Building A Diversified Dividend Stocks Portfolio

The key to successful dividend investing and even stock market investing in general is diversification.  Obviously, a well diversified portfolio of the best fixed income investments combined with the best long term dividend stocks is the safest route to consistent long term income from the stock market.

However, it’s critical to keep in mind that by diversifying you are also slashing your upside potential.  Let me explain.  A diversified portfolio will have winners and losers.  While the winners will outstrip the losers in a smartly designed portfolio, the losers will still weigh on performance.

Regardless of this fact, the stock market is simply too risky to not diversify and accept lower performance in exchange for much less risk.

If you insist on taking risk for high gains, set aside money for this activity.  You may be able to make a killing trading risky stocks.  However, don’t take undue risk in your core portfolio.  Allow the market and the power of dividends to work for you over time.

I am often asked what to do if an investor does not have enough capital to build a proper long term dividend stock portfolio.  Well, fortunately, there are pre built dividend paying portfolios available to investors in the form of exchange traded funds or ETF’s.

My favorite well diversified, high yielding ETF is:

Arrow Dow Jones Global Yield ETF (NYSE:GYLD)

The ETF is designed to track an index built from five equally weighted sub indexes of five different asset classes.  These assets are global real estate, global equity, global corporate debt, global sovereign debt and global alternative.  Each one of these sub indexes is comprised of 30 equally weighted securities chosen for yield. Boasting a nearly 9% annual yield minus the hefty 0.75% expense ratio, this ETF is perfect for high yield, risk embracing investors. Its allocations are 60% in foreign securities and 40% in fixed income, non investment grade bonds.

The ETF is up over 8% year to date and has been throwing off a hefty yield.  It is well diversified and perfect for those investors seeking diversification but lacking the capital to build a proper portfolio.

Source: http://tradingtips.com/daily/dividend-stocks/building-diversified-dividend-stocks-portfolio/