Additionally, investors should not allow high yields to blind their investment strategy. Thompson points out that if you put all of your wealth into an investment only because of its high-yields, you may become overexposed to a single market or sector that may not have a sound outlook. Potential investors should always judge whether or not the investment fits with their investment portfolio and allocate accordingly. [Four High-Yield Dividend ETF Options]
Lastly, don’t forget that dividend ETFs are based on stocks, too. Russ Koesterich, the iShares Global Chief Investment Strategist, also points out that investors should focus “on a return target for our portfolio rather than on an asset’s income potential.” If an investor overweights high-yield options, an individual may become over exposed to risky stocks and diminish the overall diversification of an investment portfolio. [Is Dividend ETF Investing Risky Business?]
Dividend ETFs include:
- First Trust Morningstar Dividend Leaders Index Fund (NYSEArca: FDL)
- First Trust Value Line Dividend Index Fund ETF (NYSEArca: FVD)
- iShares Dow Jones Select Dividend Index ETF (NYSEArca: DVY)
- iShares High Dividend Equity Fund (NYSEArca: HDV)
- PowerShares ETF Trust Dividend Achievers Portfolio (NYSEArca: PFM)
- PowerShares High Yield Equity Dividend Achievers Portfolio (NYSEArca: PEY)
- Schwab US Dividend Equity ETF (NYSEArca: SCHD)
- SPDR S&P Dividend Aristocrats ETF (NYSEArca: SDY)
- Russell Equity Income ETF (NYSEArca: EQIN)
- Vanguard Dividend Appreciation ETF (NYSEArca: VIG)
- WisdomTree Equity Income Fund (NYSEArca: DHS)
- WisdomTree Total Dividend Fund (NYSEArca: DTD)
- WisdomTree LargeCap Dividend Fund (NYSEArca: DLN)
- WisdomTree MidCap Dividend Fund (NYSEArca: DON)
- WisdomTree SmallCap Dividend Fund (NYSEArca: DES)
- WisdomTree Dividend ex-Financials Fund (NYSEArca: DTN)
- Vanguard High Yield Dividend Index (NYSEArca: VYM)
For more information on dividend funds, visit our dividend ETFs category.
Max Chen contributed to this article.