7 Best Dividend Mutual Funds: 2015 Edition

Ah, the dividend. Is there anything more beautiful than receiving regular payments from your money? Not from some employer for your labor, not from a renter, but more money from your money. A gift from money.

You know what I’m talking about: the joy of cashflow producing assets. After all, why else would you be reading a post on the best dividend mutual funds if you hadn’t been struck by the stark, utilitarian beauty that is the dividend payment? The dividend! The Statue of David of the investing world.

But I digress. Back to the topic at hand. I’ve compiled a list of the best dividend mutual funds which ought to, ideally, be of some assistance to you, the reader, when it comes to deciding what to do with your investments.

My methodology: Here’s how I picked out the funds below. I went into Reuter’s mutual fund screener and restricted the universe of mutual funds based on the following criteria:

  • Has to be an equity fund
  • Must accept new investors
  • Minimum buy-in must be less than 5,000 dollars
  • Has a dividend yield greater than 2%
  • Has a management fee of less than 1%
  • Has a five-star rating from Lipper Leaders when it comes to total return

This screen returned 36 different mutual funds. I think went through each one and filtered out all of those who had a Morningstar rating of less than 5 stars. Here’s what I was left with. I’ve ranked these from highest dividend yield to lowest.

Voya Corporate Leaders Trust B (LEXCX)

From a Wall Street Journal article  on LEXCX.

From a Wall Street Journal article on LEXCX.

Key stats:

  • Trailing Twelve Month Yield: 5.62%
  • Expenses: 0.50%
  • Minimum investment: $1,000
  • Total assets: $1.7 billion

LEXCX is an interesting fund. It was set up in 1935. At the time, it bought an equal number of shares of the 30 leading US companies. Stranger still, the fund is under certain restrictions, such that it can’t invest in new companies, except in special situations, like a merger.

Thus, today, the fund holds 22 large-cap, blue chip stocks. One article on Yahoo Finance describes the fund as the ultimate “buy and hold forever” mutual fund. And with a 5.62% dividend yield, it looks tempting.

My thoughts: This is a weird fund. With a low cost broker – I recommend TradeKing – you could recreate it without too much hassle. Just buy equal positions in its 22 holdings. Then, you won’t have to pay the expense ratio.

American Funds Intl Gr and Inc (RIGGX)

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Key stats:

  • Trailing Twelve Month Yield: 3.47%
  • Expenses: 0.59%
  • Minimum investment: $250
  • Total assets: $9.8 billion

There is very little information about RIGGX available on the web. The fund’s stated objective is conservative, international investments. According to MorningStar’s analysts, RIGGX seeks to achieve a before expenses yield of 3.5%.

My thoughts: Since there’s not that much information available, I’m forced to rely on the funds holdings. They hold a big stake in TSMC, a stock which I like, so that’s one positive point. I wouldn’t have it an international fund as my main holding, but I might recommending hold this for diversification, assuming you’re not investing in Betterment.

Wasatch Strategic Income (WASIX)

Screen Shot 2014-11-16 at 5.07.10 PMKey stats:

  • Trailing Twelve Month Yield: 2.69%
  • Expenses: 0.95%
  • Minimum investment: $2,000
  • Total assets: $116.3 million

As you’ll note by total assets, WASIX is a small fund. It focuses on a conservative asset allocation and regular income. Growing capital is a secondary concern. Expenses, at nearly 1%, are also about .5% higher than I’d like.

My thoughts: This fund might be worthwhile for those nearing or in retirement, but do your research first.

Vanguard High Dividend Yield Index (VHDYX)

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Key stats:

  • Trailing Twelve Month Yield: 2.68%
  • Expenses: 0.19%
  • Minimum investment: $3,000
  • Total assets: $13.8 billion

On this site, I probably recommend Vanguard products more than any other. I have no incentive to do so: I don’t make any money whenever someone invests in Vanguard (unfortunately!).

No, the reality is that their products are just better than 99% of the competition. This is the same reason that I like out to Amazon all the time. The costs are better than the competition.

