What is the difference between Dividend Stocks and Dividend Funds? Which one should I be investing in? - Seedly
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Anonymous

Asked on 10 Jun 2019

What is the difference between Dividend Stocks and Dividend Funds? Which one should I be investing in?

Hi,

Given the current market situation, I'm a little cautious to enter the market buying dividend stocks since it is so volatile right now.

My question would be, if there are so many fees bundled with buying trust funds that pay out dividends, why do people still buy them? Looking at FSMone, the only fees that seem to be recurring are the platform charge of 0.0875% which seems measly to me if the fund is able to provide consistent dividend rates. Please do correct me if I'm wrong thanks!

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You're looking at the platform fee, not the fund management fee.

Actively managed equity funds would usually have a Fund Management fee of between 0.7-2%. Usually closer to 1.3-1.7%.

One such fund would be "United Global Durable Equities Fund". It has historically paid more than 5% dividend p.a on a monthly basis while still having a compounded growth rate of 9.34% per annum after a management fee of 1.75% p.a.

Actively managed funds built for specific purposes like these can usually deliver constant strong dividend payouts. And though the primary objective is not for growth, investing in healthy dividend paying stocks will also give you a good chance at achieving a positive return.

But some advice, if you're looking at a pure income and reliable investment product, look for bond funds instead of equity funds. They have lower volatility and bonds are literally made to provide a coupon till maturity.

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Question Poster

10 Jun 2019

Hey Hariz, Thanks for the detailed reply. I do know about the fund management fee, but my understanding of it is that it is already reflected(deducted) in the NAV. So purely looking at consistent dividend payout and not growth in NAV/Stock price, such funds would be more feasible then? Thanks
Hariz Arthur Maloy
Hariz Arthur Maloy

10 Jun 2019

Yes, if you are ok with 4+% dividend, a PIMCO Bond fund can do that with very low volatility. For 6+% and above, high yield bonds can deliver that return. As the saying goes, higher return, higher risk taken. So if you're not looking for growth, go for bond funds.