No. of Recommendations: 5
Ha!
FlyingCircus, you sent me on a 4 hour trip down a rabbit hole. I get sidetracked easily.
"Moreover, it is tax-inefficient since you have the drag of paying income tax on the dividends every year"
Surprised at this from you, Ray. No taxes in an IRA. It has never made sense to use high dividend funds in a taxable account.
It's complicated.
Sure, no tax in a ROTH, but you do eventually pay ordinary income tax on a regular IRA.
To model the effect in a taxable account you'd have to do a complex set of calculations, modelling reinvestment of the after-tax dividend. That would not be fun.
Funds that have a high artifical Return Of Capital such as Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) (yield 8.15%) are fine in a taxable account. One could make a good case that those are better there than in an IRA.
(artificial means that the ROC payment doesn't reduce the NAV.)
Apparently testfol.io, like most sites, does not adjust for dividends in the base chart. Stockcharts does. Try out this accurate chart instead.
https://schrts.co/VMIuzkWxThis is incorrect. True, most sites chart price-only. But testfol.io defaults to reinvested dividends.
https://testfol.io/?s=kwxxV3YDJvUYahoo shows the dividend-reinvested data in the historical data tab.
From 5/1/2007-11/1/2025,
Price-only:
PONRX went from 10.10 to 10.97. 1.09x
SPY went from 150.92 to 682.06. 9.52x
With reinvested dividends:
PONRX went from 3.53 to 10.97. 3.11x
SPY went from 106.85 to 682.06. 6.38x
By doing some cut/paste into excel you can make the chart showing adjust for dividends. Too bad yahoo doesn't do that.
Where PONRX shines is that it has much lower volatility and lower max drawdown.
(BTW, Yahoo internally has prices out to many decimal places. Ex: 3.5330681800842285 and 10.970000267028809 for PONRX's 3.53 and 10.97. You just have to do some fiddly scraping.)
PONRX, for one, gapped up from and then paced the S&P for years until the 2022 (interest-rate driven) bear market brought it back down in line, and has matched it since.This is because PONRX inception date was 4/2/2007, just before the 2008/2009 financial bear market. But that was just the luck of the start date. What has it looked like since, say, 2010?
The big big advantage of PONRX is that is is much less volatile.
I am always reminded of something that I read once: "A strategy of picking up pennies in front of a steamroller always looks like a success, right up until the point that the steamroller arrives.
The problem is that returns look good in any period that does not have a visiting steamroller in it."
The advantage of funds like PONRX is that they generally just skim over the potholes.
... 9+% yields from well managed certain types of income funds ... I'm not sure where you can get 9+%. PONRX is currently 5.43%.
testfol.io has a lot of capability to look at different things. For example, you can incorporate periodic withdrawals. A constant 6% withdrawal taken monthly on $10,000 is $50/mo.
If you take that from both SPY and PONRX, the ending values are $20,069 and $10,790.
Yes, SPY had 2 bad drawdowns in 2009 and 2020, but it didn't got to zero. It was behind until 2021 and then shot way up.
https://testfol.io/?s=ao1mBBOXgwzBut whatever, suit yourself.Yup, whatever. Everybody has their own balance of greed/fear.