VHDYX is no exception. If I were to invest in just one of these funds, it’d be this one.

Why? First of all, that expense ratio is tough to beat and, second of all, while I have some doubts about whether the yield on the other funds will be maintained over the long-term, I don’t have these qualms about this Vanguard fund. The entire purpose of it is in the name: “High Dividend Yield Index.”

Buying this is like owning a small slice of every high-dividend yield stock.

Schwab International Core Equity (SICNX)

Key stats:

  • Trailing Twelve Month Yield: 2.62%
  • Expenses: 0.86%
  • Minimum investment: $100
  • Total assets: $331.2 million

This is another small fund, like a mix between RIGGX and WASIX. It’s heavily weighted towards developed, international companies – places like Japan, the UK, and Western Europe in general.

The fund’s largest holding is Nestle, which I have no opinion on. According to Schwab’s website, the fund, “seeks long-term capital growth by primarily investing in equities of publicly traded companies in select countries outside the United States.”

But so do most others.

My thoughts: I wouldn’t make this my primary holding (unless I was especially bearish on the US), but it might be okay to fulfill some % international of your asset allocation.

Vanguard Equity-Income Fund (VEIPX)

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Key stats:

  • Trailing Twelve Month Yield: 2.48%
  • Expenses: 0.30%
  • Minimum investment: $3,000
  • Total assets: $18.4 billion

Like I mentioned above, Vanguard funds are some of my favorite. This one is no exception, although I think that the one mentioned above is a better deal.

Like the others on this list, this one seeks to provide stable income – via the beautiful dividend. According to Vanguard’s website, “This fund is designed to provide investors with an above-average level of current income while offering exposure to the stock market. Since the fund typically invests in companies that are dedicated to consistently paying dividends, it may have a higher yield than other Vanguard stock mutual funds.”

My thoughts: The main problem that I have with this fund is that it looks essentially the same as VHDYX, but the management fees are higher. So if you’re in the market, why not just buy VHDYX?

SunAmerica Focused Dividend Strategy (FDSAX)

Screen Shot 2014-11-16 at 4.45.02 PMKey stats:

  • Trailing Twelve Month Yield: 2.17%
  • Expenses: 0.98%
  • Minimum investment: $500
  • Total assets: $8.5 billion

This fund is a more reasonable (and thus less interesting) take on what was happening with the first fund, LEXCX. While that fund bought a stake in 30 companies in 1935 and intends to hold it forever, this fund buys a stake in 30 high-dividend companies and then rebalances every year.

My thoughts: This seems like a solid fund. You can see holdings here. I have two main concerns: 1) the expenses are higher than I’d like and 2) with only 30 holdings, why not just build your own portfolio of high-quality, blue-chip stocks? These are the same concerns that I had with LEXCX, although I guess in this case there’s at least the possibility of a value-add by the manager. So there’s that.

Final Thoughts

Okay, so you’ve made it this far. I’ve just covered the 7 best dividend mutual funds. But maybe you want to know, if I had to pick just one, which would it?

VHDYX. I actually already have money in this fund, or one of Vanguard’s similar ones – I can’t recall off the top of my head. So I’m not just talking. I have skin in the game.

Alternatively, I think a good option would be to just open a TradeKing account and then buy stakes in a bunch of different high-dividend stocks. You can use a screener, like Yahoo Finance’s, to find them.

So go out there. Get them dividends. Build your own financial Statue of David. You, the Dividend Michelangelo.

The Best Investment Plan For Beginners

There are two ways to make money. You, yourself, can go to work, probably by selling your labor to an employer in exchange for a paycheck. Or you might start a small business, or make money by writing on a blog.

That’s the first way.

The second way you can make money is by putting your money to work. This is the art of investing. Instead of selling your labor in a never ending grind to make money, you can, like some sort of perpetual motion machine, use your money to make still more money. And then you can use your gains to make even more.

