A Modest Portfolio: Dividends & Detachment

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One gathers the modern worker, aged twenty-five to thirty-four, manages to accumulate something in the neighborhood of $59,800 annually. After the usual depredations of the taxman, that leaves a rather diminished sum – approximately $45,400, if one is being precise. Financial advisors, those earnest people, suggest setting aside 20% – a perfectly sensible notion, if one has anything to set aside. That equates to roughly $750 per month. Honestly, the sheer arithmetic is rather exhausting.

Now, even a portion of that – a mere $500, shall we say – invested with a modicum of sense, could, over a decade or three, blossom into something resembling a portfolio. The Vanguard Dividend Appreciation ETF (VIG 0.13%) – a rather clumsy name, don’t you think? – has, historically, performed rather well. A consistent dividend payer, you understand. After thirty years of diligent saving, one might find oneself with approximately $986,900. And, more importantly, a passive income stream of around $15,700 annually. Enough for a small, tastefully decorated pied-à-terre, perhaps.

The Pursuit of Consistent Dividends

This Vanguard fund, you see, concentrates on some 338 American companies that have a rather admirable habit of increasing their dividends each year. A decade of consistent increases, at least. They wisely exclude those with excessively high yields – a sure sign of impending trouble, naturally – and focus on sustainable growth. A thoroughly sensible approach, if I may say so.

Currently, the yield is a modest 1.6%. The composition is rather diversified, though heavily weighted towards information technology (27%), financials (22%), and healthcare (17%). The usual suspects, really. A glimpse at the top ten holdings reveals a predictable list:

  1. Broadcom: 6.6%
  2. Microsoft: 4.4%
  3. Apple: 4.1%
  4. JPMorgan: 4%
  5. Eli Lilly: 3.9%
  6. Visa: 2.5%
  7. ExxonMobil: 2.3%
  8. Johnson & Johnson: 2.2%
  9. Walmart: 2.2%
  10. Mastercard: 2.1%

The expense ratio is a remarkably low 0.05% – a mere $5 per $10,000 invested. One feels almost guilty accepting such a bargain. Compared to the average of 0.73%, it’s practically highway robbery… in favor of the investor, of course.

A Dividend Income Stream

Since its inception in 2006, this fund has delivered a rather impressive 563% return (assuming dividends were reinvested). An annual rate of 10%, if one is inclined to calculate. Consequently, a monthly contribution of $500, sustained over three decades, yields the aforementioned $986,900. And, as previously noted, an annual income of $15,700. Quite sufficient to maintain a certain standard of living, wouldn’t you agree?

Furthermore, the underlying investments continue to appreciate. Excluding dividends, the fund has returned 310% since its launch – an annual rate of 7.8%. At that pace, the $986,900 portfolio could swell to $1.2 million in just three years, generating an annual dividend income of approximately $19,200. One begins to see the possibilities.

Diversification, Darling

Naturally, the aforementioned strategy assumes a consistent saving of $500 per month. But the median worker, aged twenty-five to thirty-four, should be saving closer to $750. That leaves a rather agreeable $250 surplus. One could, of course, dabble in individual stocks – artificial intelligence, perhaps – if one has the inclination and the time to research. A rather tiresome prospect, in my opinion.

Alternatively, one could invest in an exchange-traded fund that tracks the S&P 500 – a collection of 500 of the most influential companies in the world. Several options are available, but the Vanguard S&P 500 ETF is particularly compelling, given its remarkably low expense ratio of 0.03%.

Finally, for those with a more adventurous spirit – and a higher risk tolerance – the Invesco QQQ Trust, which tracks the Nasdaq-100, is worth considering. Heavily weighted towards the technology sector, it has outperformed most other sectors over the past decade. A gamble, perhaps, but a potentially rewarding one.

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2026-02-01 12:13