Investing entails both risk and reward. On one hand, conservative investors focus on stabilizing their portfolios through bonds, index funds, and blue-chip dividend stocks. On the other, aggressive investors chase high-growth assets, such as tech stocks, leveraged ETFs, and high-yield dividend funds, betting on huge returns.

The middle ground is a diversified portfolio that combines growth and income while adjusting risk as retirement approaches. But what happens when a young investor leans heavily into dividend-focused ETFs, overlooking long-term growth for quick cash? That's the question tearing through the r/Dividends Reddit community after a 34-year-old shared his bold three-ETF strategy.

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“Right now, I'm planning to go with just [Vanguard S&P 500 ETF (NYSE: VOO)], [JPMorgan Equity Premium Income ETF (NYSE: JEPI)​], and [Schwab U.S. Dividend Equity ETF (NYSE: SCHD)], split like this: VOO – 45% (broad market exposure and long-term growth), JEPI – 15% (monthly income and lower volatility), and SCHD – 40% (strong dividend growth and fundamentals). I know this setup is pretty barebones, but I feel like it covers the basics well enough for now. I plan to start adding bonds in maybe 5 to 6 years, once I get closer to 40,” he wrote.

Still, the poster is wondering whether his allocations are too basic and whether he’s missing something, mentioning that he wants to build a dividend-only portfolio. The r/Dividends community on Reddit has offered its advice in the comments, so let’s analyze that.

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3-ETF Portfolio–Is He Onto Something or Is It a Bad Idea? Reddit Responds

Ditch JEPI Since You Don’t Need Income Now

Most Redditors argued that JEPI is a rather poor fit for a 34-year-old who’s still in the accumulation phase.

“Unless you are currently using the income generated from it, there’s no reason to hold JEPI or [NEOS S&P 500 High Income ETF (NYSE: SPYI)] or any of the others instead of holding the index itself like VOO. They underperform the underlying assets, so the total return of VOO will be higher than JEPI and there are also the tax implications of getting your returns as nonqualified dividends. So, if you are just going to reinvest the dividends from JEPI, there’s no reason to hold it instead of VOO, but there are good reasons to hold VOO instead,” a Reddit community member suggested.

Recommending what he thinks is a better allocation for the poster’s portfolio, this commenter also advised getting rid of JEPI: “JEPI is not only a bad option for you, it is also not very tax efficient. Stick with this: VOO/[Schwab U.S. Large-Cap Growth ETF (NYSE: SCHG)]/SCHD 70/20/10.”

“You have a job for income. You don't need JEPI at your age. Get into growth and dividend growth stocks,” a Redditor wrote.

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Shift from Dividends to Growth for Now

Many users urged the 34-year-old investor to prioritize growth-focused ETFs over dividend-heavy assets like SCHD because he's young and has a long time until retirement to grow the money.

“At 34, you have a fairly long investment horizon in front of you before you retire–20 years or more. So, you should be much more heavily invested in growth rather than dividends. Growth companies invest their earnings in growth opportunities rather than using cash to pay dividends and as a result, you will almost certainly build more wealth over 20 years with growth stocks/ETFs than you will in dividend stocks/ETFs,” a comment reads.

Suggesting that the poster’s allocation is way too conservative for his age, this Redditor shared the way his portfolio is split, recommending keeping growth-focused assets even in retirement: “You are going too hard on dividends for your age. At 40, I am about 20% dividends, 20% bonds, and 60% growth stocks. That will shift about every 5 years toward stable income goals, but even then I probably will still hold at least 40% growth in retirement.”

When it comes to long-term growth, a commenter advised the poster to invest in VOO rather than SCHD.

“VOO outperforms SCHD and is a better option for long-term growth. I’d also consider mixing in [Vanguard Russell 2000 Index Fund ETF (NASDAQ: VTWO)] and [Vanguard Mid-Cap Growth Index Fund ETF Shares (NYSE: VOT)] at 15% to 20% each to cover mid and small-cap stocks,” he said.

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This article 34-Year-Old Gambles His Entire Future On Just 3 ETFs – 'Is This A Dumb Idea Or Am I Onto Something?' Reddit Explodes Over His Risky Bet originally appeared on Benzinga.com

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