That’s investing, and it’s a pretty great deal. Of course, everyone knows it’s a great deal, or at least anyone with some basic financial literacy knows it’s a great deal.

Except, according to one Gallup poll, only 54% of Americans own stock. So what’s going on? Why aren’t more people doing it? Why not harness the ability of money to produce more money?


One reason: Americans don’t know how to get started. They’re overwhelmed by choice. After all, there are trillions of possible investment combinations out there. What Americans really need is the best investment plan for beginners.

So I decided to write such a thing.

The Importance of Savings

When it comes to building your net worth, the single most important thing you can do is to get into the habit of saving a percentage of your income. It’s not about how much money you make. It’s about how much money you keep after you take into account expenses.

This is trivial to demonstrate. Consider two people: Bob is a software engineer making 100,000 dollars a year, while Peter is an adjunct professor earning 30,000 dollars each year.

Who’s richer?

That depends on how much each one saves. If Bob doesn’t save any money and racks up credit card debt, he’s going to have a negative net worth. On the other hand, if Peter saves aggressively, stashing away a third of his income, he’ll soon leave Bob way behind.

Compare Warren Buffet and Charlie Munger, for example. Warren Buffet, as of this writing, is worth about 60 billion dollars. Charlie Munger, on the other hand, is worth around a billion.

What’s the difference? According to Munger, one of the main differences between him and Buffet is that Buffet saves more of his income. He’s a frugal guy. He drives an old car and lives in a modest house in Omaha.

Buffet’s primary advice to young people, by the way, is to, “stay away from credit cards.”

So you’re convinced about this whole savings thing. What’s the best way to get into the habit of it?

Automate Your Savings

The best way to get into the savings habit is to take a page straight from The Odyssey. In one chapter, Ulysses and his crew must sail through the land of the Sirens. The Sirens are beautiful females who lure in sailors with their enchanting music, only to have the sailors wreck themselves on the rocks.

How does Ulysses manage to make it past the Sirens alive? He has his crew tie him to the mast and the fill their ears with wax. That way, Ulysses can’t convince the crew to change course nor do it himself, and the crew cannot hear the enchanting song of the Sirens.

This is the same tact that you need to take with savings. You need to, right now, tie yourself to the mast, so that future-you is not tempted by the Sirens into spending all of your disposable income. Except, in this case, the Sirens are not beautiful women with enchanting songs, but advertisers.

How do you tie yourself to the metaphorical mask when it comes to savings?

Simple. You set up a system that automatically takes some percentage of your earned income each month and sets it aside. That way, you don’t have to exert any willpower. You don’t need to create any habit. It’s all automated for you.

To implement this, you should be able to set up automated cash transfers via your bank and checking account. Alternatively, your employer may allow you to direct deposit your paychecks into several different accounts, so you may be able to take advantage of that.

How much should you save?

Now, at this point, you may be wondering: just how much of your money do you need to be saving? The answer to this is easy: as much as you can.

But that’s not a terribly satisfying answer. It’s easier to plan a budget if you figure out an exact percentage of your money that you want to set aside. I recommend trying to start with 20%. If you set aside 20% of your earned income for your entire working career, you’ll retire very well off, assuming that you’re smart with your investments. But I’ll get to that in a minute.

On the other hand, it’s possible that you’re simply unable to currently set aside that much of your income right now. That’s okay. In such a case, start with setting aside 10%. Then, as your earnings increase, don’t expand your lifestyle. Just increase the amount you save.

The rationale behind this is straightforward: once you’ve gotten used to living a certain way, downgrading sucks. The solution: next time you can afford upgrading your living standards, don’t. Just save more. And voila! No pain.

The Best Investment Plan For Your Savings

Okay, so now you know that you need to save and that the easiest way to get into the savings habit is to automate it. Now you need to know: what should you do with all of this money that you’re saving? What’s the best investment plan for your savings?

Like I mentioned earlier, when it comes to investing, your options are staggering. You could put money into individual stocks, bonds, real estate, collectibles, gold, oil, fine art, your own business, etc.

