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A dividend ETF letter asks whether fund structures are worth it
ETF Trends published a mailbag response that tackles whether dividend-focused exchange traded funds and mutual funds can match a dividend investing approach, after readers asked for similar options. The piece frames the question around the basic idea behind funds: a basket of stocks is used to spread risk, which can mean some holdings rise while others fall at any given time.
The author argues that, compared with picking a small set of individual high quality stocks, that built in diversification can lead to lower returns. The response adds that the author generally does not favor funds, but uses them when they provide access to investments that would otherwise be difficult to hold.
As an example, ETF Trends says the author’s Essential Income strategy used an ETF for exposure to the lithium and battery industry, including companies that are not based in the US and are harder to buy directly. The article also states that this approach locked in total return of 56%.