February 23, 2008 at 1:00 am by Tom Lydon
Investors are drawn to high dividend yield exchange traded funds (ETFs) because of their supposed security and as a hedge tool during a down market.
But investors often try and buy the yield and not the ETF, says Delbert Thiessen for ETF Guide. Consider the ETF failures when the market corrects 30% or drops off its recent high, he says. A sharp fall can hurt an ETF that does not represent a long-term social or macroeconomic trend, or is under-financed by providers.
After the wreckage, the ETFs left standing are stronger and more valued.
The truth is, yields can often be history by the time an investor learns of them and a return on one’s investment isn’t guaranteed.
