One way to encourage yourself to invest for the long term is to keep income-producing investments in your portfolio. This way, you can ensure that you receive a steady stream of money over the years, even without having to sell your investments. Exchange traded funds (ETFs) can give you many excellent options for the long term, and you don’t have to feel boxed in and focused solely on growth stocks or solely on dividend stocks.
Two Vanguard funds that give you the best of both worlds and pay high dividends while giving you great growth prospects are the Vanguard Dividend Appreciation Index Fund ETF (NYSEMKT: VIG) and the Vanguard Consumer Staples Index Fund ETF (NYSEMKT: VDC). Here’s why these ETFs can be ideal options for all types of investors.
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The S&P500 an average return of 1.3%, and you can get a higher payout with the Vanguard Dividend Appreciation Index Fund ETF – the yield is 1.7%. But on top of that, your dividend income is also likely to increase with this ETF because, as the name suggests, it focuses on dividends. valuation. The fund includes stocks that have an excellent track record of increasing their dividend payments over the years.
The passively managed fund holds shares of top dividend stocks such as UnitedHealth Group, ExxonMobilAnd Home Depot. At the end of September, the fund held 338 stocks, providing investors with excellent diversification across a wide range of sectors. And even though they are focused on dividend growth, technology stocks account for 24% of the total weight of the portfolio, making it the largest sector, with financial stocks in second place with a 20% representation.
By focusing on technology stocks and some of the largest companies in the world, the Vanguard Dividend Appreciation ETF can allow you to earn excellent returns over the years while also receiving a growing dividend. Over the past twenty years, the fund has largely kept pace with the S&P 500. And with a low expense ratio of 0.06%, costs won’t have a major impact on your returns.
If a growing dividend isn’t that important to you, the Vanguard Consumer Staples Index Fund ETF may be a more suitable option. The return of 2.5% is already well higher than the payout of the Dividend Appreciation ETF. And while the company may not be prioritizing dividend growth stocks, it still has plenty of solid income investing assets in its portfolio right now.
By focusing on consumer staples, the fund offers investors exposure to companies that should do well as the economy is strong and consumers are spending money on a wide range of products. Some of the top stocks in the fund are Costco Wholesale, Coca-colaAnd Colgate Palmolive. It contains 105 stocks, which isn’t as diversified as the Dividend Appreciation ETF, but that also means its long-term returns can be stronger if the top holdings do well.
While economic conditions may not look great right now, as inflation is still causing problems for consumers, the economy should recover and continue to grow in the long term. And investing in this fund can be a great way to invest in the stock market as a whole. For much of the past two decades, the ETF outperformed the S&P 500, until in recent years the broader index took off much faster than normal. This Vanguard fund also has a fairly low expense ratio of 0.10%.
Given the inflated value of the S&P 500 right now, choosing the Vanguard Consumer Staples ETF might be the better option today, as its more modest valuation could put it on track to deliver better returns over the long term to generate.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Costco Wholesale, Home Depot, and Vanguard Dividend Appreciation ETF. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
2 Vanguard Funds That Both Growth and Dividend Investors Can Buy and Hold Forever Originally published by The Motley Fool
