Dividend ETFs or Standard Index Funds

[nihilism122]

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]

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]

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.

[Radagast]

Paying taxes is good. Dividend ETFs make you pay more taxes. Therefore, dividend ETFs is good. (Wow, I am logical.)

[Proud Foot]

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.