In its annual retirement guide, Business Week lists five funds for retirees. DVY, the iShares Dow Jones Select Dvidend Index, is the first in the list. Quick points to note:
- The other funds in the list were all open-end mutual funds: PRWCX, DODFX, PCRAX and MWTRX.
- Business Week's list is based on the recommendations of "leading financial advisors". This article shows how quickly ETFs are impacting the market. Many advisors get paid in the form of mutual fund fees, and aren't incentivized to recommend ETFs which have lower expenses and no payments for financial advisors.
- The recommendation of DVY reflects the consensus among many advisors that dividend-paying stocks (or stock funds) are good for retirees and a sound investment. But I have serious reservations about this, particularly after the rise in utility stocks.
- Even if you do decide to own stocks with high dividend yields, DVY might not make sense.