Are your clients’ returns getting gobbled up by fees? Actively-managed funds have been a disappointment to many investors sitting on dividend-paying stocks, Christine Benz writes for Morningstar; she suggests individual stocks or index-tracking funds or exchange-traded funds have fared better.
To find funds that are actually paying dividends, Benz looked for domestic-stock funds with low costs (0.75 percent or less). Nearly all the results are large-cap funds; but that’s not too surprising. Large companies are more likely to pay dividends than smaller ones, according to Benz, and small-caps tend to be more expensive.
American Funds Washington Mutual. This fund didn’t escape losses in 2008, and had a sluggish 2009. Better suited for clients further away from retirement, this fund features an experienced management team and reasonable costs.
LSV Value Equity. Investors looking for a “slow and steady offering anchored in high-quality blue chips” should stay away from this fund, Benz warns. The managers here use a “quantitative approach” and look for funds that have shown some momentum. The fund has an emphasis on financials, energy and industrial stocks due to a loose alignment with the Russell 1000 Value Index.
Vanguard Windsor II. This fund features an experienced management team who focus on cheap dividend payers, while subadvisors use a value-oriented approach.