Re: REVISED QUESTION
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One thing I think I read is that in an ETF, you get a monthly dividend based on the companies in the portfolio who paid a dividend that month. Is this accurate?
I guess my question is which of the two would be a better income generator?
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It shouldn't make a difference. For instance, SPY and VFINX (Vanguard's S&P 500 fund) both pay dividends on a quarterly basis. The difference in the yield reflects the differences in the expense ratios.
Index fund advantages:
- Can purchase fractional shares
- Can have dividends/gains automatically reinvested
- No commissions - easier to setup recurring investments
Unless you are looking to actively trade various indices, mutual funds are probably the way to go. The expense ratio on the VFINX is slightly higher, but you incur no commissions so it washes.
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