I have a question on the two pictures below.

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Here it states that Vanguard REIT ETF has high potential for investment income and some growth. The dividend payments this year so far have been $0.919 which is 1.14% of the market price as of today. $0.91 doesn't seem very high, and I know it says "potential" to be high, but is this considered "high" in terms of ETF's? I don't understand why anyone would want to own "high investment income" ETF's unless you had a significant amount of shares (tens of thousands).

Also, does the graph depicted below for the hypothetical growth of $10,000 represent the value with dividend reinvestment, or just the growth of the shares themselves and not "investment income" (dividend, Return of capital)

  • 2
    1% per quarter is 4% per year. That's pretty high. – The Photon Mar 24 '16 at 20:07

ETF's can be anywhere on the map, so I'm not sure anyone could say if this is high or low for an ETF. The real question is whether it's high for a REIT. That could also depend on how the REIT invests. Remember, though, dividends are quarterly. So 1.14% per quarter may not sound that low as far as dividends goes.

The graph should represent total returns. That is, with dividend reinvestment.

Your question about "high investment income" funds and number of shares puzzles me. I can't think of a reason why a small investor would want to hold a different portfolio in this respect than a large investor. In principle, small and large investors want to hold basically the same stuff. Small investors sometimes don't diversify as completely because of minimum investment thresholds or attention issues, but that doesn't mean they don't want to hold high investment income assets.

Is your thinking that it's too much of a hassle to reinvest the dividends? An investor with this concern would probably opt to use the associated index fund (VGSLX or VGSIX in this case). An investor of that type wouldn't buy any ETF's, though, so there's nothing special about high investment income funds.

  • I'm confused as to why you would want this relative to a admiral mutual fund with the same expense ratio. Dividends are auto-reinvested. With an ETF, if your dividend payments don't return the share price, then you have to come "out-of-pocket" to reinvest them – DukeLuke Mar 24 '16 at 20:26
  • True, so your question relates to all ETF's, not just high investment income funds. Index funds may be more convenient from a reinvestment perspective, but many admiral funds have minimum investment amounts that are greater than people have to invest. With the ETF the investor can also trade during the day, etc. Overall there's not much difference between ETF's and index funds. – farnsy Mar 24 '16 at 20:32
  • @DukeLuke vanguard has a REIT admiral fund, mentioned in this good answer: VGSLX. – user662852 Mar 25 '16 at 14:58

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