises its dividend payout on a consistent basis.
In this post, let's explore one of the most important investing strategy as a dividend investors: Dividend Growth Investing!
Related posts:
Overview: What is dividend growth investing?
Dividend growth investing is an investing style that involves investing in assets that consistently increase their dividend (or distribution) payout.
For instance, a company has grown its dividend by paying $0.10/share in dividends in 2022, $0.12/share in 2023, and $0.15/share in 2024.
Generally, as a dividend growth investor, you can expect your dividends to grow over time.
3 basic dividend investing terms you need to know:
There are 3 dividend investing terms that you need to understand before we proceed. (p.s. Please click on each term for a more detailed explanation):
- Dividend Yield: Dividend yield is an expression of dividends in the form of percentage (%), relative to the share price.
- Distribution Per Unit (DPU): DPU refers to the dividend paid per unit of share.
- Yield-on-cost (p.s. Please make sure you understand this before proceeding): Yield-on-cost is the dividend you get from your investment, divided by the original cost of the investment.
#1 Dividend growth investing via stocks
One way to do dividend growth investing is by investing in stocks that tend to increase their dividends.
Dividend Growth Stock Case Study: Apple (AAPL)
An example of a company with a history of increasing dividends is Apple (AAPL). Let's do a quick 10-year dividend analysis on Apple:
| Financial Year | Dividend Payout ($) | Annual Payout Growth | Yield-on-Cost if you invested on 2/1/2014 (Entry Price: $19.85/share) |
| 2023 | 0.950 | 4.40% | 4.79% |
| 2022 | 0.910 | 5.20% | 4.58% |
| 2021 | 0.865 | 7.12% | 4.36% |
| 2020 | 0.8075 | 6.25% | 4.07% |
| 2019 | 0.760 | 7.80% | 3.83% |
| 2018 | 0.7050 | 14.63% | 3.55% |
| 2017 | 0.6150 | 10.31% | 3.10% |
| 2016 | 0.5575 | 9.85% | 2.81% |
| 2015 | 0.5075 | 9.98% | 2.56% |
| 2014 | 0.4614 | - | 2.32% |
From the above dividend data, we can see that Apple has consistently grown its dividends for the past 10 years (2014 - 2023).
Investing in Apple 10 years ago: What would this mean to you?
If you invested in a unit of Apple share 10 years ago at $19.85/share, your yield-on-cost in the first year was just 2.32%.
However, by 2023, your yield-on-cost would be 5.48% (based on your entry price of $19.85).
Let's find out how much dividends you'd get by owning 10,000 units of Apple share from 2014:
- During the first year (2014), you'll be paid $4614 in dividends (10,000 units x $0.4614), which translates to 2.32% in dividend yield.
- 10 years later (2023), your original 10,000 units of Apple shares will pay you $9,500 in dividends (10,000 units x $0.95), translating to 4.79% in dividend yield.
Thanks to the growth in dividends, your dividend payout increased from $4,614 to $9,500 in 10 years - an incredible 105% growth!
#2 Dividend growth investing via ETF
Another way to execute a dividend growth strategy is by investing in Exchange-Traded Fund (ETF) that tend to grow their dividends.
READ: A beginner's guide to Exchange-Traded Fund (ETF)
Dividend Growth ETF Case Study: Schwab U.S. Dividend Equity ETF (SCHD)
An example of an ETF with a record of increasing its dividend consistently is the Schwab U.S. Dividend Equity ETF (SCHD). Let's do a quick 10-year dividend analysis on SCHD:
| Financial Year | Dividend Payout ($) | Annual Payout Growth | Yield-on-Cost if you invested on 2/1/2014 (Entry Price: $36.54/share) |
| 2023 | 2.6580 | 3.77% | 7.27% |
| 2022 | 2.5615 | 13.90% | 7.01% |
| 2021 | 2.2490 | 10.88% | 6.15% |
| 2020 | 2.0284 | 17.64% | 5.55% |
| 2019 | 1.7242 | 19.79% | 4.72% |
| 2018 | 1.4393 | 6.96% | 3.94% |
| 2017 | 1.3457 | 6.97% | 3.68% |
| 2016 | 1.2580 | 9.72% | 3.44% |
| 2015 | 1.1466 | 9.52% | 3.14% |
| 2014 | 1.0469 | – | 2.87% |
From the above dividend data, we can see that SCHD has consistently grown its dividends for the past 10 years (2014 - 2023).
