A good starting point for a beginning investor is to invest in a low-cost index fund that includes the top 500 companies in the USA. This would be an index fund of large-cap stocks in the S&P 500. One such ETF is the Vanguard S&P 500 ETF (ticker: VOO) with an expense ratio of 0.03%. You would recognize the top holdings, including Microsoft, Apple, Amazon and Facebook.
But this strategy misses a very large and profitable portion of the market. The segment is called “mid cap stocks.” These are generally good-sized companies, but many of them would not be recognized by the beginning investor. So, for example, Vanguard’s VO ETF includes companies like Twitter, Ball Corp, Global Payments and Digital Realty Trust.
Two good mid-cap ETFs are Vanguard’s VO and iShares Core S&P Mid-Cap ETF (IJH). Both have reasonable expense ratios, modest investment turnover and a very large base of investors. Both pay a dividend, but the dividend yield will be less than what you could get from the large cap investment. This is because mid-sized companies are less concerned with paying dividends and are generally more concerned with reinvesting in the business to grow it. Good midcap stocks can become large caps, so buying a slice of this portion of the market makes good sense for a diversified portfolio.
Wallmine link for IJH: https://wallmine.com/etf/IJh
Here are some dividend graphs using ETFREPLAY.COM: