When markets are volatile, many investors turn to safer, yet still good, investments. That generally means dividend stocks and exchange-traded funds (ETFs). But there are alternatives. While dividend ETFs are my preferred investment for portfolio diversification and balance, others favor bond ETFs as diversifiers.
When it comes to dividend ETFs versus bond ETFs, which are better investments? Let's take a look.
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Dividend ETFs invest in stocks that pay dividends, but not all dividend ETFs are the same. Some are made up of stocks with high dividend yields, like the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). This ETF tracks an index of stocks with above-average dividends.
Some dividend ETFs focus more on stability and the consistent payment of dividends, like the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG). This ETF tracks an index made of stocks that consistently grow their dividends, regardless of their yields.