Dividends and Passive is the new active for investment managers

Every investor should own some ETFs as well as individual stocks. The individual stocks are what gets you up in the morning and to watch out, but ETFs are taking the place of mutual funds which tend to have fees attached to them. The ETF market is now in the trillion dollar range in terms of assets under administration which means you need to find the correct ones to accent your stock picking. At that level, more and more funds will operate. The trick is find the large enough ones to continuing to grow as well as add to the fund, if you like a stock which is underrated in it.

In a recent article by Dale Jackson some ideas were presented:

In Technology one fund which has done well and as our economy Technology Select Sector SPDR fund which tracks 70 of the biggest stocks in the tech sector of the S&P 500 index. This means the largest companies such as Apple and Microsoft will dominant 25% of the fund. If you like a smaller company, you can always add it to your holdings.

iShares which is run by Blackrock has multiple ETFs and they range from US Aerospace and Defence ( these companies are up this year) to ishares US Preferred Stocks (if you want move defensive posture to your portfolio as interest rates rise preferred shares tend to rise).

In the world of ETFs as well as many parts of investing, there are multiple options – often sticking to vanilla or something relative simple is the best.  An interesting quote by a portfolio manager said 80% of the return is getting to the right neighborhood, or if your themes are correct the market will reward you.

Linking to dividend paying stocks, as an active investor you will hear many themes and possibilities and you can pick one or more of them. As a long term investor, you know themes come and go and the world tends to move on cycles. During the summer, people do more renovations than in the winter – do the home renovation companies reflect that? As a dividend investor, you want year over year profitability which translates into growing dividends and greater stock price. If you focus on the first part, the likelihood of the second is easier.

There are more question than answers, till the next time – to raising questions.



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