I'm new to buying stocks. I've done a bit of reading about investing in the stock market. Some people seem to recommend index funds. Other people seem to recommend only buying stocks that pay dividends.

Those recommendations have me wondering:

  1. Are there index funds for the Dow and Nasdaq?
  2. Do any of those index funds pay dividends?
  • 1
    Typically, index funds paying dividends reinvest those dividends... or at least that's how mine are set up.
    – keshlam
    Commented Feb 2, 2016 at 16:18
  • 1
    Mine do, though I do pay shortterm gains tax on the dividends. "If it happens, it must be possible."
    – keshlam
    Commented Feb 2, 2016 at 17:07
  • 1
    @Craig W: You do get the qualified dividends rate. Your mutual fund should send you an annual IRS form 1099-DIV (if you're in the US), which separates out ordinary & qualified dividends and other relevant stuff.
    – jamesqf
    Commented Feb 2, 2016 at 18:48
  • 1
    @keshlam I think it's probably your brokerage that's reinvesting the dividends. But since you're taxed on it anyway, it's equivalent to the fund paying you dividends in cash, and then you immediately using that cash to buy more shares (with no commission and allowing fractional shares).
    – Craig W
    Commented Feb 2, 2016 at 22:12
  • 1
    @jamesqf I don't buy mutual funds, but often the brokerage is the mutual fund company, e.g. Vanguard and Fidelity. For other mutual funds, I'd buy through a brokerage for convenience (assuming no transaction costs).
    – Craig W
    Commented Feb 3, 2016 at 13:26

2 Answers 2

  1. Yes, for example FNCMX, a mutual fund tracking the Nasdaq and IYY and DIA, two ETFs tracking the Dow.
  2. Yes, they all pay dividends because the funds are required to distribute the dividends they receive from their constituent stocks.

I assume that when you say 'the DOW' that you actually mean the general market.

The ticker symbol for the general market is SPY (called a 'Spider'). The ticker symbol for Nasdaq is QQQ.

SPY currently pays 2.55% in dividends in a year.

QQQ currently pays 1.34% in dividends in a year.

  • 1
    It is incorrect to say that the "ticker symbol for the general market is SPY (called a 'Spider')". First, the SPDR SPY tracks the S&P500 index, which is not the complete international or even US market. Also, there are other providers of S&P500 ETFs such as iShares (IVV) and Vanguard (VOO), not to mention mutual funds, so SPY is not "the market." Similarly, QQQ does not mean "the Nasdaq," it is an ETF by Powershares to track the Nasdaq 100, which is the top ~100 non-financials in the Nasdaq.
    – Alex Kuhl
    Commented Feb 3, 2016 at 14:29
  • I can either be helpful to a newbie or I can be exactly, technically, correct. I chose to be helpful. @Alex, While you are technically correct, your reply is not helpful. It would only be confusing to a novice in the stock market. What Johnathan asked for was help, which I provided. Commented Feb 3, 2016 at 15:02
  • I don't think writing a misleading answer that implies things that are entirely false is helpful to newbies. And "The Dow" has a common sense meaning, the Dow Jones Industrial Average ...
    – Joe
    Commented Feb 3, 2016 at 15:19
  • Neither Joe nor Alex have provided substantial help to a newbie (such as Johnathan). I propose we let Johnathan be the judge. Johnathan, who has been the most helpful, myself, Joe, or Alex? Commented Feb 3, 2016 at 15:42

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