How to Handle 00929 Dividends? One Action to Amplify Compound Interest, Don't Let Your Dividends Go to Waste

Getting Excited About Dividends is Pointless, Redeeming Principal is a Scam

Hello, readers of Lazy to be Rich (懶得變有錢)! Today, I want to discuss a very popular topic recently, but this topic reminds me of the keyword “redeeming principal” that everyone used to get excited about when buying insurance. In this investment topic, it’s called “dividend distribution,” and today’s protagonist is the Fuh Hwa Taiwan Technology Dividend 00929 ETF! 🤑

If dividends and redeeming principal are enough to get you excited, then it’s really all over after the excitement. The pleasure is just a fleeting moment, you won’t accumulate wealth, and you’ll lose the time value.

Of course, it’s not that you can’t spend dividends, but whether your financial decisions are based on a solid foundation when spending the dividend money or investing in dividend-paying, high-dividend ETFs, that’s what the “financial planning” section of my website aims to discuss.

Basic Information is Really Basic, Presented with Both Hands

Basic Information

However, let’s first take a look at the basic information of this ETF. Here is a table of basic information about the Fuh Hwa Taiwan Technology Dividend 00929 ETF:

PS: The rate of return and performance are based on the backtesting data of the Taiwan Technology Dividend ETF (00929) launched by Fuh Hwa Investment Trust in the past 5 years.

Brief Review of the Advantages of Fuh Hwa Taiwan Technology Dividend 00929 ETF

The Fuh Hwa Taiwan Technology Dividend 00929 ETF has been a dark horse in investment in recent years, not only because of its high dividend yield and monthly dividend payments, but also because of its stricter ROE screening criteria. According to available data, this ETF has an annualized return of 16%, far exceeding the S&P 500 index’s 10%. After checking the constituent stocks, I found that this is mainly because the ETF tracks the best 40 electronic technology stocks in Taiwan, and the ROE data among them are all above the standard.

The Fuh Hwa Taiwan Technology Dividend 00929 ETF not only provides high dividend yields and monthly dividend payments, but also has strict stock screening conditions and excellent performance, making it an investment option worth considering for your portfolio.

Of Course, Your Dividends Need to be Continuously Reinvested

Investment Differences and Data Simulation

Now, let’s talk about dividends. Dividends are not money to buy instant noodles, but capital to be reinvested! To demonstrate this more scientifically, we did a data simulation.

Assume you have an initial investment of NT$100,000 (USD $3,125), with an annualized return of 16% and an average dividend yield of 7.5%. We invested this NT$100,000 (USD $3,125) in a monthly dividend ETF and compared the situation after 5 years with and without reinvesting the dividends.

Here is a table of the simulation results:

This table clearly shows that if you continuously reinvest your dividends, the investment value after 5 years will be significantly different compared to not reinvesting dividends. Specifically, the investment value after reinvesting dividends will be NT$51,329 (USD $1,604) higher than the investment value without reinvesting dividends!

This data simulation result should make you understand how powerful dividend reinvestment is!

Wasting Dividends is Wasting Time Value

Remembering the Days in the Insurance Industry

In the past, in the insurance industry, the keyword for all savings insurance was “redeeming principal.” Even medical insurance “redeemed principal,” and accident insurance also “redeemed principal.” Everything had to involve redeeming principal. In the end, whether it was a loss or a redemption, time proved everything. The principal was indeed redeemed, and the protection was also earned, but time passed by like that!

Consider an accident insurance policy with NT$3 million (USD $93,750) coverage. At level 1 of accident insurance, the rider would cost about NT$3,000-4,000 (USD $93-125) per year. However, a 20-year term accident insurance policy with NT$3 million (USD $93,750) coverage would cost nearly NT$120,000 (USD $3,750) per year. Okay, I won’t calculate the details, everyone can do the math!

You think you earned NT$3 million (USD $93,750) of coverage in 20 years, but if you invested NT$120,000 (USD $3,750) in the Fuh Hwa Taiwan Technology Dividend 00929 ETF, the dividends might be enough to pay for the NT$3 million (USD $93,750) insurance premium (this is differential financial management).

So, Wasting Dividends Means Earning Less

The point here is that if you just distribute the dividends and let them rust in the bank, then you are really wasting the value of time, as mentioned in 【Investment】Monthly Dividend ETFs are Booming Like This! How Much Did We Really Lose in Monthly Dividends? We Don’t Feel It Now, But Long-Term Losses Can Be Significant!. This behavior can be considered very “arrogant” in Taiwanese people’s financial behavior! It’s like someone receiving red envelope money but just putting it in a drawer. This is not only disrespectful to money but also a limitation on the growth of one’s future wealth. Making good use of dividends to raise stocks is like letting your golden goose lay golden eggs.

Further Reading

Lazy Conclusion

懶大

金融科技新創 CEO | 獨立財務顧問

Dividend reinvestment is the key to amplifying the effect of compound interest. After receiving dividends, they should be reinvested immediately instead of being spent or left idle in a bank account. In the long run, this simple action can bring significant additional growth to your investment portfolio and is an indispensable part of achieving financial goals.

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