Depending on your personality profile, amount of free time, interest in markets and business, it’s impossible for me to say definitively which is the right option for you. Imagine if Warren Buffet had read some blog post telling him that he shouldn’t bother picking individual stocks because it’s impossible.

But, with that disclaimer out of the way, I didn’t title this post the best investment plan for beginners for nothing. I do have an opinion on how most people ought to be investing their money, especially if they’re busy and not inclined towards doing their own research.

Betterment or Vanguard’s Target Date Funds

There are two investment options that I find myself recommending over and over again, ad nauseum. Those options? Betterment and Vanguard’s target date retirement funds.

I firmly believe that you can’t go wrong with either of them. When it comes to the tradeoff between return, simplicity, and peace of mind, they’re simply best in class.

Here’s how they work.

Vanguard’s Target Date Retirement Funds

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When it comes to your investments, one of the most important things that you can do is decide on an asset allocation that fits your risk tolerance. Here’s what I mean by that. Say that you’re in your mid 20s and looking to invest your money.

Should you put it all in bonds or in stocks? What’s the difference? Well, over the long run, stocks ought to outperform bonds. Both our theoretical models and historical evidence suggest that this is the case.

But stocks are also more risky. During a market crash, like the 2008 housing crisis, a 100% stock portfolio could lose as much as half of its value.

Bonds don’t suffer from this problem. In general, bonds, especially treasury bills, are one of the safest investments out there. But they also have lower returns because of this.

Since this is the case, it’s generally recommended that young people hold more of their money in stocks, because they have plenty of future earning potential that will allow them to recover from a market crash. On the other hand, those nearing retirement or already on a fixed income can’t afford such a thing, so they should shift towards a more conservative, bond-heavy portfolio.

Asset allocation, then, is the art of deciding on how much of each time of security you want to hold in your portfolio. Should you have 90% stocks and 10% bonds? Or a 50/50 split?

There’s no simply analytical formula, and deciding can be stressful. Plus, the more you slice and dice your portfolio among different assets, the more complex it is to manage everything.

The solution?

Put your money into one of Vanguard’s target date retirement funds.

These are low cost funds that automagically handle everything for you. Vanguard determines asset allocation based on when you want to retire and, as your target date gets closer, they slowly shift your assets toward less risky securities.

Basically, Vanguard does everything that I would recommend for you. You can simply dump money into this fund and, when it comes time to retire, voila! It has all be handled.

Highly recommended.


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Imagine having a personal financial advisor – except smarter, cheaper, and less prone to making mistakes.

That’s Betterment. Betterment is sorta a robot financial advisor.

Here’s how it works: You invest money with Betterment, and then Betterment’s software handles the rest of your portfolio for you. Since it’s all automated on their end, Betterment is able to charge less than a typical financial advisor would. After all, there’s no labor involved.

These savings are then passed along to you. Basically, you invest money with Betterment and, then, like Vanguard, the rest is all handled for you, even included complicated strategies like tax loss harvesting.

Frankly, Betterment is arguably the best approach when it comes to a hands-off portfolio. If you want a dead-simple, impossible-to-screw-up investing approach, the best plan is to open a Betterment account and let them handle the rest.

Also highly recommended. Check it out.

Putting It All Together

Alright, alright, alright. We’ve covered a lot of ground in pursuit of the best investment plan. You learned about the importance of investing and how the number one means of building wealth is regular savings. And that the best way to build a savings habit is to automate it all, so that you don’t have to fight yourself. Just like Ulysses and the Sirens.

Then, I spoke about two different best investment plans. Both of these are simple, hands-off methods of building your portfolio. They are:

  • Vanguard’s target date retirement funds
  • Betterment

Each of these take care of all your assets so that you don’t have to. You can set them and forget them, and the fees that they charge are very reasonable.

Check ’em out: Vanguard, Betterment.

7 Top Index Funds To Buy

Looking for the top index funds to buy? You’ve come to the right place. After a couple hours of research, I’ve put together this list of top index funds. I started with a few safe-but-boring options, and then went out and bagged progressively weirder stuff.

