ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

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Vision
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ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Vision » Sun Oct 30, 2016 8:10 am

What are your thoughts on this index?
The Fund seeks investment results, before fees and expenses, that track the performance of the S&P 500 Dividend Aristocrats Index. The Index targets companies that are currently members of the S&P 500, have increased dividend payments each year for at least 25 years, and meet required market capitalization and liquidity.
http://www.marketwatch.com/investing/fund/nobl

Can you explain why you think it is worse than regular S&P500 index?

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happyisland
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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by happyisland » Sun Oct 30, 2016 8:15 am

Can you explain why you think it is better than regular S&P500 index? :happy

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Vision » Sun Oct 30, 2016 8:21 am

happyisland wrote:Can you explain why you think it is better than regular S&P500 index? :happy
No. I'm asking to explain why it is not.

This guy says it is better:
http://www.marketwatch.com/story/heres- ... 2015-01-09

MarkArmbruster
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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by MarkArmbruster » Sun Oct 30, 2016 8:22 am

While my thoughts are not specific to this ETF, I generally believe that dividends are a bad thing. Many disagree with me on this, but dividends just increase your taxable income. I don't think people (some trusts may be an exception) need income from their portfolios; they just need money. So, you should strive to grow your portfolio as fast as your risk tolerance allows, and access your money in as tax-efficient a manner as possible. Generally this means realizing capital gains or drawing the principal portion out of your portfolio, rather than generating income through dividends and bond interest. From an academic perspective, Miller and Modigliani showed back in 1961 that dividend policy is irrelevant for the valuation of a firm, so portfolios with solid growth prospects can be achieved without accentuating dividends. Therefore, I think you'd be better off, if you have a taxable account, with a more traditional index fund for your large-cap domestic stock exposure.

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happyisland
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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by happyisland » Sun Oct 30, 2016 8:54 am

I feel like the burden of proof should be on the non-Boglehead theory, but here are a few of my thoughts anyway:
1) past performance does not necessarily predict future results.
2) dividend-heavy investing can lead to unwanted tax consequences.
3) If you were to replace VTI with a dividend fund you would be losing out on owning a lot of the market.
Just my two cents! :sharebeer

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by pkcrafter » Sun Oct 30, 2016 8:59 am

Vision, I don't know if NOBL is better or worse than the S&P500 because it's too different to compare. NOBL has twice the amount of mids and cap size is half the 500 index. It also has only 51 stocks. It is not a market index. Also worth a note to point out the yield from NOBL is not any higher than the S&P500.

I think the article's author, who knocks the Bogleheads, is comparing apples with oranges and a comparison isn't valid. If you're interested in the fund, evaluate it for what it is and what it isn't.

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Last edited by pkcrafter on Sun Oct 30, 2016 9:37 am, edited 1 time in total.
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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by alexost » Sun Oct 30, 2016 9:00 am

It is worse because it might not match or beat the whole index in the future.

Buying the index guarantees the index performance whereas buying the Aristocrat index includes the possibility of under performance.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by nisiprius » Sun Oct 30, 2016 9:23 am

Here is one specific way in which it is worse--it may not be important, but it is are valid and objective reasons why it is worse.

Since it is an equally weighted index of a small part of the market, rather than a cap-weighted index of almost all of the market, it takes more work and more buying and selling for a fund managers to keep the proportions equalized.

NOBL has a turnover ratio of 21%, not high but higher than;VTI, with a turnover ratio of 3%.

This is probably an important reason why
NOBL has an expense ratio of 0.35% and
VTI has an expense ratio of only 0.05%.

It is a more expensive index to track, and I think any product that tracks it is likely to have higher costs directly due to the nature of the index itself. Again, 0.30% more is not a whole lot, and a sane person could believe that the intrinsic coolness of dividend growth stocks might overcome the extra costs.