Investing in SCHD 10 years ago: What would this mean for you?
If you invested in a unit of SCHD 10 years ago at $26.45/share, your yield-on-cost in the first year was just 3.96%.
By 2023, your yield-on-cost would be 7.27% (based on your entry price of $36.54).
Let's find out how much dividends you'd get by owning 10,000 units of SCHD from 2014:
- During the first year (2014), you'll be paid $10,469 in dividends (10,000 units x $1.0469), which translates to 2.87% in dividend yield.
- 10 years later (2023), your original investment in SCHD will pay you $26,580 in dividends (10,000 units x $2.6580), translating to 7.27% in dividend yield.
Thanks to the growth in dividends, your dividend payout increased from $10,469 to $26,580 in 10 years - a whopping 153% growth!
READ: My review on SCHD ETF (why this is my favorite dividend growth ETF)
Why do I choose dividend-growth ETFs over dividend-growth stocks?
There is no one absolute right way to invest since everyone has different goals and aspirations.
Reason #1: Dividend growth ETFs suit my passive investing style
Personally, I choose to invest in dividend growth ETF (such as SCHD) as it is a more passive way to do dividend growth investing.
- I am not a fan of investing in individual stocks:
- Investing in individual stocks means I will always have to be on the lookout for the next dividend growth stocks as my current stock may cut its dividends someday.
- It is an active effort which I am not keen in doing.
- I like how effortless ETF investing is:
- Investing in ETF means I am investing in a basket of stocks that are included as they fulfill the criteria (or methodology) of the ETF. When a stock fails to fulfill the selection criteria, it will be routinely replaced by another stock that is a better fit.
- This selection practice is done automatically by the fund manager, requiring no additional effort from the investor.
Most dividend growth ETFs have a stock selection criteria that ensures that only quality dividend stocks are included.
Reason #2: ETFs have selection criteria (a.k.a. Methodology) in place
As an example, for SCHD, stocks are selected based on the following criteria:
- Dividend payout: Minimum 10 consecutive years of dividend payments.
- Size of the company: Minimum Float Adjusted Market Cap of $500 million.
- Liquidity: Minimum three-month Average Daily Volume of Trading of $2 million.
Then, qualified stocks are further ranked as per the following criteria:
- Dividend yield
- 5-year dividend growth rate
- Company’s financial health (ie. Free cashflow vs debt)
- Return on equity (ROE)
From the above methodology, this gives me confidence that I am investing in a basket of quality dividend growth stocks by investing in SCHD.
READ: My review on SCHD ETF (why this is my favorite dividend growth ETF)
Why dividend growth investing?
Dividend growth is one of the strategies I use while building my Freedom Fund, with dividend growth ETFs like SCHD and FUSD making up close to 20% of my Freedom Fund.
Read: My review on FUSD ETF (Ireland-domiciled ETF)
3 key advantages of dividend growth investing:
- Given time, dividend growth is a great dividend investing strategy as you can expect to receive more dividends from the stocks or ETFs that increase their dividends consistently.
- Aside from a steady rise in dividends, investors tend to also enjoy returns in the form of capital appreciation (ie. Increase in stock price) from most dividend growth stocks/ETFs.
- If you plan to live off your dividends one day, dividend growth strategy is also an effective way to combat inflation.
- If you own a dividend stock or ETF that grows its dividends by an average rate of 8% annually (ie. You get paid 8% more (on average) every year), it will beat a 3% inflation. This prevents your buying power from eroding when you live off your dividends.
Who should do dividend growth investing?
I think dividend growth strategy is a decent choice for:
- Dividend investors with a longer investing time frame before they need to live off their dividends, ideally 10 years or longer.
- Investors who are looking to build a steady & growing cashflow from dividends.
Try it yourself: How to identify dividend growth stocks/ETF (for US market)
Seeking Alpha is a platform providing extensive information on the US stock market.
There's a FREE version that everyone can use (with most features restricted), you can still see if a stock/ETF has been raising its dividends consistently.
