Here’s How Bank of America Says You Should Invest in This Market

According to Bank of America, it’s still possible for investors to make money in a bear market by investing in dividend ETFs.
Updated April 11, 2024
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Earlier this year, Business Insider reported on a note that Bank of America sent to investors, giving them recommendations on how to weather the upcoming market storms. According to Business Insider, the memo stressed that shareholders are fed up with companies that don’t pay dividends, especially since those same companies have less corporate debt now than they’ve had all century.

So what does Bank of America recommend investors do to make money in a declining stock market? Invest in exchange-traded funds (ETFs), specifically ETFs that invest in companies offering high-yield dividends and stock buybacks.

Below, we’ll help you understand how to invest in ETFs and give a few recommendations on funds to invest in during the year’s final quarter.

What are ETFs?

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In simple terms, exchange-traded funds are bundles of stocks or bonds chosen by financial experts. These funds are then traded on the stock market much like individual stocks are.

Exchange-traded funds are often considered good investments for first-time investors. Since they often include the stock of hundreds of companies, they’re inherently diverse, and they can be less risky than investing in individual stocks. Just as with regular stock, you can start investing in solid ETFs by finding an online brokerage firm that offers ETFs.

In its memo to investors, Bank of America recommended finding ETFs that invest in companies that have a high level of free cash flow, pay high-yield dividends, offer stock buyback options, and have a low level of debt — such as the ETFs listed in the following slides.

Pacer U.S. Cash Cows 100 ETF (CBOE:COWZ)

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The Pacer U.S. Cash Cows 100 ETF sorts through the Russell 1000 to find 100 companies with the best free cash-flow yield. Typically, a company with an increasing free cash-flow yield can afford to pay shareholders higher dividends, and a free cash-flow yield of at least 4% indicates a company is worth considering as an investment.

Vanguard High Dividend Yield ETF (NYSEMKT:VYM)

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The Vanguard High Dividend Yield ETF specializes in companies with high dividend yields. With more than 440 stock holdings, the fund is fairly diversified and offers better value to would-be investors. As of October 2022, the Vanguard High Dividend Yield ETF paid an annual dividend yield of 2.69%.

iShares U.S. Dividend and Buyback ETF (CBOE:DIVB)

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The iShares U.S. Dividend and Buyback ETF focuses not only on companies that pay dividends, but also on companies that offer stock buybacks. (Many companies do both.) Dividends and buybacks are two solid ways for investors to make a profit on shares. Whether you hold onto your stock and receive dividends or sell it back to the company for cash, these shares can be a source of passive income.

Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD)

The Schwab U.S. Dividend Equity ETF invests in companies on the Dow Jones U.S. Dividend 100 Index, or companies that consistently pay shareholder dividends. In October 2022, the Schwab U.S. Dividend Equity ETF had an annual dividend yield of 2.83%, which is even higher than the Vanguard High Dividend Yield Index ETF.

First Trust Value Line Dividend Index Fund (NYSEMKT:FVD)

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Unlike most other dividend ETFs, the First Trust Value Line Dividend Index Fund invests equally in every company on its roster. None of its nearly 200 stocks makes up more than 0.6% of the fund’s total investments. This low-risk approach to dividend yield ensures that all your investment eggs aren’t in one high-yield basket. Even if one of its companies falls apart, the ETF itself may not suffer a huge loss.


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The Alerian MLP ETF focuses on dividend-paying energy infrastructure companies, like pipeline corporations. It invests in far fewer companies than most ETFs on this list, but its 8% dividend yield is also higher than the annual yield of most ETFs. Plus, the energy sector has seen immense growth during this otherwise volatile year; energy stocks on the S&P 500 grew nearly 40% in 2022. That’s good news for energy-centric ETFs like this one, since they should expect dividends to increase as the energy boom goes on.

Bottom line

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Interested in making extra money by investing in dividend ETFs? Start by opening an online brokerage account. An ETF broker can point you toward ETFs with solid dividend yields, allowing you to capitalize on the $7.1 trillion that Bank of America predicted companies would be shelling out to shareholders this year.


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Author Details

Michelle Smith Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.

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