Lecture Notes: Investing in SCHD ETF for Financial Freedom

Introduction

Goal of Dividend Income Investors: Achieve financial freedom by growing annual dividend income to cover expenses and surpass day job income.
Focus of Lecture: Schwab U.S. Dividend ETF (SCHD) and how a $20 daily investment can potentially replace a full-time job income.

Expense Ratio: Very low at 0.06%, making it cost-effective for long-term investment.
Portfolio Composition:
- Diverse with stocks from various sectors (financials, healthcare, consumer staples, etc.).
- Includes companies like Pfizer, BlackRock, and Coca-Cola.
- Contains 103 different companies to minimize risk.
Comparison with Other Funds:
- Less heavily weighted towards tech stocks compared to S&P 500.
- More value-oriented, making it suitable for recession periods.

Unique Feature: Focuses on stocks with potential for dividend growth over time.
Performance During Downtrends:
- Paid record high dividends during the 2020 market downturn.
- Continues to increase dividend payments annually.

Growth Since Inception:
- Created on October 20, 2011.
- Grown from $8.34 to $27.60 per share in 13 years (9.5% annual growth).
Dividend Yield: Approximately 3% annually, compounded with share price growth.
Compounding Effect:
- Reinvesting dividends accelerates growth.
- $20 daily investment can grow significantly over 20-30 years.
- Potential to reach $500,000 by year 20 and $1.5 million by year 30.

Current Market Considerations:
- Lower interest rates favor dividend-paying companies due to cheaper loans and increased spending.
- Increased investor interest in dividend stocks for stability and reliable income.

Strategic Long-Term Investment: SCHD offers a balanced approach with growth potential and income generation.
Recommendation: Consider the ETF for long-term financial goals, keeping in mind personal due diligence.