Step 1: Head over to Seeking Alpha's site (click HERE) and search for the stock you are looking to research:
Step 2: Under 'Dividends', select 'Dividend Growth'
Step 3: Scroll to the 'Dividend Growth' section and you'll find the dividend payout history of the stock/ETF:
You can also see the annual payout growth of the stock/ETF under 'Dividend Growth History':
Risks & Caveats of Dividend Growth Investing
#1 Risk of dividend cuts
The biggest uncertainty a dividend growth investor must face is the risk of a stock or ETF stop growing its dividends, or even cutting its dividends, especially during a difficult market/economic condition.
As such, it is important to:
- Select stocks and ETFs with a consistent dividend growth history. That said, a healthy record of dividend growth is still not a guarantee of future dividend growth.
- For individual stocks, select companies with a growing revenue and healthy cashflow. This ensures that the dividend growth is sustainable.
#2 Time & patience are the ultimate recipe
A caveat to effective dividend growth investing is it will take time.
Hence, it may not suit investors with a shorter investment time frame (especially if you plan to live off your dividends in <10 years).
Furthermore, dividend growth investing tend to be boring and less exciting compared to the latest hype in the market.
If you invested in SCHD in 2014, your yield-on-cost is just 3.96%, which can be discouraging for investors that have no patience to let their dividends grow.
#3 Dividend withholding tax
Dividend withholding tax is something dividend investors should be aware of while investing.
A 'withholding' tax is a method that a country uses to collect taxes from non-residents who have derived income from the country.
For example, Malaysians investing in US-listed stocks and US-domiciled ETFs will incur a 30% dividend withholding tax.
One work-around is to invest in markets that charge a more efficient dividend withholding tax. For Malaysians, investing in Malaysia, Singapore and Hong Kong stocks and domiciled-ETFs, for instance, comes with 0% dividend withholding tax, while Ireland and Canadian-domiciled ETFs charge a 15% dividend withholding tax.
I will discuss this workaround in more detail in future posts.
p.s. There are also instances where it makes sense to invest in the US stock market for dividends, despite the 30% dividend withholding tax. For me, SCHD is such example as it has one of the most consistent dividend growth track record among dividend ETFs.
READ: To learn more about dividend withholding tax, click HERE.
Verdict: Consider incorporating dividend growth investing in your dividend portfolio
When it comes to dividend investing, most investors tend to go for the stock with the highest dividend yield.
However, dividend investors with a longer investing time frame should give dividend growth investing a try. Most stocks or ETFs that grow their dividends consistently (like Apple and SCHD) tend to start with a lower dividend yield, but would turn out to be an attractive dividend beast with time.
What are your thoughts on dividend growth investing? Feel free to share your thoughts and questions with me in the comment section below!
Disclaimers
Past performance is not indicative of future performance.
This post is produced for general information purposes only. It is not intended to constitute professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.
The inclusion of Interactive Brokers’ (IBKR) name, logo or weblinks is present pursuant to an advertising arrangement only. IBKR is not a contributor, reviewer, provider or sponsor of content published on this site, and is not responsible for the accuracy of any products or services discussed.
How to invest in the S&P500 Index for non-US residents (via Ireland-Domiciled ETFs)
Are you looking for a (simple) investment that has proven itself over the past few decades?
How about one that makes money 76% of the time over the past 30 years?
The S&P500 index is perhaps one of the best testaments for simple, yet practical investment that has withstood the test of time (AND financial crises, AND Covid-19).
But what exactly is the S&P500, and how can you (as a non-US resident) invest in the S&P500 index?
In this post, let’s explore how you can invest in the S&P500, and the things that you need to know before investing in it!
Before this, here are some related posts that you may want to read:
- Interactive Brokers (IBKR review): Invest in the global market including Ireland-domiciled ETF!
- Malaysians’ guide to ETF investing
- Are you a dividend investor? Here are the best dividend-paying ETFs in Malaysia!
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What is the S&P500 Index?
The S&P500 index is a stock market index that has been tracking the performance of the top 500 largest US-listed companies since 1957.
Just like how the KLCI and STI are used to measure the performance of the Malaysian and Singapore stock markets respectively, the S&P500 is commonly used as a proxy to the US stock market.
In fact, since the US stock market is so dominant, the S&P500 is sometimes considered as THE stock market.
So, what are the key companies within the S&P500 index?
