Where the protected money sits

The dividend arithmetic, which is the whole content of this page

The idea is that the protected money earns something, and the something funds the playing. The formula is:

Annual dividend income = amount invested × yield.

That is all of it. Here it is across a range of yields, so that no single figure is being asserted as anybody's current rate. Read down your amount and across to whatever yield you find when you go and look it up.

The number that surprises people is the bottom row. At a 1% yield it takes a million dollars to produce about $10,000 a year. The “live off the dividends” idea does most of its work in people’s heads at the right-hand end of that table and very little at the left, and which end applies to you is a fact about the thing you actually hold. Go and read it.

Which is not an argument against it. It is an argument for doing the multiplication before building a plan on it. At realistic win sizes, dividends fund a small bankroll. They do not fund a life, and any page telling you otherwise has not shown you this table.

Why there is no yield printed on this page

Because a rate is stale within weeks, because we would be publishing a number about a product we have not recommended, and because a figure on a page outranks the reader's own checking even when it should not. The table above is a sensitivity range, not a quote. Go and read the current yield from the fund or the provider itself, put it in the formula, and the answer is yours rather than ours.

One trap that catches active traders specifically

Dividends taxed at the lower qualified rates have to clear a holding period. The IRS's test is that the share must be held “more than 60 days during the 121-day period that begins 60 days before the ex-dividend date” IRS Pub 550. Miss it and the dividend is taxed as ordinary income instead.

That rule is aimed at exactly the habit somebody arriving from a trading account is likely to bring with them. It is the one thing on this page that is specific to this audience, which is why it is here and the rest is not.

The rate that then applies is set by your other income, not by the dividend. That is also why this page cannot tell you what you would pay.

Who to ask instead

Three sources that are not selling anything, run by a regulator or by an industry body under regulatory oversight:

• Investor.gov, the SEC's Office of Investor Education and Advocacy. Plain explanations and a tool for checking whether somebody offering you advice is registered Investor.gov.
• FINRA for investors, including BrokerCheck FINRA.
• IRS Publication 550 for how investment income is actually taxed, rather than how a blog says it is IRS Pub 550.

And a human. Not because that is the polite thing to say at the end of a page like this, but because everything that decides the answer, your other income, your filing status, what else you owe, how long the money is meant to sit still, is invisible to a website.

What this page will not do

• No fund, no ticker, no provider, no platform. Naming one is a recommendation whatever the sentence around it says.
• No best-of list and no comparison table. Affiliate-shaped, stale in weeks, and not our competence.
• No rate, no yield, no projection. A compounding chart has two axes and we would own neither.
• No allocation. How a win divides between protected, invested and playing money has no citable source, so any split printed here would be ours and unsourceable.

What this section does own is next door: the new bankroll for the money that keeps playing, move it the same day for getting it off the exchange, and retirement accounts and trading money for why the 401(k) idea mostly does not work. Back to after a big win.