Wihout further ado…

Vanguard’s Target Date Retirement Funds

When I started Top Financial Advisor, I did so because the subject was so broad. Finance! Money! The global economy! What could be more complex than the global economy? A whole multiverse of possible assets to invest in, debt techniques and psychology to sharpen…

This hasn’t proved to be the case. I mean, sure, everything I said is true. But when it comes to actual advice, I repeat, over and over and forever, recommendations for two products:

There is no simpler, better choice for the lazy investor. (The enterprising investor is welcome to choose differently, but he thrusts himself into a world of infinite complexity.) But, right, I will focus on the target date index funds.

Here’s how they work. You pick one that best corresponds to the date when you wish to retire. Then, the guys over at Vanguard calculate some asset allocation based on that date, and fill it with index funds.

Like Betterment, this is the sort of fund where you can set up some monthly contribution and forget about it until you need to retire. That’s the idea, anyways, and my #1 recommendation.

Vanguard 500 Index Fund

Okay, maybe that last strategy wasn’t for you. You might not trust my recommendations which, you know, stings a little bit, but it’s sort of understandable. At this point in our relationship, I’m just a guy on a blog.

If that’s the case, if I lack the authority to persuade you, let me introduce you to a quote to someone you ought to recognize:

My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s. (VFINX))
–Warren Buffet

That’s right, friends. You heard it from the sage of Ohama himself, Warren Buffet, who recommends that his wife place her money into Vanguard’s VFINX. VINX, by the way, tracks the S&P 500, so it concentrates on large-cap stocks like Apple and Exxon.

Bogleheads, investors, and whatever, they like to use this quote as ammunition, arguing that this proves that their preferred philosophy of investing is the ‘right’ one. I don’t read it this way at all, and anyone with even a passing familiarity with Graham’s, Buffet’s, or Munger’s writings would realize that. Buffet is recommending passive investing for the busy or lazy investor. Not for every investor.

That aside, this is a fine choice for one of your core holdings, and you don’t take have to take my word for it.

Vanguard Small-Cap Value Index Fund

Academic finance has evolved since the heady days of the 1970s. Back then, the capital asset pricing model was du jour. The basic idea: risk and return are two sides of the same coin. For more returns, take on more risk.

There was one, tiny, tiny issue with this idea, though. Experimentally, the relationship didn’t and hasn’t hold up. Very risky stocks have low returns, not high ones.

So PhDs everywhere went searching for other factors to explain returns. Thus, the Fama-French three factor model was born. This model extended the classical CAPM to include two more factors: small cap stocks – those representing small companies – and value stocks, those which are cheap compared to the amount of assets that they hold.

Historically, these two types of stocks, small cap and value, have commanded excess returns. Because of this, many investors “tilt” their portfolios towards these kinds of assets – meaning that they hold more of them percentage-wise than the market does as a whole.

How can you, too, tilt your portfolio to take advatage of this premium, assuming that it will continue to exist? Simple, buy some shares of Vanguard’s Small-Cap Value Index Fund (VISVX).

Vanguard REIT Index Fund

A friend of mine recently bought land out in Colorado. As far as I know, he hasn’t done anything with it yet, although it’s possible that he has plans in motion. Maybe eventually it will earn him some sort of income.

I like productive assets. I don’t like things like commodities or gold, because the underlying assets don’t produce any cashflow. In contrast, a business has earnings. Real estate has rent. Cashflow.

If you do want to invest in real estate, the first notion everyone has, I think, it to buy some property and find renters. This usually turns out okay, and sometimes spectacularly well, like in the case of Arnold Schwarzenegger.

But, supposing you don’t want to go through that hassle, what’s a guy or gal to do? You could invest in a REIT. In the same way that the other funds listed here own small shares of different businesses, REITs own small slices of different properties.

That’s how the Vanguard REIT index fund works.

