"How can Income Investors Benefit From Using Exchange Traded Funds"

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The most obvious advantage of using ETFs for income investors, is that of diversification. This is especially true if your funds are relatively small. If you're really wealthy, you can afford to buy shares in a large number of dividend-paying stocks. If one goes down, you'll have the others.

However, many people cannot afford this. To obtain the safety of diversification, they must pool their money with other investors in either mutual funds or ETFs.

Of course, many exchange traded funds do contains stocks which pay dividends, but they're not the focus of investors. For example, while the 30 Dow Jones Industrial Average (DJIA) pay dividends, they're not the highest available. Most people who buy Diamonds just want the benefit of holding the best known index.

Plus, ETFs don't reinvest your dividends or any capital gains. This is all right if you're currently retired and want to maximize your present income, but it makes the task of reinvesting dividends to increase your future income more difficult. You have to deposit that quarterly dividend check into your checking or money market account, and then tell your broker to buy more ETF shares. If you're starting small, the dividend check will be small and you'll just have to keep it in an interest account such as your money market or ordinary passbook savings account.

Exchange Traded Funds Aimed at Dividend Investors:

iShares Dow Jones Select Dividend Fund -- DVY

BlackRock Dividend Achievers Trust -- BDV

BlackRock Strategic Dividend Achievers Trust -- BDT

Vanguard Dividend Appreciation -- VIG

WisdomTree LargeCap Dividend -- DLN

WisdomTree Dividend Top 100 -- DTN

SPDR S and P Dividend -- SDY

WisdomTree Japan Total Dividend -- DXJ

WisdomTree Japan SmallCap Dividend -- DFJ

PowerShares HighYield Dividend Achievers -- PEY

WisdomTree MidCap Dividend -- DON

WisdomTree Europe Total Dividend -- DEB

WisdomTree SmallCap Dividend -- DES

PowerShares Intl Dividend Achievers -- PID

WisdomTree International MidCap Dividend -- DIM

WisdomTree Europe SmallCap Dividend -- DFE

Claymore/Zacks Yield Hog ETF -- CVY

There are a number of ETFs that do represent industry sectors or types of investments that generally pay dividends, so you can check them out:

iShares Dow Jones Utilities Sector Index Fund -- IYU

Vanguard Consumer Staples -- VDC

Vanguard Financials -- VFH

iShares S and P Global Financial Sectors Index Fund -- IXG

iShares Dow Jones U.S. Financial Sectors Index Fund -- IYF

iShares Dow Jones U.S. Financial Services Index Fund -- IYG

iShares Dow Jones U.S. Real Estate Index Fund -- IYR

iShares Cohen and Steers Realty Majors Index Fund -- ICF

streetTRACKS Wilshire REIT Index Fund -- RWR

The Consumer Staples Select Sector SPDR Fund -- XLP

The Financial Select Sector SPDR Fund -- XLF

The utilities Select Sector SPDR Fund -- XLU

PowerShares Dynamic Food & Beverage -- PBJ

KBW Regional Banking -- KRE

Vanguard REIT Index -- VNQ

Bond EFTs Exchange Traded Funds:

iShares iBoxx Investment Grade Corporate Bonds -- LQD

iShares Lehman 1-3 Year Treasury -- SHY

iShares Lehman 7-10 Year Treasury -- IEF

iShares Lehman 20+ Year Treasury Bond -- TLT

iShares Inflation-Protected Securities -- TIP

iShares Lehman Brothers Aggregate -- AGG

These names are provided to you as suggestions to check out. Their respective prices and yields of course change over time. Also, new ETFs are always being added, so you may find better Exchange Traded Funds.

Shares of ETF Exchange Traded Funds are created and controlled by Authorized Participants.

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