How to reduce the risk of making bad stock choices

Rob Carrick, Globe and Mail

Choosing from among the three Canadian-market dividend ETFs traded on the Toronto Stock Exchange is faster, easier and safer than picking individual dividend stocks.

But don’t get the idea that any dividend-focused, exchange-traded fund will do. Each of the three choices has unique characteristics that make them good for some portfolios and not so good for others. Ready to dig down into the three to find out which is right for you?

Before we get going, let’s review the strategy of seeking dividends through ETFs rather than individual stocks or mutual funds. Two of the dividend ETFs we’re looking at here track indexes that are constructed to represent the best of this country’s dividend-paying corporations, while the third is run by an experienced manager who selects what he considers to be the best stocks.

Whichever you choose, you’ll benefit from a owning a diversified package of stocks that pays out dividend income monthly or quarterly. The risk of making bad stock choices is much reduced when you own a dividend ETF, and so is the need to keep on top of how individual companies are doing. (more)