By the way, I personally have a bias against it just because of the use of an obvious marketing term in the name of the index itself. "Aristocrats" my sweet Fanny Adams. Stocks with high dividend growth should be called something like "high dividend growth stocks," not "Aristocrats" or "Nobility" or "Superheroes" or "Rock stars."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by nisiprius » Sun Oct 30, 2016 9:31 am

Vision wrote:...This guy says it is better:...
And why do you pay attention to this guy, rather than the guy who says the equal-weighted S&P is better, or the guy who says small-cap tilting is better, or the guy who says high dividend yield (not dividend growth) is better, or the guy who says fundamental indexing is better, or the guy who says smart beta mutual funds are better, or the guy who says long-short factor mutual funds are better, or the guy who says 200-day moving average market timing is better, or the guy who says a smart manager of an active fund is better?

They all can come up with numbers to support their claims.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by tibbitts » Sun Oct 30, 2016 10:09 am

Vision wrote:What are your thoughts on this index?
The Fund seeks investment results, before fees and expenses, that track the performance of the S&P 500 Dividend Aristocrats Index. The Index targets companies that are currently members of the S&P 500, have increased dividend payments each year for at least 25 years, and meet required market capitalization and liquidity.
http://www.marketwatch.com/investing/fund/nobl

Can you explain why you think it is worse than regular S&P500 index?
Not worse, not better, just different, given that the expenses are the same. But they aren't.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by dbr » Sun Oct 30, 2016 10:18 am

It isn't a bad idea to recognize that the first lever to turn on risk and return is the the stock/bond allocation. With respect to that no particular allocation is better or worse, but as the man says, just different. Except in that case the expenses are pretty much the same. If one wants to prove that some particular set of investments assets is much better or much worse than some other set, then there will be a lot of work to be done for uncertain results.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by BrklynMike » Sun Oct 30, 2016 10:26 am

My personal hypothesis is that the dividend heavy theme index investments will perform better. Without any data to support this hypothesis, I reason that if I were to invest my money, wouldn't I want the companies with the most established and growing cash flows that return it to me? I can then take those dividends and reinvest them getting periodic compounding. I further reason that in down markets, there will be a flight to quality. That being said, I invest basically in the three fund portfolio, but that's only because these dividend focused options aren't available in my 401k.
"In a world of uncertainty, one should focus more on the consequences than the probabilities." - Benjamin Graham

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by happyisland » Sun Oct 30, 2016 10:40 am

BrklynMike wrote:My personal hypothesis is that the dividend heavy theme index investments will perform better. Without any data to support this hypothesis, I reason that if I were to invest my money, wouldn't I want the companies with the most established and growing cash flows that return it to me? I can then take those dividends and reinvest them getting periodic compounding. I further reason that in down markets, there will be a flight to quality. That being said, I invest basically in the three fund portfolio, but that's only because these dividend focused options aren't available in my 401k.
Just remember that for your hypothesized dividend-focused investments to outperform, you have to know something that the rest of the market doesn't.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by danaht » Sun Oct 30, 2016 10:46 am

This would not be an ETF I would invest in.
Here's why:
1) It only has 51 holdings. You need an ETF to be more diversified with hundreds of stocks.
2) The expense ratio is high for a passive ETF at 0.35%

If you must buy a DIvidend Aristocrat "growth" ETF - I recommend VIG. VYM is also a good dividend high yield ETF (not growth). Both are from Vanguard.
VIG has 186 holdings, and a .09% expense ratio. VYM has 416 holdings and also has a .09% expense ratio. I also recommend VTI over both of these - since it has a lot more holdings. I believe in buying the entire market (including international) - not a small portion of it.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by oldcomputerguy » Sun Oct 30, 2016 11:06 am

Vision wrote:
happyisland wrote:Can you explain why you think it is better than regular S&P500 index? :happy
No. I'm asking to explain why it is not.