Apple, Microsoft, Amazon, Meta (formerly Facebook), Alphabet, Berkshire Hathaway, and JP Morgan – just to name a few.
Essentially, by investing in the S&P500, you’ll get exposure to the finest companies in the US stock market.
But is there more to the S&P500? In the section below, let me show you some surprisingly impressive feats about the S&P500 index!
Time-tested Performance: Why invest in S&P500
In 2020, Warren Buffett stated that “for most people, the best thing to do is to own the S&P 500 index.”
Personally, I think there are solid reasons to this statement. Here are 2 indications of why the S&P500 is a great long-term investment:
#1 The S&P500 produced gains 76% of the time over the past 30 years.
Over the past 3 decades (1992-2021), the S&P500 has ended up higher in 23 out of 30 years. This makes up to gains 76% of the time*!
That, ladies & gentlemen, is just you investing your money passively without having to manage them at all! Not sure 'bout you, but I think that's a fantastic deal relative to the effort required!
*Important: Past performance is NOT indicative of future performance.
#2 The S&P500 has grown by 1019%* over the past 30 years.
This translates to an 8.38% in annualized return (ie. 8.38% yearly COMPOUNDED return over the past 3 decades!)
*1992 to 2021
Now, if #1 and #2 aren’t good enough, consider this:
Over the past 3 decades, the S&P500 has survived the dot-com bubble (2000), global financial crisis (2008), the Covid-19 pandemic crisis (2020), many other smaller crises – and STILL grown by 1019%!
In other words, the S&P500 has not just overcome the biggest financial and health crises of the past decades, but still managed to thrive coming out of them.
If you are looking for a simple AND reliable way to grow your wealth, I am pretty sure the time and crises-tested S&P500 could find its place in your portfolio.
How to invest in S&P500 Index as a non-US resident
As an investor, we cannot invest directly in the S&P500 index.
Instead, the easiest way to invest in the S&P500 index is through investing in the S&P500 Exchange-Traded Funds (ETFs).
An ETF is an instrument that mirrors the performance of an underlying index. Similar to stocks, ETFs are also traded in the stock market.
In other words, you can buy/sell ETFs just like how you buy or sell stocks.
Before we proceed, as a non-US resident, it is not viable for us to invest in US-listed ETFs for the long-term due to tax reasons. More on why and what you can do about it in the following section.
RELATED READ: Guide to ETF Investing
Withholding & estate tax for investing in the US stock market
In the US, there are many popular S&P500 ETFs, such as:
- SPDR S&P 500 ETF (ticker: SPY)
- iShares Core S&P 500 ETF (IVV)
- Vanguard S&P 500 ETF (VOO)
These ETFs are especially popular among US investors as they track the performance of the S&P500 index closely.
However, it is not recommended for non-US residents (eg. investors from Malaysia or Singapore) to invest long-term in the US-listed S&P500 ETFs (eg. VOO, SPY, IVV).
Why?
-
Withholding Tax on Dividends
As countries without tax treaty with the US, non-US residents investing in the US stock market are taxed 30% on dividends received.
So, let’s say you received $100 in dividends, you’ll only end up getting $70 due to withholding tax.
This is certainly not ideal if we invest in US-listed stocks or ETFs that pay out dividends.
Check the list of countries with tax treaty with the US HERE.
-
Estate tax
There is also a 40% estate tax in the US for foreign investors.
So, let’s say I pass away with $1 million worth of stocks, $400k will go to the US government, and only $600k will be received by my appointed nominee.
Ireland-Domiciled ETFs: The best S&P500 ETFs for non-US residents
Well, does that mean we are not able to invest in the S&P500 after all?
Not exactly. There are ways to go around this:
The easiest way for non-US investors (eg. Malaysians, Singaporeans) to invest in the S&P500 index is through Ireland-Domiciled ETFs.
Why?
Because Ireland-Domiciled ETFs benefit from the US-Ireland tax treaty of only 15% withholding tax on dividends. This is significantly lesser compared to the 30% withholding tax of US-listed ETFs.
(a) How many Ireland -Domiciled S&P500 ETFs are there?
The following are 8 Ireland-Domiciled S&P500 ETFs are ETFs listed in the London Stock Exchange (LSE) that tracks the S&P500 index.
