Which Index Funds Pay Monthly Dividends?
Need to know which index funds pay monthly dividends? Learning about index funds that pay out monthly dividends can help to maximize your investment. Dividends help increase earnings, and the compounding nature of the monthly payout helps the principal grow. These index funds tend to be bond funds. An AAA rating signifies the highest credit worthiness, which results in the lowest risk. For simplicity, we will look at funds within the Vanguard family of funds that fit this bill.
- Total Bond Market Index Fund (VBMFX). This fund invests in 3,000 individual bonds. It has an expense ratio of 0.22% and a minimum investment of $3,000, with an average maturity of 6.6 years. This index fund has 76.8% of its holdings in AAA-rated bonds and has a risk rating of average.
- Long-Term Bond Index Fund (VBLTX). This fund invests in bonds with an average maturity of 22.8 years. This index fund invests 45% of its holdings in AAA-rated bonds while 23.6% are allocated to BBB-rated bonds.
- Intermediate Bond Index Fund (VBIIX). This index fund invests in bonds with an average maturity of 7.5 years. This fund received a five-star rating from Morningstar, which is linked below. It invests 56% of its holdings in AAA bonds, with 20% and 19% allocated to A-rated and BBB-rated funds respectively.
- Short-Term Bond Index Fund (VBISX). This fund invests in bonds that have an average maturity 2.8 years. This fund invests 76% of its holdings in AAA-rated bonds and has 7.3% allocated to BBB-rated bonds. This fund has an expense ratio of 0.18%.
Index funds offer the lowest expenses and, combined with monthly dividend distributions, provide an excellent buffer against the ups and downs of the market. Although the above example was strictly a Vanguard set of funds, most fund families have their own set of index funds that pay monthly dividends. If you decide to look into another fund family, simply check the distribution tab on the website after selecting all of the funds. This will inform you of which index funds pay monthly dividends. Whether you select Vanguard or not is not important. The important thing is to invest wisely.