This guy says it is better:
http://www.marketwatch.com/story/heres- ... 2015-01-09
Looking at NOBL over on the Fidelity site and comparing it to typical S&P 500 ETFs, I see the following:

3-year market returns:

Proshares NOBL S&P 500 Aristocrat Dividend ETF -- 8.58%
Vanguard VOO S&P 500 ETF -- 8.70%
Blackrock iShares IVV Core S&P 500 ETF -- 8.68%
SPDR SPY S&P500 ETF -- 8.62%

(No five- or ten-year returns shown for NOBL)

Expense ratios:

NOBL -- 0.35%
VOO -- 0.05%
IVV -- 0.04%
SPY -- 0.0945%

Turnover ratios:

NOBL -- 21%
VOO -- 3%
IVV -- 4%
SPY -- 2.77%


No, thanks.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Erwin » Sun Oct 30, 2016 11:45 am

Anything but investing in the total market is an active bet.
Much has been written showing that in the long run passive investment is the most efficient, and that has been the main philosophy of this forum since the very beginning.
In short, there is no sure bets and no free lunch (except the power of diversification.) But I will not try to convince anyone on the virtues of investing in total markets, since John Norstad wrote a super paper in 2001 (updated in 2011) with the input from some of the Bogleheads senior members explaining in detail the reasons.
Please read...
http://www.norstad.org/finance/total.html
Erwin

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by stlutz » Sun Oct 30, 2016 12:35 pm

Steeping away from the question of whether or not the concept is any good, there are better (i.e. cheaper) ways to execute on it using ETFs from Vanguard (VIG) and iShares (DGRO). If you're going to do it, at least use ETFs that cost less than 10 basis points, not ones that cost 35. :dollar

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Vision » Tue Nov 01, 2016 5:44 pm

nisiprius wrote:
Vision wrote:...This guy says it is better:...
And why do you pay attention to this guy, rather than the guy who says the equal-weighted S&P is better, or the guy who says small-cap tilting is better, or the guy who says high dividend yield (not dividend growth) is better, or the guy who says fundamental indexing is better, or the guy who says smart beta mutual funds are better, or the guy who says long-short factor mutual funds are better, or the guy who says 200-day moving average market timing is better, or the guy who says a smart manager of an active fund is better?

They all can come up with numbers to support their claims.
Ah, but I pay attention to all. That is why I'm collecting all the counterarguments for his theory on this forum.
I also recommend VTI over both of these - since it has a lot more holdings. I believe in buying the entire market (including international) - not a small portion of it.
Ah, so it seems I did not shoot wrong with my choice to go:
60% VTI
30% VXUS
10% BND?

Thanks for all the opinions guys.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by TropikThunder » Wed Nov 02, 2016 12:21 am

Vision wrote:What are your thoughts on this index?
The Fund seeks investment results, before fees and expenses, that track the performance of the S&P 500 Dividend Aristocrats Index. The Index targets companies that are currently members of the S&P 500, have increased dividend payments each year for at least 25 years, and meet required market capitalization and liquidity.
http://www.marketwatch.com/investing/fund/nobl

Can you explain why you think it is worse than regular S&P500 index?
Maybe I'm naive, but the requirement for >25 years of dividend growth, not merely good dividend yields, is misguided. A company that has been paying a solid 10% yield each and every year for 40 years doesn't make the cut (no such beast, I know, but a hyperbolic example). But is there one of us who wouldn't own it?

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by AlohaJoe » Wed Nov 02, 2016 3:31 am

I'm trying to wrap my head around how it can have such a high turn over.

it has 50-something stocks. 21% turnover means 10 companies a year. Every year 10 companies "break" their 25-year streak of raising dividends? I guess I can believe that. But doesn't that mean that eventually this index will shrink to zero? Or are there also 10 companies that are currently on a 24-year streak and will become eligible next year to join the index? Somehow I find that even more implausible. And once a company leaves the index, they can't rejoin it for 40 years, right?

With 10-companies of turnover a year then within a decade 100 companies -- 20% of the S&P 500 -- will have passed through the index.

I feel like I'm missing something because that can't possibly be right.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by AlohaJoe » Wed Nov 02, 2016 3:41 am

Interestingly: it appears that management is aware of these kinds of indexes/investor preferences and game the system to some extent.