Don’t worry, let me simplify this table and tell you which S&P500 ETFs are the best among all:
In the table above, there 6 things that you need to pay attention to:
(1) Trading Currency:
Most ETFs can be bought either in GBP or USD. Personally, I’d go for USD-denominated ETFs as USD is still the go-to global currency.
(2) Expense Ratio:
ETF providers charge a small annual management fee for their ETFs. In this case, all ETFs have a very low expense ratio so the difference is negligible.
(3) Fund Size:
In general, an ETF with a larger size fund size is a good indicator of the ETF’s durability as well as its popularity. Larger ETFs can also make use of economies of scale to lower their costs.
So, ETFs like CSP1 and CSPX are the obvious winner here. That said, other ETFs are also fairly respectable in size (billions) so you’ll be in good place regardless of which S&P500 ETF you select.
(4) Dividend Handling:
There are 2 approaches on how these ETFs manage dividends:
- Distributing: Your dividends are redistributed to you.
- Accumulating: Your dividends are reinvested automatically.
Choosing to invest in either ETF is your personal preference. Personally, I’d go for Accumulating ETFs as I want my dividends to be re-invested automatically, so I can compound my returns more efficiently.
(5) Unit Price:
Some ETFs are larger in terms of per unit share price. As an example, CSPX is USD 400+/share while VUAA is USD 80+/share.
If your investment capital is small, ETFs with smaller per unit price like VUAA would provide you more flexibility to invest in the S&P500.
(6) Trading Volume:
Here’s something that you may not know - the trading volume of an ETF has a minimal indication of the ETF’s liquidity.
Rather, it is the trading volume of the underlying component companies that truly affect the liquidity of an ETF (for S&P500 it’d be companies such as Apple, Microsoft etc.)
Hence, it’s okay to not put too much weightage into the trading volume of an ETF in our decision-making process.
(b) Which is the best Ireland-Domiciled S&P500 ETF?
Considering all the key factors, personally, I think CSPX or VUAA are the best Ireland-Domiciled S&P500 ETFs among all. Here are why:
- Both CSPX and VUAA are denominated in my preferred currency, USD.
- Both CSPX and VUAA have a very minimal expense ratio of 0.07%/annum.
- Both CSPX and VUAA will reinvest my dividends automatically (accumulating).
- Both CSPX and VUAA use a full replication approach. Meaning, I’ll get the most accurate representation of the S&P500 index when I invest in either of them.
- CSPX is the larger ETF compared to VUAA, but it has a larger per-unit price. This makes it less flexible to invest in it with a smaller capital.
- On the other hand, VUAA is a smaller ETF. However, it has a smaller per unit price, which is easier for investors to invest with a small capital.
Regardless, I think either ETFs are great for you to gain exposure in the S&P500 index.
Recommended broker to invest in Ireland-Domiciled S&P500 ETFs: Interactive Brokers (IBKR)
To invest in Ireland-Domiciled S&P500 ETF, you’ll need to have a broker with access to the exchange where the ETF is listed.
In this case, all the ETFs that we discussed are listed on the London Stock Exchange (LSE).
For this, I use Interactive Brokers (IBKR) to invest in Ireland-Domiciled S&P500 ETFs listed in the LSE. In fact, IBKR gives investors access to 150 markets in more than 33 countries! (US, Hong Kong, China, Japan, UK, Singapore, Europe, and more!)
In my opinion: IBKR is a no-brainer for investors looking to gain access to global markets at a low commission.
RELATED READ: Interactive Brokers Long-Term Review
Open an Interactive Brokers (IBKR) account today:
Click the image below to explore Interactive Brokers' Low Commission:
No Money Lah's Verdict
So, what do you think? Isn't the S&P500 amazing, given how it has withstood the test of time and crises?
For me, I genuinely think that the S&P500 is a great long-term investment, be it as a standalone investment, or being part of a long-term investment portfolio.
Remember, if you want to invest in Ireland-Domiciled ETFs, be sure to check out Interactive Brokers for global market access at a competitive price!
Disclaimers
This article is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions.
This post may contain promo code(s) that afford No Money Lah a small amount of commission (and help support the blog) should you sign up through my referral link.
All You Need to Know about Dividend Withholding Tax for Malaysians (stocks & ETFs)
Did you know? Depending on where you invest, a tax may be charged on your dividends!
