What is the best ETF for passive income?
Chevron Corporation (NYSE:CVX), one of the best dividend stocks for passive income, has been growing its dividends for the past 37 years consistently. The company offers a quarterly dividend of $1.63 per share and has a dividend yield of 3.37%, as of March 20.
- SPDR S&P Dividend ETF (SDY)
- Vanguard High Dividend Yield ETF (VYM)
- WisdomTree U.S. Quality Dividend Growth Fund (DGRW)
- iShares iBoxx $ High Yield Corporate Bond ETF (HYG)
- JPMorgan Equity Premium Income ETF (JEPI)
- Vanguard Dividend Appreciation Index Fund ETF (VIG)
| ETF | Assets Under Management | Expense Ratio |
|---|---|---|
| Vanguard Information Technology ETF (VGT) | $70 billion | 0.10% |
| VanEck Semiconductor ETF (SMH) | $16.3 billion | 0.35% |
| Invesco S&P MidCap Momentum ETF (XMMO) | $1.6 billion | 0.34% |
| SPDR S&P Homebuilders ETF (XHB) | $1.8 billion | 0.35% |
Chevron Corporation (NYSE:CVX), one of the best dividend stocks for passive income, has been growing its dividends for the past 37 years consistently. The company offers a quarterly dividend of $1.63 per share and has a dividend yield of 3.37%, as of March 20.
| Symbol | Name | Dividend Yield |
|---|---|---|
| PEX | ProShares Global Listed Private Equity ETF | 12.14% |
| SPYI | NEOS S&P 500 High Income ETF | 12.10% |
| BTF | Valkyrie Bitcoin and Ether Strategy ETF | 12.08% |
| SDIV | Global X SuperDividend ETF | 12.06% |
One of my favorite vehicles for generating passive income is investing in exchange-traded funds (ETFs). I own several income-focused ETFs, including the JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI). I routinely buy more shares of the ETF, which offers a lucrative monthly income stream.
Most ETF income is generated by the fund's underlying holdings. Typically, that means dividends from stocks or interest (coupons) from bonds. Dividends: These are a portion of the company's earnings paid out in cash or shares to stockholders on a per-share basis, sometimes to attract investors to buy the stock.
| Fund (ticker) | YTD performance | Expense ratio |
|---|---|---|
| Vanguard S&P 500 ETF (VOO) | 10.4 percent | 0.03 percent |
| SPDR S&P 500 ETF Trust (SPY) | 10.4 percent | 0.095 percent |
| iShares Core S&P 500 ETF (IVV) | 10.4 percent | 0.03 percent |
| Invesco QQQ Trust (QQQ) | 8.6 percent | 0.20 percent |
| Ticker | Fund | 10-Yr Return |
|---|---|---|
| VGT | Vanguard Information Technology ETF | 19.60% |
| IYW | iShares U.S. Technology ETF | 19.58% |
| IXN | iShares Global Tech ETF | 18.20% |
| IGM | iShares Expanded Tech Sector ETF | 17.95% |
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.
How to make $1,000 a month passive income?
- Buy US Treasuries. U.S. Treasuries are still paying attractive yields on short-term investments. ...
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WisdomTree U.S. Quality Dividend Growth ETF (DGRW)
One of the best run dividend ETFs in the world has the added advantage of paying monthly dividends. DGRW's focus on both quality and growth characteristics makes it ideally suited for most portfolios even though the dividend yield is on the lower end.
The answer depends on several factors when deciding how many ETFs you should own. Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.
| FUND(TICKER) | EXPENSE RATIO | 10-YEAR RETURN AS OF APRIL 1 |
|---|---|---|
| Vanguard Growth ETF (VUG) | 0.04% | 15.07% |
| iShares Russell 1000 Growth ETF (IWF) | 0.19% | 15.78% |
| iShares S&P 500 Growth ETF (IVW) | 0.18% | 14.34% |
| Schwab U.S. Large-Cap Growth ETF (SCHG) | 0.04% | 15.95% |
You can make money from ETFs by trading them. And some ETFs pay out the money the ETF makes to investors. These payments are called distributions.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
- “Spyders” = S&P 500 ETF.
- “DIAmonds” = Dow Jones Industrial Average ETF.
- “Qubes”** = Nasdaq 100 ETF.
Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.
Do I pay taxes on ETF if I don't sell?
At least once a year, funds must pass on any net gains they've realized. As a fund shareholder, you could be on the hook for taxes on gains even if you haven't sold any of your shares.
Both have the same expense ratio and similar dividend yield, so you should choose whichever one you prefer based on the fund's strategy. If you only want to own the biggest and safest companies, choose VOO. If you want broader exposure and more diversification, choose VTI.
Mutual funds and ETFs may hold stocks, bonds, or commodities. Both can track indexes, but ETFs tend to be more cost-effective and liquid since they trade on exchanges like shares of stock. Mutual funds can offer active management and greater regulatory oversight at a higher cost and only allow transactions once daily.
The single biggest risk in ETFs is market risk.
Vanguard S&P 500 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
