Author Topic: Dividend ETFs or Standard Index Funds  (Read 969 times)

nihilism122

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Dividend ETFs or Standard Index Funds
« on: March 28, 2018, 05:17:26 PM »
Which ones are the better investment?  Obviously the latter is more diversified, but that does not necessarily mean the return will be better.  I am personally invested in standard index funds, but my GF is getting into investing and I am considering getting her into dividend ETFs.  She is about to inherit six figures to lump sum invest.  Thoughts? 

frugal_c

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Re: Dividend ETFs or Standard Index Funds
« Reply #1 on: March 29, 2018, 12:11:14 PM »
The diversification IS an issue.  If you could find an etf that has good diversification I would say go for it.  Some international ETFs (not even the dividend version) have yields around 3% while maintaining broad diversification, so that is what I use.

CorpRaider

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Re: Dividend ETFs or Standard Index Funds
« Reply #2 on: March 29, 2018, 12:23:24 PM »
Why would you want skew to the dividends? For a psychological benefit that you know GF would likely experience from seeing the dividends or having potentially lower volatility?  Otherwise, you're probably losing diversification and maybe making a less tax efficient investment for no good reason.
« Last Edit: March 29, 2018, 05:18:13 PM by CorpRaider »

Radagast

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Re: Dividend ETFs or Standard Index Funds
« Reply #3 on: March 29, 2018, 01:37:24 PM »
Paying taxes is good. Dividend ETFs make you pay more taxes. Therefore, dividend ETFs is good. (Wow, I am logical.)

Proud Foot

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Re: Dividend ETFs or Standard Index Funds
« Reply #4 on: March 30, 2018, 09:15:14 AM »
If you are going with a mutual fund/ETF I would stick to a standard index fund. More diversification with those. What makes you think the Dividend ETF would have a better return? Lets look at these ones.

                                                              Dividend Yield    10 yr Return     
Vanguard S&P500 (VFIAX)                         1.87%                9.49%
Vanguard Dividend Appreciation ETF (VIG)  1.86%                9.03%
Vanguard High Dividend Yield ETF (VYM)     2.96%                9.13%
Vanguard Total Stock Market (VTSAX)         1.78%               9.74%

So better returns over the past 10 years with the index funds and they are more tax efficient by having a lower dividend. Plus they have the benefit of more diversification.