Dividend withholding tax is something that most investors are unaware of when investing.
In this post, let's learn about dividend withholding tax as a Malaysian, how it affects your investments, and what can you do about it!
Related Read:
Highlights of dividend withholding tax
- Dividend withholding tax is a tax that investors incur while receiving dividends from their investments.
- Depending on what you invest in (stocks or Exchange-Traded Funds (ETFs)), the withholding tax rate will apply to you differently.
- Dividend withholding tax impacts each investor differently. In particular, dividend investors should be mindful of the tax when making their investment decisions.
What is dividend withholding tax?
Withholding tax is a method that a country uses to collect taxes from non-residents who have derived income from the country.
As an example, when we invest in stocks in a foreign country (eg. the US), the dividends that we received from our investments are usually charged with a withholding tax. To be precise, that’s what we call ‘dividend withholding tax’.
So, how does dividend withholding tax work? How does it affect us as an everyday investor?
Let’s find out!
How does dividend withholding tax work?
Depending on what you invest in, the way a dividend withholding tax will apply to your investments will differ:
Scenario 1: You invest in stocks
If you invest in stocks, your dividend withholding tax rate is determined by your country of residence.
Most of the time, the rate is determined by whether Malaysia has a tax treaty with the other country.
So, if you invest in US stocks as a Malaysian, you are charged with a 30% dividend withholding tax. If you invest in Singapore stocks, you will enjoy a 0% rate as a Malaysian.
Scenario 2: You invest in funds such as Exchange Traded Funds (ETFs)
The dividend withholding tax rate of an ETF is determined by the country where the fund is domiciled in.
Simply put, ‘domicile’ refers to the country where a fund’s holding company is legally incorporated.
What’s the difference though? Glad you asked.
Essentially, not every ETF listed in a country is necessarily domiciled in that country.
For instance, Singapore has its own S&P500 ETF (which tracks the top 500 listed companies in the US) listed on its exchange, namely the SPDR S&P 500 ETF Trust (SGX code: S27). However, if you dig into the fund’s prospectus, you’d notice that S27 is actually a US-domiciled fund.
Hence investors of S27 ETF, regardless of country of residence, are subjected to a 30% dividend withholding tax.
Meanwhile, S&P500 ETFs such as CSPX and VUAA are Ireland-domiciled ETFs listed on the London Stock Exchange (LSE). Since Ireland has a tax treaty with the US, Ireland-domiciled ETFs are only subjected to a 15% withholding tax.
As a result, instead of investing in US-domiciled funds, Ireland-domiciled ETFs are usually the go-to choice for investors outside of the US to gain exposure to the US market due to favourable tax conditions.
READ MORE: Guide: How to invest in S&P500 as a non-US resident
So, how do we pay our dividend withholding tax?
Essentially, there is no need for an investor to 'pay' dividend withholding tax directly, as it is deducted automatically from your dividends BEFORE it is distributed to you.
As an example, Apple decides to pay out $0.10 distribution per share to investors. Let’s say you own 1,000 shares, you’d receive:
- With dividend withholding tax deducted (30% for US-listed stocks): $70 in dividends ($0.10*70%*1000 shares)
Be mindful of the latest 2% dividend tax
That said, Malaysians should be aware of the latest 2% dividend tax (which is different from dividend WHT) under budget 2025, which targets Malaysians who generate more than RM100,000 in annual dividends from local companies.
Find out more about the latest 2% dividend tax for Malaysians HERE.
Dividend withholding tax rates for Malaysians
Below, you can find the dividend withholding tax rates relevant to most Malaysian investors:
p
| Country | Dividend Withholding Tax Rate |
| Malaysia | 0% (10% for REITs) |
| Singapore | 0% |
| Hong Kong | 0% |
| UK | 0% |
| China | 10% |
| Canada | 15% |
| Australia | 15% on unfranked dividends. 0% on franked dividends. |
| Japan | 15% |
| Ireland-Domiciled ETFs (London Stock Exchange) | 15% |
| US | 30% |
How does it affect you?
Dividend withholding tax affects investors differently.
-
Growth investing - minimal impact
If you invest in growth-related stocks or ETFs like Tesla and ARKW, the impact of dividend withholding tax is minimal.
