Investing doesn’t have to mean taking big risks. Many investors prefer the stability of dividend stocks, which they don’t have to worry about.
While some investors enjoy the process of investing in individual stocks, it’s not suitable for everyone. You may not have the time to research each company or you may not be able to tolerate the potential volatility.
However, investing remains one of the best ways to accumulate wealth. Fortunately, there are many ways to invest, some of which can generate passive income with little effort. If a pre-selected basket of stable dividend stocks is a better fit for your investment style and risk tolerance, consider buying this index fund and holding it for the long term.
Low risk, high yield
Investors can find a high dividend yield with relatively low risk in the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD 0.72%). This exchange-traded fund is comprised of at least 90% stocks of the S&P 500 Low Volatility High Dividend Index. The index itself includes 50 stocks from the S&P 500, particularly those with attractive dividend yields and a history of low volatility. Unlike most dividend stocks, SPHD pays a monthly dividend.
Data by YCharts.
Due to the composition of the underlying index, SPHD constituents often have strong balance sheets and lower betas (a measure of volatility) than the overall market. The S&P 500 has a beta of 1, so securities with a beta greater than 1 are more volatile than the market as a whole, and securities with a beta less than 1 are less volatile.
Data by YCharts.
As you can see above, SPHD is in beta 0.68 at the time of this writing. That’s even lower than tech giant Apple, which has the largest weight in the S&P 500.
You can set this and forget it.
When it comes to investing, there is no one-size-fits-all approach. Everyone invests with different goals and schedules. There are individual investors looking to save for retirement, hedge fund managers looking to beat the market every year, and a wide range of people in between.
According to YCharts data, the ETF has delivered a compounded annual total return of 10.0% since its inception. This may not match the S&P 500’s 14.3% annualized total return over the same period, but consider what your priorities are. If stable dividends and the peace of mind that comes with owning a basket of low-risk stocks are important to you, SPHD stands out as an attractive option. ETFs allow shareholders to collect passive income each year with a set-and-forget option.
Bram Berkowitz has no position in any stocks mentioned. The Motley Fool has a position in and recommends Apple. The Motley Fool has a disclosure policy.
