The recent volatility in the stock market may be a little worrisome to you, but one of my currently recommended exchange-traded funds (ETF) is producing gains from both capital appreciation and dividend income. The iShares Dow Jones Select Dividend Index (DVY) is an ETF that seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones Select Dividend Index. With DVY, you own a fund that invests in a basket of the biggest and best dividend-paying stocks available.

One reason why I like DVY right now is that I think the Fed’s grand experiment of trying to boost the economy by printing money -- otherwise known as quantitative easing part II, or QE2 -- is going to be bad for the long-term fiscal health of the United States. This quantitative easing also has the possibility of creating a market sell-off in the short term, especially if the Fed fails to meet the already priced-in expectations that it will inject hoards of monetary stimulus into the economy in the coming months.

If we do see a short-term retreat in stocks, it may create a good buying opportunity for you to enter DVY. Subscribers to my High Monthly Income investment newsletter were advised to buy the fund at prices lower than its current level, so that position remains nicely profitable right now. One word of caution is that I recommend that you use stop-loss prices when you invest to lock in your profits when a position rises, or to limit potential losses if it falls.

Despite the market’s recent fluctuations, I think the trend remains relatively bullish. Events such as North Korea’s one-day military skirmish with South Korea and the need for a bailout of the debt-ridden Irish government and banks have pulled the market down of late, but both situations seem to have gained stability in recent days.

If you think a bull market remains intact, DVY gives you a chance to benefit when its price rises with the market. You also would own a fund that is somewhat protected from the worst of the ups and downs of investing because it pays a dividend. Wharton Business School Professor Jeremy Siegel has researched equities going back decades and found that the best-performing investments for long-term periods are income-generating equities. DVY fits that description perfectly.

While my High Monthly Income subscribers are enjoying increased gains in their DVY position so far today as the market rises, you could be doing likewise. DVY also is a position that I have recommended in the past. The last time I closed an investment in DVY in my High Monthly Income portfolio, it finished up 20.45%.

As you can imagine, I like to pick my spots when investing in DVY and my proven trend-following strategy has helped me to choose when to buy and to sell – letting my High Monthly Income newsletter subscribers profit in the process. 

If you want specific advice about which ETFs to buy and to sell, as well as the stop-loss prices to set, I recommend that you check out my ETF Trader service by clicking here. As usual, I am pleased to answer any of your questions about ETFs. To send your questions to me, please click here. You may see your question answered in a future ETF Talk.