Dividends vs Growth Index

How much you lose holding dividend stocks instead of a non-dividend index, measured after selling everything.

All figures are in today's money: every rate on this page is real, i.e. above inflation. Why?

Returns & Horizon

Initial Investment (€)

Hold (Yrs)

Payouts / Yr

Dividend Yield (%)

Both portfolios compound to the same 5.0% total return (global Market Return, set in the header). The dividend stock's price grows 2.0% and pays the remaining 3.0% as dividends. Reinvested with no friction, this is identical to the index.

Taxes & Reinvestment

Yearly Dividend Tax (%)

Charged every year on dividends above the allowance.

Sale (Capital Gains) Tax (%)

Charged once, only when you finally sell.

The defaults (25% / 25%, a 1,000 allowance) resemble German rules. For a Swiss private investor, capital gains are tax-free (set 0%) and dividends are taxed as income at your marginal rate, with no allowance.

Annual Tax-Free Allowance (€)

Dividends up to this amount per year are tax-free (e.g. German Sparerpauschbetrag: €1,000).

When on, the dividend holding is trimmed each year so its payout stays inside the allowance; the surplus is moved into the growth index. You pay capital-gains tax on each trimmed slice now, but stop paying yearly dividend tax on it: a net win over long horizons, a net cost over short ones. Transaction costs of the yearly trims are not considered.

Days you forget to reinvest30 days

Each dividend sits idle this long before reinvesting, permanently missing that compounding.

Metric	Growth Index	Dividend Portfolio	Advantage
After-Tax Value	€223,997	€221,032	+€7,204

Final After-Tax Proceeds (Year 20)

Growth Index€223,997

Dividend Stocks€221,032

What each choice actually pays

Where your after-tax wealth after 20 years lands under each strategy: the growth index in the upper panel, dividends in the lower one. Both panels use exactly the same buckets, x axis and y axis, so a bar compares directly with the bar below it. Read the shapes, not the overlap: both strategies ride the same market in any one scenario, so the distance between these two peaks is not the odds of one beating the other. The Advantage column above settles that.

Zoom the x-axis (both panels)€43.5k – €1.1M

€43.5k€1.1M

Upper panel (Growth index): The share of scenarios in which growth index finishes in each range.
Lower panel (Dividend strategy): The share of the same scenarios in which dividend strategy finishes in each range. Both panels use exactly the same buckets, x axis and y axis, so a bar here compares directly with the bar above it.
point at the chart: Hovering or tapping anywhere on the chart names the bucket under the pointer and, for each side, the share of scenarios that finish inside it, below it and above it (the three add to 100%). Dragging across the chart with the mouse zooms to what you selected.
clipped tail: The ‹ and › percentages at the ends of the axis are the scenarios finishing outside the drawn range, each after a ■ in its side's colour. Up to 1.0% of one side's scenarios sit outside it; they are counted in every number on this page, just not drawn here.

Portfolio value over 20 years

Growth index P10–P90 · 80% of scenarios: The middle 80% of simulated futures: 1 run in 10 ends above this ribbon and 1 in 10 below it.
Growth index P25–P75 · middle half: The middle half of simulated futures: a quarter end above it, a quarter below.
solid = median (P50) path: The solid line is the median (P50) path. Because returns compound, the arithmetic mean sits ABOVE the median: a few very good runs pull the average up.

Solid lines are the median (P50) outcome; the shaded emerald fan is the modelled P10–P90 range of the growth index, computed directly from the return distribution (σ = 15%, set in the header), not sampled, so identical on every render. Values are before the final capital-gains tax.

Driver	Impact	Share
Higher cost basis (basis step-up) Reinvested dividends raise your cost basis, so less capital-gains tax at sale. A benefit when green.	+€25,570	-862%
Yearly dividend tax drag Dividends are taxed every year instead of compounding tax-deferred until sale (first 1000 tax-free per year reduces this drag).	−€28,176	950%
Reinvestment lag Dividends sit idle for 30 days before being reinvested, permanently missing compounding.	−€358	12%
Total lost to dividend strategy	€2,965	100%

Dividend tax paid over 20 yrs

€18,975

Index final sale tax

€41,332

Dividend cap-gains tax

€14,703

Dividend shares are "freshly bought" with reinvested payouts, so they carry a higher cost basis (€176,925) and owe less tax at sale than the index, which partly offsets the loss. Transaction costs of the yearly trims are not considered.

How the scenarios work: the market is modelled as a lognormal return distribution with volatility σ = 15% (set in the header) around the 5%/yr median. Both strategies are decompositions of that ONE total-return path: the growth index compounds it with no payouts, the dividend stock carves its 3% yield out of the same grown value each period, so only the dividend friction (yearly tax, reinvestment lag, basis step-up) separates them. The range of outcomes is computed one year at a time; paying 4 times a year instead of once is then applied as one fixed adjustment taken from the median path, because payout frequency moves the result by only about 1%. The solid line is the median (P50) path.

Growth index (no dividends, tax deferred to sale)

G(Y) = P \cdot (1+r)^Y

G(20) = 100,000 × (1 + r)^20

G(Y): growth index value after Y years
P: initial investment
r: index total return, as a fraction = marketReturn/100
Y: holding period, years

Dividend leg, one payout period

\text{gross} = \text{invested} \cdot (1+r)^{1/F} \qquad \text{dividend} = \text{gross} \cdot \frac{y}{F} \qquad \text{tax} = \max(0,\ \text{dividend} - \text{headroom}) \cdot t_d \qquad \text{invested}' = \text{gross} - \text{dividend} + (\text{dividend} - \text{tax}) \cdot (1+r_d)^{-fd}

gross = invested × (1+r)^(1/4) dividend = gross × y/4 tax = max(0, dividend − headroom) × t_d invested′ = gross − dividend + (dividend − tax) × (1+r_d)^(−30)

F: payouts per year
y: dividend yield, as a fraction = divYield/100
headroom: tax-free allowance left for the current calendar year
t_d: yearly dividend tax rate, as a fraction = divTaxRate/100
r_d: daily total-return rate, used to discount the reinvestment lag
fd: days the dividend cash sits idle before reinvesting

Dividend leg cost basis (the basis step-up)

\text{basis}' = \text{basis} + (\text{dividend} - \text{tax})

basis: the dividend leg's cumulative cost basis, basis(0) = P

Capital-gains tax at sale

\text{tax}_{cg} = \max(0,\ t_{cg} \cdot (\text{final} - \text{basis}))

t_cg: capital-gains tax rate, as a fraction = capGainsRate/100
final: the leg's terminal value before this tax
basis: the leg's cost basis (P for the growth index, the accumulated basis above for the dividend leg)

Tax-allowance shift (only while "Shift excess dividends to growth index" is on)

\text{target} = \frac{\text{allowance}}{y} \qquad \text{surplus} = \text{invested} - \text{target}\ \text{(when invested} > \text{target)} \qquad \text{cgt} = \max(0,\ t_{cg} \cdot (\text{surplus} - \text{surplus's share of basis}))

target = 1,000 / y whenever invested > target: surplus = invested − target; cgt = max(0, t_cg × (surplus − surplus′s share of basis)); move (surplus − cgt) into the growth sleeve, realizing cgt now

allowance: annual tax-free dividend allowance
target: dividend-sleeve size whose yearly payout exactly fills the allowance

Assumptions behind every figure: how this site models the market →