Looking for investment income? I am a more active trader using day and swing trading but when I am not compounding my earnings from day/swing trading; I am feeding an income portfolio. I like to use ETFs (Exchange Traded Funds) for income investing because I don’t have the time to research individual stocks. Buying an ETF gives me exposure to multiple stocks and bonds or whatever the ETF tracks without doing much research. If you have more time, individual stocks can be more profitable but also inherit more risks, if you’re wrong.
iShares Aggregate Bond Fund (AGG)
iShares Aggregate Bond Fund (AGG) tracks the Barclay’s Capital U.S. Aggregate Index which invests mostly in investment grade bonds. AGG currently yields 4.64%.
iShares Investment Grade Corporate Bond Fund (LQD)
Looking for a little more risk in the bond market? Try iShares Investment Grade Corporate Bond Fund (LQD) which invests in Corporate Bonds and currently yields 5.61%.
iShares TIPS Bond Fund (TIP)
iShares TIPS Bond Fund (TIP) tracks Barclays Capital U.S. TIPS Index. This ETF is invested at least 95% in Treasury Inflation Protection Securities. The ETF is also a great hedge for inflation with all the new money the government is printing. TIP currently yields 6.34%.
PowerShares Dividend Achievers (PFM)
If you are a fan of the S&P High Yield Aristocrats (SDY) but want more diversification try the PowerShares Dividend Achievers which only hold 17% of it holdings in financials services sector, followed by industrial services and consumer goods: each with 15%. PFM currently yields 3.57%.
When looking at dividends, don’t forget the yield is from historical dividends and many companies such as one from the financial sector have cut their dividend, if not completely eliminating it.
Always Check Sector Holdings
An ETF like PowerShares High Yield Dividend Achievers (PEY) might grab your attention as something that you would want to invest in, but take a look at the sector holdings below:
With almost 70% of holdings in the financial sector, this ETF lacks diversification. Why not just buy a financial ETF such as the XLF (Financial Select Sector SPDR)?
As with any investment do your research. Income ETFs might be good for a source of income but usually don’t offer much for growth.
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