It appears that Walmart (a dividend aristocrat) has increased their dividend by 1 cent each time for the past few years in order to (technically) keep the streak alive. This article suggests the streak may end this year as they keep the cash in-house to invest in competitive struggles against Amazon and Costco: http://www.fool.com/investing/2016/09/0 ... doubt.aspx

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by misterno » Thu Feb 23, 2017 6:17 pm

danaht wrote:This would not be an ETF I would invest in.
Here's why:
1) It only has 51 holdings. You need an ETF to be more diversified with hundreds of stocks.
2) The expense ratio is high for a passive ETF at 0.35%

If you must buy a DIvidend Aristocrat "growth" ETF - I recommend VIG. VYM is also a good dividend high yield ETF (not growth). Both are from Vanguard.
VIG has 186 holdings, and a .09% expense ratio. VYM has 416 holdings and also has a .09% expense ratio. I also recommend VTI over both of these - since it has a lot more holdings. I believe in buying the entire market (including international) - not a small portion of it.
I checked VIG against SP500 index

Guess what, it is lagging in 1-2-3-5 years behind SP 500 index

I am surprised though. You would think dividend paying stocks would appreciate more but it is not

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by aristotelian » Thu Feb 23, 2017 8:31 pm

misterno wrote: I checked VIG against SP500 index

Guess what, it is lagging in 1-2-3-5 years behind SP 500 index

I am surprised though. You would think dividend paying stocks would appreciate more but it is not
I would not expect that. They are paying out cash that directly takes away from their market capitalization as well as from funds that they could invest in the growth of their company. I would expect S&P to beat big dividend payers. Dividend payers are playing the game with one hand tied behind their back.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by misterno » Thu Feb 23, 2017 11:27 pm

aristotelian wrote:
misterno wrote: I checked VIG against SP500 index

Guess what, it is lagging in 1-2-3-5 years behind SP 500 index

I am surprised though. You would think dividend paying stocks would appreciate more but it is not
I would not expect that. They are paying out cash that directly takes away from their market capitalization as well as from funds that they could invest in the growth of their company. I would expect S&P to beat big dividend payers. Dividend payers are playing the game with one hand tied behind their back.
Here is what I am wondering

Does VIG reinvests the dividend ?

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Phineas J. Whoopee » Thu Feb 23, 2017 11:34 pm

misterno wrote:...
Here is what I am wondering

Does VIG reinvests the dividend ?
Mutual funds in the US are required to pass along dividends to the shareholders, which outside of tax-advantaged accounts is a taxable event. The shareholder is free to reinvest any portion of the dividend in additional shares, just as they might buy shares with any other money they have. Reinvestment does not change the investor's current-year tax liability for the dividend.

PJW

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by rgs92 » Thu Feb 23, 2017 11:44 pm

I've owned a pretty large chunk of SPYD (SPDR S&P 500 HIGH DIVIDEND ETF) for quite a while and I like the big dividend (now 4%) and the lower volatility and I am holding it for the long term. It's expenses are reported as .12%, good enough for me. Rational? Who knows. But it has done well and that's that. Check it out.
I picked this over the much more widely known SDY (the S&P500 Dividend ETF) because SDY has a .35% expense ratio. And SDY has a lower yield to boot (now 2.25%).
SPYD has done better than the S&P500 and had a larger dividend, but take this with a micro-grain of salt (a molecule?) since it has only existed a short time.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Crisium » Fri Feb 24, 2017 8:40 am

Larry just released a dividend article today, actually:

http://www.etf.com/sections/index-inves ... -dividends

My conclusion/interpretation: dividend stock chasing is never logical, but can be very rational. Humans are not Vulcans, after all.

...

Last poster brought up SPYD, a new fund. I've been wondering about that too, and may look into it next year (it's not even 1.5 years old, so another year is a significant extension of its history). While it may not be logical to chase it for dividends, consider that SPYD is an 80 stock equal weight ETF.

