"In this piece, we'll have a closer look at a pair of intriguing dividend ETFs that not only can act as durable, growing income streams but can also offer more in the way of diversification, especially in a time when many indexers may be unaware of how much downside risk they could face if the technology sector were to go through a storm of sorts."
"Indeed, it falls back to the S&P 500's concentration risk, which might continue to get out of hand as the Magnificent Seven stocks continue to do much of the heavy lifting in any given year. With volatility kicking things up in October, with new 100% tariffs potentially on the table for China come the start of November, perhaps it's time to take more of a lower-beta, income-oriented approach to ride out what could be a rocky fourth quarter for markets."
"With more names (581 stocks) and more representation of sectors underrepresented (at least compared to tech) compared to the S&P, the VYM certainly seems like a great alternative to side-step the concentration risk and the froth that could make the tech sector most vulnerable come the next market-wide valuation reset or rotation. For the most part, the dividend-paying growers are nicely balanced out with some of the low-growth, high-yield heavyweights."
Dividend ETFs offer incentives for long-term holding because many can pay distributions indefinitely, reducing the need for frequent trading. Dividend strategies can supply steady monthly or quarterly cash flows while providing diversification across sectors and stocks. Concentration risk in the S&P 500, driven by the Magnificent Seven, raises downside exposure if technology faces a sustained sell-off. Rising volatility and potential policy shocks, such as steep tariffs, increase the appeal of lower-beta, income-oriented positions. The Vanguard High Dividend Yield ETF (VYM) delivers a 2.5% yield, holds about 581 stocks, and balances dividend-paying growers with high-yield, low-growth names to mitigate concentration risk.
Read at 24/7 Wall St.
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