{"id":11152,"date":"2022-12-15T18:40:32","date_gmt":"2022-12-15T23:40:32","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=11152"},"modified":"2022-12-15T18:40:33","modified_gmt":"2022-12-15T23:40:33","slug":"1-solid-index-fund-that-dividend-investors-can-buy-with-confidence-in-a-bear-market","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=11152","title":{"rendered":"1 Solid Index Fund That Dividend Investors Can Buy With Confidence in a Bear Market"},"content":{"rendered":"\n<ul><li>Stocks that consistently grow their dividends over time tend to be less volatile than the broader market.<\/li><li>Index funds allow dividend investors to sidestep the complexity of studying individual stocks.<\/li><li>The Vanguard Dividend Appreciate ETF has outperformed the S&amp;P 500 throughout the bear market this year.<\/li><\/ul>\n\n\n\n<h2>This dividend-paying index fund has outperformed the broader S&amp;P 500 this year.<\/h2>\n\n\n\n<p>Dividend stocks are a great way to earn passive income. Companies that make enough cash to consistently pay (and raise) a dividend often outperform the broader market. For instance,&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/stock-market\/types-of-stocks\/dividend-stocks\/dividend-aristocrats\/\">dividend aristocrats<\/a>&nbsp;produced an annualized total return of 10.8%&nbsp;over the last 15 years, beating the 8.5% return of the broader&nbsp;<strong>S&amp;P 500<\/strong>, according to&nbsp;<strong>S&amp;P Global<\/strong>.<\/p>\n\n\n\n<p>Moreover, high-quality dividend-paying stocks tend to be less volatile. For instance, the dividend aristocrats collectively declined about 9%&nbsp;through the first 10 months of 2022, but the S&amp;P 500 dropped 18%&nbsp;during that time period. In a nutshell, a well-chosen dividend stock can beat the market while sparing investors the anxiety that comes with huge fluctuations in their portfolios.<\/p>\n\n\n\n<p>However, there is a downside. Passive income investors must diligently monitor the financial performance of each stock in their portfolio to ensure the dividend is sustainable.&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/stock-market\/types-of-stocks\/dividend-stocks\/dividend-payout-ratio\/\">Payout ratio<\/a>&nbsp;&#8212; the percentage of net income paid out in dividends each year &#8212; is one of the most critical metrics to watch. According to Hartford Funds, stocks with a dividend payout ratio of around 40% tend to outperform the S&amp;P 500 most frequently, while those with a higher payout ratio are more likely to cut their dividends at some point.<\/p>\n\n\n\n<p>Fortunately, index funds allow investors to sidestep that complexity by taking a basket approach. Here is one index fund you can buy with confidence in a&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/2022\/11\/06\/this-indicator-been-spot-on-calling-bear-markets\/\">bear market<\/a>.<\/p>\n\n\n\n<h2>A basket approach to buying dividend stocks<\/h2>\n\n\n\n<p>The\u00a0<strong>Vanguard Dividend Appreciation ETF<\/strong>\u00a0<strong>(<a href=\"https:\/\/www.fool.com\/quote\/nysemkt\/vig\/\">VIG<\/a>\u00a0-2.27%)<\/strong>\u00a0seeks to track\u00a0 the S&amp;P U.S. Dividend Growers Index, which measures the performance of U.S. companies that have consistently increased their dividends for at least 10 years. The index excludes the top-25% highest-yielding companies, which helps eliminate stocks that have unsustainable payout ratios.<\/p>\n\n\n\n<p>The Vanguard Dividend Appreciation ETF represents a diversified blend of value stocks and&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/2022\/11\/12\/nasdaq-bear-market-5-growth-stocks-regret-not-buy\/\">growth stocks<\/a>, and its 289 constituents&nbsp;span 10 of the&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/stock-market\/market-sectors\/\">11 stock market sectors<\/a>. The real estate sector is absent. The top five holdings include healthcare companies&nbsp;<strong>UnitedHealth Group<\/strong>&nbsp;and&nbsp;<strong>Johnsons &amp; Johnson<\/strong>, tech titan&nbsp;<strong>Microsoft<\/strong>, financial giant&nbsp;<strong>JPMorgan Chase<\/strong>, and consumer staples stalwart&nbsp;<strong>Procter &amp; Gamble<\/strong>.<\/p>\n\n\n\n<p>As of Oct. 31, 2022, the Vanguard ETF had a dividend yield of 1.92%, meaning a $10,000 portfolio would produce about $192 in dividends each year. That may not seem like much, but reinvesting those dividends can snowball over time. For instance, the Vanguard ETF produced a total return of 165% over the past decade, or 10.2%&nbsp;on an annualized basis. That falls short of the 13.4% annualized return of the broader S&amp;P 500, but the Vanguard ETF has been less volatile, as evidenced&nbsp;by its five-year&nbsp;<a href=\"https:\/\/www.fool.com\/investing\/how-to-invest\/stocks\/beta\/\">beta<\/a>&nbsp;of 0.86.<\/p>\n\n\n\n<p>The combination of a reliable dividend and limited volatility is particularly valuable during a market downturn. High inflation and rising interest rates have many investors worried about a recession, and that concern has sent the stock market tumbling this year. The S&amp;P 500 delivered its worst first-half performance since 1970, and it currently sits 16%&nbsp;off its high. Meanwhile, the Vanguard ETF has dropped just 11%<\/p>\n\n\n\n<p>That makes the Vanguard ETF an attractive option for risk-averse passive income investors that prefer to avoid the complexity of tracking individual stocks. And with a low expense ratio of just 0.06%, investors will pay just $6 per year on a $10,000 portfolio.<\/p>\n\n\n\n<p>As a final thought, risk-tolerant investors looking for a little more upside potential should consider buying an\u00a0<a href=\"https:\/\/www.fool.com\/investing\/2022\/11\/09\/advice-from-warren-buffett-make-you-a-millionaire\/\">S&amp;P 500 index fund<\/a>. Warren Buffett has long been a proponent of that investment strategy.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stocks that consistently grow their dividends over time tend to be less volatile than the broader market. Index funds allow<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[254,3421,3422],"tags":[3443,3431,3519,888,3425,3561,3671],"_links":{"self":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/11152"}],"collection":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11152"}],"version-history":[{"count":1,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/11152\/revisions"}],"predecessor-version":[{"id":11153,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/11152\/revisions\/11153"}],"wp:attachment":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11152"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11152"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11152"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}