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I am finally taking ownership of my retirement my very very small nest egg and I am looking to undertake a value based strategy when it comes to investing.

I have been gravitating towards high dividend index funds. While my upside will be limited on growth i think they are pretty stable vehicles for growing a portfolio right?

My thinking is grounded in the fact that they are trying to match an index while shooting out dividends. MY concern is the market is so volatile and i have been essentially flat with my earnings being wiped out and built up again in a cycle. With the dividends at least I get something out of it even if the market is flat over a long time span.

Am i missing something? I have read some comments about expense ratios and distributions. I am not sure what the risks are if the dividend history is pretty steady.

Thanks in advance for the help.

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    Dividend payments aren't immune to down markets. GE is a great example of this. The dividend was cut by 67% shortly after the start of 2009, also shortly after Immelt said the dividend wouldn't be touched. With that said, plain vanilla index funds typically carry a lower expense ratio than some fancy-pants managed fund. Over a long period you're probably better off not parting with the increased expense costs. I'd pull your statements to get an idea of what you're paying in expenses now to determine your level of comfort moving up or down from there.
    – quid
    Feb 24, 2016 at 17:19

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While my upside will be limited on growth i think they are pretty stable vehicles for growing a portfolio right?

Actually, High-dividend index funds behave similarly to broader equity index funds and very similarly to straight value funds. Volatility will be only slightly less in the long run so you will still feel the pain in a downturn and in major downturns dividends will slow down a lot as well. Of course, if you hold your funds for the long run (saving for retirement?) volatility will matter little to you either way, as long as you don't panic in a downturn and sell.

If you want a portfolio that has much lower volatility than adding some bond index funds will have more of an effect than the small differences between value, dividend and broader funds.

In theory at least, dividends don't really matter in the long term. In practice, this is not quite true. The biggest reason is dividends are taxed when you receive them and with capital gains you can delay paying taxes as long as you don't sell. So dividends perhaps are not preferred in the long run but this is also a small difference.

I have read some comments about expense ratios.

A good thing to be reading about. Given that you are thinking of value index investing and the above differences I mentioned were small, often differences in expense ratios can be more important than whether you choose a value fund, a dividend fund or even a broad index fund.

My thinking is grounded in the fact that they are trying to match an index while shooting out dividends.

This is not quite correct. They actually build an separate index of high-dividend companies and then match that index.

closed end index mutual funds ?

On a separate note, Closed end funds can require a lot more care and are more prone to novice trading mistakes than open-ended funds and liquid index etfs.

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