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VDE vs. QYLD

I’m always on the lookout for ETFs to add to my investment portfolio. I came across 2 that I thought were possible candidates. Because I have a limited amount of money to invest, I tend to limit myself to 1 stock investment during my investment period. Currently, my eye is on these 2. Both are consistent performers in term of dividends.

  1. VDE (Vanguard Energy ETF) – VDE tracks a market-cap-weighted index of US energy companies. The index includes those companies deemed investable by MSCI and covers 98% of the market. The fund invests in stocks of companies operating across energy sectors. It invests in growth and value stocks of companies across diversified market capitalization. This fund will allow me to diversify my portfolio to include energy stocks. As the name implied, this fund was created and managed by Vanguard (which I tend to prefer) back in 2004. Cost ratio is around .10%, which is a bit higher than I prefer. The fund is designated as an average risk (all investment entail a certain amount of risk, nothing is a sure thing). And lastly, the key factor to me is the dividend yield and dividend payout which is 5.69% and $2.74, respectively. The 5 year growth rate is a modest 4.73%. The current share price is $48.46. Which would not allow me to maximize my share ownership with my limited funds. $100 investment would only get me 2.06 shares. At the current dividend payout amount this would give me $5.65 in dividends.
  2. QYLD (Global X NASDAQ 100 Covered Call ETF) – The investment seeks to provide investment results that closely correspond, before fees and expenses, generally to the price and yield performance of the CBOE NASDAQ-100® BuyWrite V2 Index (the “underlying index”).The fund will invest at least 80% of its total assets in the securities of the underlying index. The CBOE NASDAQ-100® BuyWrite Index is a benchmark index that measures the performance of a theoretical portfolio that holds a portfolio of the stocks included in the NASDAQ-100® Index, and “writes” (or sells) a succession of one-month at-the-money NASDAQ-100® Index covered call options. It is non-diversified. The cost ratio is around 0.60% (a bit high for me) but the dividend yield and payout are 11.78% and $2.55, respectively, which is better than most % yields. There is no data for the 5 year growth rate. The investment risk is above average but the return is considered high. This fund was started in 2013. Lastly, the current share price is $21.69. This is a better price in terms of maximizing share ownership. $100 investment will get you 4.61 shares. At the current dividend payout amount this would give me $10.97 in dividends.

From the start I’m going to tell you that I like Vanguard funds and tend to gravitate toward them. I’m not saying that Vanguard funds are better than Fidelity or others, just that I like them better than the others. Another factor that goes into my decisions is that I try to avoid risks in my investments. All investments have a certain level of risk associated with them and I try to minimize those whenever I can. I tend to stay away from high risk investments and investment activities (i.e. day trading, value investing, etc.) for no other reason that I’m at an age where I may not have the luxury of recouping any losses that I incur. Again, with all investments there is always a possibility of incurring losses but those, again, I try to minimize/avoid. I don’t gamble. I live in an area where I am no more than an hour away from a casino, yet I can’t remember that last time I was in one.

Another factor that affects my decisions is that I love dividends, consistent dividends. If one of my funds cuts their dividend payout two time within the same period, they become a prime candidate for me to sell. I’m in it for the income. My goal is to replace my current wages with income from my investments so that I can stop having to get up and go to work. Additionally, if I should die the income from the investments, if left alone, would be enough to sustain my wife. So I like dividend investments with dividend that pay consistently and grow.

So, based on many factors and data, including my investment goals and preferences, I’ll probably go with VDE.

This is NOT a recommendation to buy or not buy a certain ETF stock. This post is just a collections of information and thoughts that I had when I was going through to determine which ETF stock to invest in. This post is not intended to be any kind of financial analysis for evaluating specific ETF stocks, other than for myself and to show others what kind of evaluation I go through.

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