There are a number of people out there who like investing in funds. I’m one of them. I’m a big fan of index funds and ETFs. And, as I learn more about dividend investing, I have been excited to discover that there are dividend funds. You can find index funds and ETFs comprised of dividend stocks, providing you with a way to build your portfolio while enjoying income in the form of dividend payouts.
Funds: Instant Diversity and Income
One of the reasons that funds are so popular amongst some investors is that they provide almost instant diversity (if you pay attention to the investments in the funds and choose funds accordingly), and there is a certain expectation of better-managed risk with many funds.
If you combine an index fund or an ETF with dividends, then you have a dream from many investors who are somewhat cautious about the whole investing thing. Dividend funds are composed of investments that offer regular payouts. There are high dividend funds, funds comprising dividend aristocrats, and other specializations. Chances are, there is a dividend fund out there to designed to help you reach your goals.
And, of course, you can use your dividend fund as a source of income, or as a way to boost your portfolio building efforts. You can usually choose to receive regular payments from the fund, providing you with a regular stream of income, or you can decide to have those funds automatically reinvested. Reinvested dividends buy you more shares, helping you build future wealth a little bit faster.
Choosing Dividend Funds
If you decide that dividend funds are the way to go, you will need to choose which to include in your portfolio. When choosing dividend funds, one of the most important things to consider is the cost of fees. Many investors like index funds and ETFs because the have low costs. Additionally, you should find out what stocks are in the fund. Make sure that the stocks in the fund are in line with your goals. If your goal is diversity, choosing a sector fund may not help you reach that goal.
A number of brokers provide access to dividend funds. If you already have a broker, you can look through the dividend fund options, or perhaps open another account if someone else has what you are looking for. In many cases, you can use dollar cost averaging to get started, gradually building your portfolio. Whatever you decide, you might discover that dividend funds provide just what you need.