I Want Income… What ETF Is Best?
If you want an ETF that offers a good yield, performs well, and has dividend growth, Schwab U.S. Dividend ETF (SCHD) checks all those boxes.
Being a fund that only invests in firms with a ten-year minimum history of paying dividends, this ETF can help you earn sustainable, passive income.
Investing in Reliable Dividend Index Funds
If you’re looking for a steady stream of income, dividend index funds may be the perfect investment for you. These funds, which can come in the form of either ETFs or mutual funds, focus on stocks that pay dividends and aim to track a specific index. Not only do they offer the potential for a reliable dividend, but they may also appreciate in value over time.
Dividend index funds are a low-risk option that doesn’t require any stock-picking skills, making them ideal for beginner investors or those who prefer to avoid the volatility of high-growth stocks. They are meant to be held long-term, and may be especially appealing to retirees. Overall, dividend index funds offer a straightforward and potentially lucrative way to diversify your portfolio and generate income.
More on Schwab U.S. Dividend ETF
The Schwab US Dividend ETF is a popular choice for investors seeking consistent income. It tracks the Dow Jones U.S. Dividend 100 Index, which is made up of American stocks with a strong track record of high dividend yields.
With a diverse portfolio that includes top holdings such as Merck & Co. Inc., Cisco Systems Inc., and Home Depot Inc., this ETF offers a solid yield that has historically hovered around 3%.
Sectors such as IT and financials make up over 40% of the index, with consumer staples, health care, and industrials rounding out the top holdings. With an average annual return of over 14% since its inception in 2011 and a best three-month return of nearly 22%, the Schwab US Dividend ETF has proven to be a reliable performer.
Plus, its low cost and ten-year streak of raising distributions make it a smart choice for any investor looking to build a steady stream of income. Even in bear markets, you can expect to receive dividends from this ETF.
Instant Diversification and a Low Expense Ratio
One of the main benefits of investing in ETFs like the Schwab U.S. Dividend ETF is the level of diversification they offer. When you purchase shares in an ETF, you’re investing in a diverse portfolio of reliable companies, which can help to mitigate the impact of any one company’s poor performance.
Another key factor to consider when choosing an ETF is its expense ratio. This ratio reflects the percentage of assets that are used to cover operating costs and can have a big impact on your investment returns. In general, a reasonable expense ratio for an actively managed portfolio is between 0.5% and 0.75%. However, some ETFs have ratios as high as 1.5% or higher, which can significantly reduce your profits.
The Schwab U.S. Dividend ETF has an extremely low expense ratio of just 0.06%. This means that for every $10,000 you invest, you’ll pay only $6 per year in operating costs. With such a low expense ratio, you can maximize your investment returns and potentially grow your wealth over time.
Is Schwab U.S. Dividend ETF Right for You?
If you’re in early retirement or simply looking to add a reliable, income-generating investment to your portfolio, the Schwab U.S. Dividend ETF is a solid choice. While you can add this ETF to your portfolio at any time, the sooner you do, the more time you’ll have to potentially benefit from its long-term growth potential.
Unlike cyclical stocks, which may be better suited for short-term trading, the Schwab U.S. Dividend ETF is a buy-and-hold investment. Its broad market exposure and steady yields make it a good choice for investors seeking long-term stability.
If you’re concerned about the current market volatility and want to diversify your portfolio with dividend-paying stocks, the Schwab U.S. Dividend ETF is a safe bet. You’ll get broad exposure to large-cap companies without having to worry about picking individual stocks, which can be especially valuable in turbulent times.
Overall, now is a good time to consider adding a few shares of the Schwab U.S. Dividend ETF to your portfolio. This investment can help you balance risk and reward, while providing a passive income stream and greater peace of mind.