Home : finance : Automobile : 5 Mistakes To Avoid When Investing In A High Dividend ETF
5 mistakes to avoid when investing in a high dividend ETF

5 mistakes to avoid when investing in a high dividend ETF

Exchange-traded funds (ETF) have been gaining popularity in the investment sector for some time now. Along with mutual funds, they have been one of the most preferred investment options among investors. With investors having pumped in billions of dollars in ETFs by now, these funds sure seem like a lucrative investment avenue. However, financial experts suggest treading this path carefully so as to avoid unforeseeable losses. Here are a few mistakes that you can avoid while investing in high dividend ETFs:

  • Overlooking long-term investment
    Looking at long-term goals is the golden rule when it comes to any type of investment. However, seasoned investors invest in ETFs on a short-term basis through a type of trading called intraday trade. This type of trading allows the investors to buy and sell stocks and other investments on the same day. However, if not thought out carefully, investing in high dividend ETFs through intraday trading can result in lower returns and higher trading costs.
  • Buying an ETF simply based on its name
    This is one of the most common mistakes people make when investing in high dividend ETFs. Investors may think that an ETF’s name provides an insight into its investment reach, i.e., whether the ETF has local or/and global investors. However, this is a ploy that ETF issuers often use to lure investors. Investing in an ETF based solely on its name can lead to disastrous investments. So understand an ETF’s underlying holdings and market objectives before making an investment.
  • Investing in the wrong ETF
    Like every investment, almost every ETF is vulnerable to market trends and economic slowdowns. However, this does not mean that the particular ETF has failed. When an ETF liquidates, you might still receive some money (termination and other fees might be levied). But this may take a while and you may lose out on the time that could have otherwise been utilized to make other investments. However, it is important to know when an ETF is failing so that you can liquidate your investment before it crashes. Some signs of a failing ETF are a short track record and low share liquidity, among others.
  • Not researching adequately
    Not researching enough on how high dividend ETF funds can diversify your portfolio can result in redundancy or even losses. For example, you might be investing in an ETF and large-cap mutual fund of the same type of stock or even by the same company. It can also result in liquidity risk if you have invested in a specific sector. If you are not armed with enough information, then you might find it difficult to sell the ETF whenever you want.
  • Small ETF investments
    The most sought-after investment strategy is putting aside a set amount for investing every month. This is referred to as the dollar cost strategy. However, putting an amount in only an ETF can be counterproductive if you are investing small. This is because you might have to pay commission on a few ETFs that you buy and sell. So make sure to set aside a dynamic amount when investing in ETFs. You can even turn to ETF issuers and online brokerage platforms that do not charge any commission on trading.

Top Reads

Top Tags

Popular Reads

4 popular credit cards for college students
finance

4 popular credit cards for college students

A good credit score is essential as it can be a criterion for lucrative job prospects or renting an apartment. Moreover, a good credit score is an uncompromisable necessity while applying for a loan that has terms and conditions that favor you. To ensure that you have a good credit score, it is better to start building it young and early. One of the easiest ways to do so is by applying for a student credit card from prominent credit cards companies. Now, there are several credit cards companies that offer lucrative credit cards, making choosing the right one confusing. To help you narrow down your choices, here are some of the best credit cards companies that offer student credit cards. Bank of America® Travel Rewards Credit Card for Students: One of the biggest credit card companies in the country Bank of America offers a slew of benefits with its student credit card. With each dollar spent using this card, students can earn 1.5 points. This applies to purchases without any caps. The points can be redeemed as discounts on hotels, flights, rental cars, and vacation packages. There are no restrictions or blackout dates applicable for availing these discounts. With no foreign transaction fee or annual fee, the card allows one to earn nearly 25,000 points on spending about $1000 in the first 90 days.
Read More

What you must know about guaranteed business loans

If you’re looking for funding your small business with a loan, you’ll most likely come across the term “guaranteed business loans.” People often misunderstand this term as business loans that are guaranteed to be approved. But, this is not what guaranteed business loans means. To clarify the confusion, let’s understand what the term actually means, and discuss the most popular types of guaranteed business loans. What are guaranteed business loans? In simple terms, guaranteed business loans in the world of small business loans refer to loans that are secured or backed by a guarantee. The guarantee can be in the form of collateral, deposit, or an agreement. This essentially means that the lender is guaranteed to receive their money back even if the borrower fails to pay. When we talk about guaranteed business loans, we refer to loans with a personal guarantee or, more commonly, loans guaranteed by the small business administration (SBA). Let’s take a look at both these types. Personally guaranteed business loans As you understand from the term “personal,” when you make a personal guarantee on a business loan, you essentially agree to sell your assets to pay off the loan, if your business is unable to do so.
finance

How to qualify for a reverse mortgage

A reverse mortgage provides the elderly access to equity in their homes and supplements their income. With its flexible repayment option, it gives homeowners more control over their money. However, the government has laid out strict rules and guidelines concerning reverse mortgage eligibility criteria. So, if you’re considering a reverse mortgage, read on to know the reverse mortgage eligibility criteria and the types of reverse mortgages. Reverse mortgage eligibility criteria The first criterion for a reverse mortgage is that the primary homeowner must be at least 62 years of age. If your spouse is under the age of 62, you might still be eligible if you meet other reverse mortgage eligibility criteria. If you’re not 62 or older than 62, then you won’t qualify for a reverse mortgage even if you satisfy the criteria mentioned below. You must be the primary resident of the home you’re seeking a reverse mortgage for. Note that vacation homes or rental properties do not qualify. You must either entirely own the house or have at least 50% equity in it. If you have any mortgage balance remaining while applying for a reverse mortgage, you must be in a financial position to pay off that balance.
finance

5 benefits of opting for debt settlement

Debt settlement can be a financial lifesaver for many. Managing debt is quite a difficult task. With every advancing payment due date, one may feel their finances getting tighter and tighter. Between paying for a house mortgage, student loans, credit card debt, personal loans, and many other debts, it is quite common to miss out on paying one payment. Although it may not seem like a big problem initially, this is not good for financial health in the long term. This is where debt settlement comes in. There are multiple benefits to availing debt settlement offered by some of the top 10 debt settlement companies. No more bills With debt settlement, no more bills will be incoming in the mailbox. Debt settlement results in the closure of a debt account by the creditor. In such cases, one will not be able to use their credit cards again. However, this can be beneficial since it will prevent further debt in the future. With debt settlement, there is a permanent erasure of debt. No more collection calls With mounting debt, the calls of creditors are always incessant. If one if falling behind on too many bills, they are bound to be subjected to creditor calls throughout the day.
finance

Coping with urges that can trigger a relapse post treatment

Addictions when left untreated can turn into crippling conditions. One can be addicted to smoking, binge drinking, or even shopping. Once addicted, one willfully submits to urges, despite having satisfied them before. However, addictions can be managed and to a great extent treated to full recovery. But, the post-recovery phase is crucial where both the mind and body are put to test and can trigger a relapse. Continue reading to know more about the most common triggers for addictions and how to deal with them. Stress Stress is commonly the root cause of many problems and addictions, both physical and psychological. One can become an addict as a way to manage the stress that may stem from strained relationships or priorities. The best way to avoid a relapse during recovery is to make lifestyle changes that don’t trigger a return to addictions amidst a stressful situation. One can practice mindfulness, engage in relaxation techniques, manage one’s time to avoid stressful situations, and imbibe healthy eating habits and exercise in their daily routine. Emotions There is an umpteen number of triggers that invoke a positive or negative emotional response. However, the stress associated with dealing with emotions daily can trigger urges without one even realizing.
health