Q: This is perhaps the most naive question you've ever answered in your life, but I just have to ask anyway. How do ETFs actually work, in respect to dividends? That is, where do all the dividends go, from the respective companies within one ETF?
For example, I note that VGG has a dividend yield of 1.5%, while any of the single companies within the ETF outperform its yield -- Microsoft, as an example, has a present yield of 2.6% and JNJ is at 3.0%. If one were looking for a decent income stream, wouldn't it be better to simply put your money into the individual stocks and then reap the better reward?
I understand the diversity that is provided by holding an entire basket, but I have found that ETFs very rarely outperform good equities, if they went toe to toe -- and there is always the risk of the under performing equities held within that basket.
In any case, I am still wondering where all the dividends go, from the individual companies, and whether the end consumer ever really profits much from it.
Does the fund manager rake it all in, from the equities? Who wins, who loses on this type of trade.
My apologies if this question should be in the Stupid Queue, but I've just never understood why ETF yields are so much lower, for the most part, than the equities they hold.
Thank you.
For example, I note that VGG has a dividend yield of 1.5%, while any of the single companies within the ETF outperform its yield -- Microsoft, as an example, has a present yield of 2.6% and JNJ is at 3.0%. If one were looking for a decent income stream, wouldn't it be better to simply put your money into the individual stocks and then reap the better reward?
I understand the diversity that is provided by holding an entire basket, but I have found that ETFs very rarely outperform good equities, if they went toe to toe -- and there is always the risk of the under performing equities held within that basket.
In any case, I am still wondering where all the dividends go, from the individual companies, and whether the end consumer ever really profits much from it.
Does the fund manager rake it all in, from the equities? Who wins, who loses on this type of trade.
My apologies if this question should be in the Stupid Queue, but I've just never understood why ETF yields are so much lower, for the most part, than the equities they hold.
Thank you.
