Dividends4Life: Can ETFs Outperform Individual Stock Picks?

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Can ETFs Outperform Individual Stock Picks?

Posted by D4L | Friday, September 04, 2015 | | 0 comments »

Can sector ETFs outperform individual stock picks? In the time frame studied, the answer to that is yes in the area of total return, and maybe, in the area of income. For the retiree, looking only for income the message is mixed. Since the five-year annualized growth rate of the stock portfolio is only 3.2%, it is quite possible that the ETF strategy could provide more income a few more years down the road.

Did the 10 stock portfolio provide higher yield and growth than the S&P 500? In the first year, the 10 stock portfolio provided 90% more income than the SPY. In 2014, the income advantage had dropped to only 29% for the 10 stock portfolio. If the trend continues, it is possible that within another five years, the SPY could be paying out more income than these 10 stocks, even if the dividends are spent along the way. As far as growth goes, whether you define the growth as growth of income or total return, the 10 stock portfolio turns out to be a below average achiever on both accounts.

Source: Seeking Alpha

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