"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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