Dividend yield funds offer better downside protection, say experts

The higher dividend yields of these portfolios cushion the fall during market corrections

Due to a prolonged period of underperformance lasting until 2020, investors had lost interest in the dividend yield category of funds. Of late, however, their performance has picked up, leading to revival in interest.  

“Dividend yield funds, which underperformed in earlier years, are now gaining from the good performance of old economy stocks such as steel and infrastructure,” says Arun Kumar, head of research, mutual funds, Fundsindia.com.

Where do they invest?

Dividend yield funds invest primarily in stocks that have a higher dividend yield. Dividend yield is a stock’s dividend per share divided by its current market price. A