The reason is, growth stocks do not usually pay high dividends (or they do not pay dividends at all).
-
Dividend investing – significant impact
As for dividend investors, it is essential to be aware of dividend withholding tax while investing.
Since dividends make up a significant portion of the overall return of dividend-focused stocks/ETFs, it is crucial to take into account the impact of withholding tax.
For instance, assuming you invest $100,000 in a US dividend portfolio that generates a 6% dividend yield annually.
Below is the total dividend that you'd earn without dividend withholding tax (0%):
In this case, a 30% dividend withholding tax would cause you to end up with over 42% (~$93,000) less in dividend income over the span of 20 years!
In short, it is obvious that dividend withholding tax will impact the returns of dividend investors as a whole.
How to deal with dividend withholding tax as an investor
Usually, most investors would look to the US stock market while investing globally.
However, the 30% dividend withholding tax from the US can be very costly, especially to investors holding stocks where dividends form a significant portion of their returns.
Here are some of the things you can do to reduce the impact of dividend withholding tax on your long-term returns:
- Generally, avoid dividend stocks/ETFs that are listed or domiciled in the US. For ETFs, you can find out the domicile details on the official site or prospectus of the fund.
- Opt for stocks/ETFs that are listed or domiciled in markets with 0% withholding tax, such as Singapore and Hong Kong.
- Alternatively, you can also opt for Ireland-domiciled ETFs that are listed on the London Stock Exchange (LSE) or Canadian-listed stocks/ETFs, which are generally more tax efficient (15%).
Regardless of the market, Interactive Brokers (IBKR) has you covered with access to over 150 markets in 34 countries (US, Canada, Malaysia, Hong Kong, China, Japan, UK, Singapore, Europe, and more!).
Check out my review on Interactive Brokers HERE.
Side note:
With 0% withholding tax, the Singapore REIT market is one of the most established REIT markets in Asia, and it pays a decent dividend as well! Click HERE to learn more about Singapore REIT ETFs!
A word on tax on Foreign-Sourced Income (FSI) for Malaysians
As of the production of this post, Malaysians are not required to pay any further tax on dividends received from overseas investments, aside from the existing Dividend WHT explained in this article.
In Budget 2025, the Malaysian government has extended individual income tax exemption for Foreign-sourced Income (FSI) from 2026 to 2036.
In short, for your overseas dividends, you are not required to pay any tax aside from the Dividend WHT mentioned in this post - at least until 2036.
Will any of these policies change (for the better or worse)?
Based on my understanding of the Malaysian government’s policy-making habits, I think it is hard to tell and I have zero control over this. So, I will focus on continuing to grow my dividend portfolio instead of worrying about the things that may or may not happen.
I will keep this section updated if there’s any news!
No Money Lah Verdict
I hope this guide has been clear and helpful!
I’ve received many tax-related questions on dividends in the past and I think we may have overcomplicated things due to a lack proper of information.
If you have any questions, feel free to let me know in the comments section below!
FAQ on Dividend Withholding Tax
Q1: How do I pay for dividend withholding tax on my dividends?
You DO NOT need to pay for dividend withholding tax directly. Instead, they are deducted before your dividends are paid to you. In short, the dividends that you are receiving have been offset by withholding tax – there is nothing you have to do on your end.
Q2: Is dividend investing still a reliable approach with dividend withholding tax around?
Personally, I think dividend investing is still the most reliable way to build passive income. Meanwhile, dividend withholding tax is just part of the game, not a bug.
I will give additional thoughts into withholding tax while doing my research, but it will not deter me from building my dividend income portfolio!
Q3: What is the difference between ‘franked’ and ‘unfranked dividends’ for Australia-listed stocks/ETFs?
A franked dividend is a system set by the Australian government to eliminate double taxation in dividends.
As such, franked dividend is paid with a tax credit attached, where shareholders submit the dividend income plus the franking credit as income but will only be taxed on the dividend portion.
Meanwhile, unfranked dividends carry no tax credit. Since the company has not paid tax on the dividends paid, you will have to pay income tax on the particular dividend that you received as an Australian.
Disclaimers
Any of the information above is produced with my own best effort and research.
This post is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions.
This post may contain promo code(s) that afford No Money Lah a small amount of commission (and help support the blog) should you sign up through my referral link