The risk characteristics of this type of asset are similar to stocks, but can add diversification to a portfolio. Still, I would not allocate more than 10% of my portfolio to a REIT.

iShares MSCI Frontier 100 ETF

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There are developed markets, like United States and emerging markets, like India and China. These ought to be familiar to you.

And then there are frontier markets. These are ones you can’t yet call emerging. These are countries like Estonia and Vietnam.

iShares MSCI Frontier 100 ETF tracks these markets. They’re high risk, but with the potential of high return. Who wouldn’t want to have gotten in on China before it was China, you know? Of course, you could always end up getting into something like Argentina, which is still… Argentina, a country so messed up that Bitcoin is a less volatile alternative to their national currency.

Historically, frontier market returns have exceeded both those of developed and emerging markets. Since frontier markets represent only 1% of global market capitalization, even if I were very bullish on such markets, I’d hold less than 5% of a portfolio in one of these indexes.

AQR Style Premia Alternative

AQR has the neatest index funds around. They dive deep into the academic literature and spit out weird concoctions with the hope that these will realize excess returns.

Of these, my favorite is their “Style Premia Alternative” fund. It attempts to capture excess returns by focusing on four factors:

  • Value: You’ll remember this from what I wrote about Small-Cap Value Index Funds. The Value premium is the historical tendency of cheap stocks to outperform expensive, or growth, stocks.
  • Momentum: The idea here is similar to Newton’s second law, inertia. Just as a body in motion tends to stay in motion, a stock on the rise or fall tends to stay on the rise or fall.
  • Carry: I’m not exactly sure what factor they’re exploiting here, but perhaps it has something to do with what I’ve been calling assets-that-produce-cashflow.
  • Defensive: I mentioned earlier that empirically risky assets have not outperformed low-risk ones. In fact, the opposite. The fund attempts to exploit this value.

This fund is interesting. I would like to have invented it myself, and I would probably own some of it, except that the total annual fees on it are 2.11% (!). This is highway robbery, and I’m not at all confident that the value-add here is going to be enough to make up for it.

Market Vectors Mstar Wide Moat

Ah, and finally, that brings us to my last index fund, although as I’ve progressed through these, they’ve started to look less and less like traditional indexes and more like actively managed funds. This one is no exception.

The basic idea of Morningstar’s MOAT fund is to buy shares of quality businesses and short shares of poor businesses. Quality businesses are those that have a wide-economic moat, a concept popularized by Warren Buffet. A moat is a durable competitive advantage.

Consider, for instance, Coca Cola, one of both Buffet’s and MOAT’s holdings. Coca Cola’s durable competitive advantage is that its product isn’t fungible. Trust me. I’ve spoken to waiters at places that only serve Pepsi products. For most people, the two are emphatically not the same.

That’s Coke’s moat. Consumers are not willing to switch from it to another product, so you can have a pretty high degree of certainty that Coca Cola is going to be around for a while.

Now, the analysts over at Morningstar have a more complicated model for capturing this basic idea, but that’s the gist of it.

Most interesting about Morningstar’s MOAT fund, though, is that it only holds about 20 assets. This means that you can pretty trivially buy some of the stocks it holds for yourself. Or even all of them. You could create a DIY fund, but without the fees.

How the taxes on such a thing would turn out, I don’t know but, still, that’s kinda neat.

Putting It All Together

So, those are my 7 top index funds, or at least 7 interesting index funds. They’re ranked in roughly descending order of where I think you ought to actually put your money–my top recommendation is going with either one of Vanguard’s target date funds or Betterment.

If you’re more inclined to do-it-yourself, you could do something like combining a core holding of the next fund I mentioned, Vanguard 500 Index Fund, with some others, like the Small-Cap value fund or the frontier markets fund. You’ll probably want some international market and bonds in there, too. Maybe even a REIT.

The last two are more sorta interesting than anything I’d really recommend putting money into.

If you are leaning towards any of these, here’s the best recommendation I’ve got: do your research. Do the due diligence. No one cares as much about your money as you do.