If in a tax advantaged account dividends are neither good nor bad, then could this ETF be attractive to those that like the concept of equal weight and want an equal weight SP500 value? SPYD top 10 is a smaller percentage than most other Large and Mid-Value funds even if those have many more stocks. .12 ER isn't a bad penalty for equal weight in this case, compared to the fairly popular RSP with .40 ER (I understand that is the full SP500 and not value, but am illustrating that equal weight carries a larger penalty in ER).

I'm really not sure if it makes sense, but I prefer the concept of equal weight but have yet to buy any equal weight funds due to outrageous ERs for US ETFs, so this intrigues me to get some equal weighted non-small value since it's not expensive.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by misterno » Fri Feb 24, 2017 10:30 am

rgs92 wrote:I've owned a pretty large chunk of SPYD (SPDR S&P 500 HIGH DIVIDEND ETF) for quite a while and I like the big dividend (now 4%) and the lower volatility and I am holding it for the long term. It's expenses are reported as .12%, good enough for me. Rational? Who knows. But it has done well and that's that. Check it out.
I picked this over the much more widely known SDY (the S&P500 Dividend ETF) because SDY has a .35% expense ratio. And SDY has a lower yield to boot (now 2.25%).
SPYD has done better than the S&P500 and had a larger dividend, but take this with a micro-grain of salt (a molecule?) since it has only existed a short time.
Please enlighten me

If you have invested all dividends from SPYD back to SPYD what would be the return comparison to Vanguard SP500 index fund net of expense ratios and all?

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by aristotelian » Fri Feb 24, 2017 11:34 am

misterno wrote:
rgs92 wrote:I've owned a pretty large chunk of SPYD (SPDR S&P 500 HIGH DIVIDEND ETF) for quite a while and I like the big dividend (now 4%) and the lower volatility and I am holding it for the long term. It's expenses are reported as .12%, good enough for me. Rational? Who knows. But it has done well and that's that. Check it out.
I picked this over the much more widely known SDY (the S&P500 Dividend ETF) because SDY has a .35% expense ratio. And SDY has a lower yield to boot (now 2.25%).
SPYD has done better than the S&P500 and had a larger dividend, but take this with a micro-grain of salt (a molecule?) since it has only existed a short time.
Please enlighten me

If you have invested all dividends from SPYD back to SPYD what would be the return comparison to Vanguard SP500 index fund net of expense ratios and all?
Well, it crushed VOO 24% to 12% total return in 2016. Who knows what it will do in the future.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by GLState » Fri Feb 24, 2017 2:09 pm

Since it's inception in late 2013, NOBL and SPY have performed about the same. There isn't any increased performance or reduced volatility by owning NOBL over SPY. We're not getting anything for the higher expense ratio.

Code: Select all

                                          SPY                NOBL
Annualized Return                      0.1087235       0.1017161
Annualized Standard Deviation          0.1036002       0.100409
Annualized Sharpe Ratio (Rf=0%)       1.049452         1.013017

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Wakefield1 » Sun Feb 26, 2017 12:25 am

The cost and turnover put it on the defense against the traditional Vanguard index fund right off. As someone would say,extra headwind.

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by Erwin » Sun Feb 26, 2017 12:52 am

Most Bogleheads invest in the total market and there is a good reason for that. The following article by John Norstad, although old, does an excellent job explaining why:
http://www.norstad.org/finance/total.html
Erwin

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Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Post by NibbanaBanana » Sun Feb 26, 2017 10:16 am

I agree with everybody. Low cost, broad based index funds are the best.

That said, I own most of the companies on that list as individual issues in my brokerage account. Most of them are really fabulous companies too. For example:

The Gorman-Rupp company produced a system of 17 pumps for the army corps of engineers to control flooding in New Orleans. They are capable of pumping over 180,000 gallons of water per second! 11 million gallons per minute! That's an achievement.

I've picked them up over the decades when they went on sale in the market which happens from time to time. But from what I can see, since they are for the most part great companies, they consequently usually sell for very great prices. Not necessarily a good investment. They do pay a steady increasing divy though if you like that.

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