US-Listed ETFs Sorted by Asset Class and Year-to-Date Return

Why I Own: VIG
Vanguard Dividend
Appreciation ETF
Name: Ben Tobias
Title: President
Firm: Tobias Financial Advisors
Founded: 1980
Location: Florida
AUM: $180 million
All ETFs? No
ETFR: What is your favorite ETF at the
moment?
Tobias: Well, I’ll give you a choice: DLN
[WisdomTree LargeCap Dividend Fund]
or VIG [Vanguard Dividend Appreciation
ETF]. They’re both very similar, and
they select stocks based on dividends.
ETFR: What made you decide to buy
into VIG?
Tobias: Basically, I’ve always thought
that value is more appropriate for the
kind of portfolios that we run than
growth; there’s just a little bit less volatility.
Moreover, our client base has a
lot of preretirees and retirees, and income
is a little bit more important than
just capital gains. In the long run, I truly
believe that value performs better than
growth, and that the dividend yield is
a large component of that. This is especially
so in the case of VIG in terms
of dividend increases: With VIG, the
actual dollar amount of the dividend
increases, but the percentage of the
value doesn’t necessarily go up. Plus,
over the long run, you can do a little
bit better with a little bit less volatility.
And as with most ETFs that we use,
we like to use low expense ratios.
ETFR: How does VIG help you overweight
value?
Tobias: Actually, these funds and the
DFAs [Dimensional Fund Advisors] are
almost all of our portfolios. You know,
that’s most of where we go in. My
background is in certified public accounting,
and since those days, I’ve
always been partial to the companies
that have shown consistent growth in
dividends. I feel that that’s a good corporate
responsibility that every company
should have. And I think the results
speak for themselves over time.
We do a lot of rebalancing. Rebalancing
with ETFs makes life a little bit
easier as far as doing the trades, and
sometimes setting prices, and things
along those lines. Also—though hopefully
we don’t have this for a while—
the similarities and differences between
these two ETFs mean that in the event
that the market takes large swings, we
could use these to book losses, and harvest
tax losses in accounts where that is
appropriate.
ETFR: Looking at these two funds, DLN
has a distribution yield of 2.43 percent—higher
than VIG’s 2.13 percent—
but the Vanguard product is much
cheaper at only 18 basis points.
Tobias: Yes, the pricing of the Vanguard
fund is magnificent.
Vanguard Dividend Appreciation
Equity: U.S. - High Dividend Yield
Issuer: Vanguard
Legal Structure: 1940s Act
Expense Ratio: 0.18%
AUM: $6,317.15 billion
ADV (60-Day): 685,000
Avg. Spread: 0.03%
Competing Funds:
DLN, DVY, SDY, PEY
Data as of: 06/08/11
Source: Bloomberg
June 7, 2010 – June 7, 2011
ETFR: What is it that makes you have a
preference for one over the other? And
does that preference change over time
as you’re holding the product?
Tobias: It’s like, “What comes first, the
chicken or the egg?” I’m not sure which
one of their core principles works better.
DLN is more dividend weighted,
and VIG is more based on increasing
dividends. There’s a little bit of a fundamental
difference between the two
of those, and honestly, I can’t decide.
I’ve looked at the data for both, and I
can’t decide which one I would prefer
to be in, if I had to choose one or the
other. I like them both.
ETFR: Is the focus on these two dividend
funds a new thing for you? There’s a lot
of chatter in the headlines right now
about dividends. Is this an area you’re
focusing on now, or have you been here
all along?
Tobias: I’ll say we’ve been here all
along, as far as focusing on dividends
on the large-value side. VIG is a very
new fund for us, though.
Even though we’ve got well over 40
percent of our overall portfolios in ETFs,
I have stayed away from the smaller
ones, the sectors ones, and things like
that. I’m not comfortable with them.
And again, I think it’s my background
as an auditor. The smaller you get, the
more issues you can have, and I don’t
like surprises.
ETFR: Do the sizes of these two products factor
into why you decided to go with them?
Tobias: They’re large enough; I’m not
necessarily looking for funds the size of
IVV [iShares S&P 500 Index Fund] all
the time.
J J A S O N D J F M A M J
2010
2011
24.39%
8 ETFR • July 2011