A great way to protect your portfolio in retirement is through diversification. In particular, having exposure to a wide range of dividend stocks can be incredibly valuable, as that can drastically reduce your dependency on an individual stock's payout.
Exchange-traded funds (ETFs) can be highly useful for this purpose, as they can hold dozens, hundreds, and even thousands of different stocks. Through just a single investment, you can tick off many checkboxes along the way.
But when it comes to dividend stocks, you don't necessarily want to be overly diversified. You want to focus on quality, high-yielding stocks that you can comfortably hang on to for the long term. Here's why the Schwab U.S. Dividend Equity ETF (SCHD 0.40%) can be an ideal investment in this case.
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The Schwab fund focuses on fundamentally strong dividend stocks
Just getting exposure to a big basket of dividend stocks may not necessarily be ideal for retirees. Some stocks may offer low yields, while others may offer high payouts that aren't sustainable. It can be a bit of a balancing act to get the right mix where your risk isn't high and where your yield isn't too low as a result of too much diversification.
This is why the Schwab fund is extremely valuable for retirees. Its focus is on stocks with strong fundamentals and whose financials can support their payouts. While this doesn't eliminate risk for investors, it certainly goes a long way in reducing it. And the Schwab fund is still able to offer investors a fairly attractive yield of 3.3%, which is far higher than the S&P 500 average of 1.1%.
NYSEMKT: SCHD
Key Data Points
The ETF can be a great pillar to build your portfolio around
The Schwab U.S. Dividend Equity ETF can be a great place to park the bulk of your portfolio's money. Its low expense ratio of 0.06% means fees won't make a big dent in your overall returns from the investment. And over the past five years, it has averaged a beta of just 0.61, which indicates that it isn't highly volatile in relation to the overall stock market. It can remain steady even when the market appears shaky.
Over the past 12 months, the ETF has generated total returns (which include dividends) of about 25%, which is almost identical to the S&P 500's total returns over the same time frame, which total approximately 26%. If you want some excellent stability and dividend income, the Schwab fund can be a solid option to put in your portfolio today.
