How about a Fund for a Change?
Me, I’m keen on managing my own portfolio of individual stocks. And when I look at my rollover IRA and my personal portfolios, I think I’ve down well relative to the major indices over the years.
But that doesn’t mean I disrespect portfolio managers and financial advisors. Large investment firms have technological and research capacities that an individual investor like me cannot match. (But that doesn’t mean you should turn your money over to investment managers — there’s no rule against capitalizing on their research and expertise. If I find a fund that impresses me, I look over their top holdings to get ideas for what stocks I might want to consider adding to my portfolio.)
All that said, income-motivated investors shouldn’t forget that mutual funds and exchange-traded funds are an option. And there are a lot of dividend paying funds out there.
So, if I were to take a stake in a fund today, what might I choose?
An exchange traded Vanguard Europe fund, VGK is what I most recently added to my retirement portfolio. At the end of last week, VGK was trading at just under $52 a share and sported a distribution yield of almost 4%.
Because of weakness in European stocks, the fund is down almost 15% year-over-year, which I think represents a buying opportunity.
The company focuses on stocks from developed European countries of all capitalization sizes. Companies from the United Kingdom, France and Germany represent the largest share of VGK’s holdings.
And with a net expense ratio of just .09%, fees aren’t going to eat up too much of the returns. I also find the turnover ratio of just 6% reassuring.
I don’t have a lot of international exposure in my combined portfolio, so I’ve been adding some in my IRA recently, mostly through funds since I don’t feel as comfortable picking international stocks as I do picking U.S. names. And while I’m skeptical of index funds, numbers don’t lie. When I look at the funds I have a stake in, more often than not they don’t measure up to the performance of an index fund. For this I’m paying sometimes 100 basis points or more? If a managed fund is consistently falling behind index funds, I’m moving my money out of the managed fund.
One caveat: a more cautious investor might take their time before moving into a European stock fund, especially given the uncertainty surrounding Brexit. I tend to move into new stocks and funds slowly, so I’ll have the chance to pick up more VGK later if the price does fall during a messy Brexit process.
Dividend Pick of the Week 