Making Money Alert
ETF Talk: A Proven Formula is Diversification and Income
01/11/2012
A diversified approach to investing has proven to be a wise strategy to deal with market volatility, especially during the past six months. Dividend-paying stocks also have shown their worth during that time as the market’s direction varied going into 2012. One of the best ways to enhance your portfolio with both diversification and dividend- paying stocks is the SPDR S&P Dividend ETF (SDY).
The SPDR S&P Dividend ETF seeks to match the returns and characteristics, before expenses, of the S&P High Yield Dividend Aristocrats Index. The fund’s strategy is designed to provide you with low portfolio turnover, accurate tracking and limited costs.
With more than 62 holdings and a dividend yield of 3.19%, SDY can provide investors with exposure to a basket of sectors, including consumer staples, financials, industrials, utilities, consumer discretionary, materials and healthcare. All of these sectors have an allocation ranging between 19% and 10%. The fund’s top 10 holdings, as of Jan. 10, were: Pitney Bowes Inc, 3.99%; AT&T Inc., 3.33%; Cincinnati Finl Corp, 2.89%; HCP Inc., 2.89%; Leggett & Platt Inc., 2.74%; Old Rep Intl Corp., 2.34%; Consolidated Edison Inc., 2.20%; Kimberly Clark Corp., 2.18%; Nucor Corp., 2.12%; and Sysco Corp. 2.12%.
Naturally, uncertainty causes investors to become wary about putting their hard-earned cash into the market. But such times can provide the best opportunities to find real value, because separating the winners from the losers can be easier. Doing your homework and finding solid performers amid volatility can pay off, especially when markets become highly correlated. Diversification and buying dividend-paying stocks are time-tested ways to build a successful investment portfolio, no matter which way the market is heading at a particular time. ETFs such as SDY let you invest by using a strategic approach that many professional investors and institutions follow themselves.
As always, if you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my ETF Trader service. I am happy to answer your questions, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.