Investing in Dividend ETFs: Smart Strategy, but Not Risk-Free

Investing in Dividend ETFs: Smart Strategy, but Not Risk-Free
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Thanks to risks in the market and extreme stock volatility over the past few years, many investors sought out more stability in their portfolios along with high levels of current income. Unfortunately, bond yields were quite low pushing many into high-dividend-paying stocks instead.  

Beyond individual securities, investments in equity ETFs, which have stocks that pay high-dividend yields, emerged as a source of decent income for investors at this time. This has proven to be a pretty good strategy as intermediate-term bonds are still yielding below broad stock markets and equities are rising higher so far in 2012 as well (see: Emerging Markets Dividend ETFs for Income, Growth & Diversification).

Risk in Dividend ETFs

While dividend-focused ETFs may be safer than other equity funds, they are by no means risk-free. These securities still have market risk and can experience more volatility than their bond cousins.  

Furthermore, there is always the risk that dividends could be cut if a company runs into trouble while bond investors are more likely to see their payments paid out on a regular basis thanks to their improved position in a liquidity event (see:

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Investment strategy class
News from Fort Leavenworth Lamp:

Lt. Col. Jim Redwine, local author of “Win the Money War: A Straightforward Plan for Service Members,” is offering a free investment strategy class, in cooperation with the Financial Readiness program on post, from 1:30-3:30 p.m. March 28 in classroom 10 at the Army Education Center, 120 Dickman Ave. This class is for anyone who wants a more effective investment strategy and who wants to understand the major considerations for buying a home, participating in the Survivor Benefit Plan and drawing Social Security.

…………… continues on Fort Leavenworth Lamp
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