Many have capitalized on dividend mutual funds’ reinvestment benefits, but with dividend exchange traded funds rising in popularity, investors are beginning to grow their portfolios with ETF dividend reinvestment plans.
Mutual funds are losing a key advantage to ETFs, writes Sarah Max for Time, pointing to the rising popularity in dividend-focused ETFs that have pushed most brokerages to change policies to accommodate dividend reinvestors.
“From an investor standpoint the experience should be similar, though the process behind the scenes is different,” Heather Pelant, a personal investor strategist with BlackRock, said in the article.
Prior to the exponential growth in ETFs, many brokerages tacked on a fee for each ETF dividend reinvestment transaction. Consequently, many dividend investors remained with their tried-and-true dividend mutual funds.
However, the times are changing and mutual funds are no longer the best vehicle for dividend reinvestments as more brokerages provide for ETF investors.
“These platforms have since come up with procedures and features that are parallel to mutual funds,” Pelant added.