08-24-2014, 11:15 AM
(08-19-2014, 07:04 AM)Slowlife Wrote: I'm not saying I want to add ETF's or bonds. I don't really know much about them and I was curious if other people who subscribe to the dgi strategy use them. Sounds like the overwhelming answer is no. Many of the books I've been reading, especially the older books, suggest diversifying using bonds or funds. They don't seem to fit with the strategy I've developed, but being new to this type of investing I wanted to know if other dividend growth investors use them. I'll have to take a look at that seeking alpha article, but I think I already know what it's going to say...
As it was already explained the ETFs are much less efficient than buying specific good valued and solid companies for dividend growth investing.
The benefit of ETFs however is the instant diversification it provides.
If your account is small and you can't diversify it enough just by buying dividend growth stocks than I would prefer having at least 10-20% in ETFs just to protect myself from picking a really bad company and wiping myself out of business before I even get started.
Once you get the diversification using dividend stocks (in my opinion ~20 companies is a good start) than I would sell the ETFs and open another 2-4 new positions using the money I just freed up.