Hedge funds are always buying and selling stocks and exchange-traded funds (ETFs), and while it might not always be a great idea to replicate their moves, it doesn't hurt to keep a watch on what they're eyeing. Despite the recent volatility, hedge funds have made several buy and sell transactions in the third quarter, and they're loading up on , and Vanguard High Dividend Yield ETF (NYSEARCA:VYM).
The S&P 500 is starting to pick up speed going into late-October after experiencing a bit of volatility on the back of the government shutdown, new Trump tariff threats, and a few early quarterly earnings fumbles. Despite the temporary setbacks, the dip-buyers have been more than willing to brave the dips, and that's made it tough to score anything more than a 2% or so dip from the S&P's all-time highs.
Amplify CWP Enhanced Dividend Income ( NYSEARCA:DIVO ) stands out with its actively managed approach, blending dividend-paying stocks with a covered call strategy to boost income. Over the past 10 years, DIVO has delivered a robust 12.5% annualized return, slightly edging out SCHD's 12.2%. This performance stems from its focus on high-quality , dividend-growing companies combined with option income, which cushions volatility.
Other ETFs have outperformed it, and some have done so while paying higher yields. Diversifying into these ETFs is a good idea just in case the index SCHD tracks (Dow Jones U.S. Dividend 100 Index) underperforms. It is also an even better idea to look into monthly dividend ETFs. These ETFs compound faster and are more convenient if you want to compound your holdings over decades or get paid more frequently if you are retired.
The first step is to set a target of $1,000 to keep yourself motivated. Work backwards from there. Identify the amount you need to invest if you're seeking an annual dividend of $1,000. If you're looking at individual stocks, you must spread your investments across 20-30 different companies in various sectors. This will protect your capital amount while ensuring steady passive income. Further, invest in high-yield exchange-traded funds (ETFs) that have low volatility and invest in large-cap companies. It is a hands-off approach where the managers handle all the work for you. Some ETFs also pay monthly dividends.
Investors have been concerned about market volatility over the past few weeks, and it is natural to be worried. However, you must remember that corrections continue to happen in the stock market, and the market usually recovers from each one. If you're someone who loses sleep due to market volatility, you might want to consider an exchange-traded fund. It is a low-cost, low-risk investment option that provides an opportunity to own elite names without requiring hours of research.
Dividend ETFs with solid payout histories that quote at a discount to their Net Asset Values (NAV) may offer an upside potential kicker in addition to any intrinsic index tracking upside and dividends received.
All it takes is one or a handful of dividend ETFs to build a sound income portfolio around. Investors should start with a strong foundation to produce steady passive income.
The Schwab U.S. Dividend Equity ETF (SCHD) is one of the gold standards as far as dividend-focused ETFs are concerned. With a nearly 4% yield, the American equity basket delivers on the income front while also allowing for a good amount of growth.
