What is CID? (Pros, Cons, and Strategies)

Investors looking for a balanced approach to international markets often consider ETFs that offer exposure to high-dividend, low-volatility stocks. One such option is the CID (VictoryShares International High Div Volatility Wtd ETF). This article will explore what CID is, its advantages and disadvantages, and the strategies you can use to maximize its potential in your investment portfolio.

What is CID?

CID stands for VictoryShares International High Div Volatility Wtd ETF. This ETF seeks to provide investors with a combination of high dividend yields and low-risk exposure to international markets.

CID tracks the NASDAQ Victory International High Dividend 100 Volatility Weighted Index, which includes international companies that offer high dividends and exhibit lower volatility.

Unlike conventional high-dividend ETFs, which often focus on high yields alone, CID incorporates a volatility weighting to reduce overall portfolio risk. This dual focus is designed to provide more stable returns while still offering attractive income.

Key Features of CID

• Companies with a higher dividend yield relative to others in the market
• A volatility weighting scheme designed to reduce risk
• Exposure to a diverse array of international markets

Companies selected for CID typically have a track record of stable dividends and lower price volatility compared to broader international markets.

CID Composition

CID comprises a well-diversified mix of international stocks from various sectors, including financial services, consumer goods, telecommunications, and utilities. The ETF includes companies from established markets in Europe, Asia, and other regions, with a low proportion of tech stocks and startups.

Pros of CID

Income Stability

With a focus on high-dividend-paying companies, CID offers stable income for investors seeking consistent dividend payouts. The volatility weighting further ensures that the investment is less susceptible to market swings, providing a more predictable income stream.

International Diversification

Investing in CID gives you exposure to multiple international markets, helping diversify your portfolio beyond domestic boundaries. This international diversification can mitigate the risks associated with investing solely in one country's market.

Reduced Risk Through Volatility Weighting

The volatility weighting feature helps reduce the overall risk of the ETF. By weighing stocks based on their volatility, CID aims to maintain a lower risk profile compared to other high-dividend international ETFs.

Cons of CID

Lower Capital Appreciation

While CID focuses on stable income and reduced risk, it does not prioritize capital appreciation. Investors seeking high-growth opportunities may find CID less attractive, as it often includes well-established companies with lower growth potential.

Currency Risk

Investing in international markets introduces currency risk. Changes in exchange rates can impact the value of the dividends received and the ETF’s overall performance.

CID Investment Strategies

CID is primarily suited for investors looking for stable income and low-risk exposure to international markets. Here are a few strategies on how to incorporate CID into your portfolio effectively:

Long-term Income Strategy

Given its focus on high dividends and reduced volatility, CID is best suited for long-term investors seeking steady income. Holding CID for an extended period allows you to benefit from consistent dividend payouts and the inherent stability offered by the volatility weighting.

Portfolio Diversification

CID can be used to diversify a primarily domestic portfolio. Adding CID offers exposure to international markets and industries typically underrepresented in U.S.-centric investments. This diversification can help better manage overall portfolio risk.

Reinvestment for Compound Growth

To maximize returns, consider reinvesting the dividends received from CID. Through dividend reinvestment, you can take advantage of the compound effect, gradually increasing your investment's value over time, enhancing both income and capital appreciation.

Conclusion

CID offers a compelling option for investors seeking high dividend yields with reduced risk across international markets. While it may not provide significant capital appreciation, its stability and income potential make it a valuable component of a diversified investment strategy. By understanding its pros and cons and applying the right investment strategies, you can make the most out of CID in your investment portfolio.