Dividend investing is the most popular choice of passive income seekers. While such investors are mostly looking for good dividend yields and franking credits, alongside, ETFs offer a wide range of options to passive income aspirants.
Exchange Traded Funds (ETFs) are becoming popular globally as these can help in building a passive income strategy. So much so that they are now able to match active investing. After considering the management costs and potential transaction fees, investors can derive a passive income stream to obtain regular and attractive cash flow throughout the year.
Easier said than done, with several ETFs in the market to choose from, it becomes crucial to analyse and identify right ETFs to add to your portfolio. While some ETFs enable significantly higher yields, some others offer franking credits to enhance after tax income.
Although most of the seasoned investors have the first criteria of selecting a theme based ETF, depending upon the sector in favour, fixed income ETFs are fast catching up.
Bond ETFs, which had been so far ruled largely by big investment groups and banks is witnessing increasing inflows. This is driving new players to come to the fore. Whereas only one of the 20 biggest bond funds in the world was an ETF ten years ago, today five of the largest bond funds are ETFs.
Most of the ETFs following a set mechanism of tracking indices are now shaping the markets and investments. The liquidity improving significantly with the advent of bond ETFs is just a secondary part of the transformation.
Before jumping to invest in any of the wide range of ETFs being offered, setting a specific goal of passive income to be generated is crucial. The investment in properly identified ETF for passive income can prevent many a pitfalls. Right kind of ETF can offer diversification, risk tolerance matching your profile, time horizon and sustainability.
With several Australian ETFs available for varied set of investors, here we list three such ETFs, which can suit a wider section of investors looking to have a regular stream of passive income.
Betashare Global Robotics and Artificial Intelligence ETF (RBTZ)
Betashare Global Robotics and Artificial Intelligence provides a cost-effective exposure to the leading companies likely to take advantage from the growing adoption and utilisation of Robotics and A.I. RBTZ invests in companies involved production or use of Robotics and AI products and services.
Annual yield 4.99%. Management Fee 0.57%
(As per ASX)
Vanguard Australian Shares High Yield ETF (VHY)
Vanguard Australian Shares High Yield ETF (VHY) is an exchange traded fund that aims to track the return of the FTSE Australia High Dividend Yield Index before taking into account fees, expenses and tax.
Annual yield 5.27%. Management Fee 0.25%
(As per ASX)
BetaShares Australian Composite Bond ETF (OZBD)
BetaShares Australian Composite Bond ETF is formed to be a core portfolio allocation for fixed income. It tracks the performance of an index (before fees and expenses), which offers exposure to a diversified portfolio of Australian corporate and government bonds.
Annual yield 3.88%. Management Fee 0.19%
(As per ASX)
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