Yields have declined over the past several decades, driving some investors into high-yielding stocks to shore up their income. Fund providers have responded to this desire with rules-based strategies specifically focused on yield. But it's important to remember that high-yielding stocks can be riskier than the overall market. Therefore, the risk management aspect of yield-centric funds becomes an important part of their investment merit. Furthermore, investors should not lose sight of the basic principles that have led to improved long-term performance. Low fees and portfolio diversification should not be abandoned in the quest for yield.
Vanguard International High Dividend Yield ETF (VYMI) strikes a careful balance between risk management and yield, earning a Morningstar Analyst Rating of Bronze.
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Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.