The historic bull market just celebrated its eight-year anniversary this month. For investors worried about how much upside the aging bull market has left, dividend exchange-traded funds, or ETFs, are a great, conservative way to diversify a portfolio.
Most stocks are now at or near all-time highs. It’s always risky putting all your eggs in one basket, especially if they’re expensive eggs.
Instead of banking on further upside from individual stocks, dividend ETF investors can enjoy diversified exposure to segments of the market that may still be undervalued. They are also able to use ETFs to invest in assets other than stocks and enjoy reliable yields of above 4%.
Dividends and diversification are the two D’s of responsible long-term investing. The higher stock prices rise, the more investors should shift their attention from market upside to risk management.
Here are three dividend ETFs that provide investors with both diversification and high yields.
Dividend ETFs for Diversification: Vanguard REIT ETF (VNQ)
Dividend Yield: 4.7%
Expenses: 0.12%, or $12 per $10,000 invested annually
Investing in real estate is traditionally something that has been reserved for the extremely wealthy. After all, how many properties can the average person afford to buy before he or she is tapped out?
The rise of the real estate investment trust (REIT) made real estate investing possible for a whole new class of investors. Today, all you need to invest in real estate is the $80 it takes to buy a share of the Vanguard REIT Index Fund (NYSEARCA:VNQ).
There are a number of advantages to investing in the VNQ from a risk-management perspective. First, the real estate market tends to perform very well during bull markets, yet it has a relatively low historical correlation to stocks and bonds. That loose correlation is exactly what investors should be looking for in terms of portfolio diversification.
In addition, the fund also has internal diversification as well. The fund currently contains 157 REIT holdings, limiting the risk from any particular trust.
Of course, the cherry on top for the VNQ is its generous 4.7% dividend yield. That yield is more than double the 1.9% yield of the S&P 500.
Dividend ETFs to Buy: Alerian MLP ETF (AMLP)
Dividend Yield: 7.4%
While most stock market investors have been riding the overall market’s gains, some market sectors have been…
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