The Reason I’m Investing in These 3 High-Dividend ETFs for Passive Income

Achieving financial independence is a goal that many people aspire to, and one effective strategy to reach this milestone is by growing passive income to cover recurring expenses. This approach allows individuals to have more control over their financial future and reduce reliance on traditional sources of income. One individual who is actively pursuing this goal is taking a multipronged approach that includes investing in dividend stocks, exchange-traded funds (ETFs), and real estate.

One key aspect of this individual’s strategy is to invest in dividend ETFs to grow passive income. Dividend ETFs are a popular choice for investors looking to generate a steady stream of income while also benefiting from potential capital appreciation. The individual is loading up on several dividend ETFs, including JPMorgan Nasdaq Equity Premium ETF, SPDR Portfolio High Yield Bond ETF, and iShares Core U.S. Aggregate Bond ETF, to diversify their income sources and increase overall portfolio stability.

The JPMorgan Nasdaq Equity Premium ETF takes a unique approach to generating income by writing out-of-the-money call options on the Nasdaq-100 Index. This strategy allows the fund to generate options premium income each month, which is then distributed to investors. With a dividend yield of 9.5% over the past 12 months, this ETF offers a higher yield compared to U.S. high-yield junk bonds and the U.S. 10-year Treasury bond. Additionally, the fund provides price appreciation potential through its equity portfolio, offering investors the best of both worlds in terms of income and growth potential.

On the other hand, the SPDR Portfolio High Yield Bond ETF provides exposure to the high-yield (junk) bond market, which carries a higher risk of default due to the weaker financial profiles of the issuing companies. However, the fund holds a diversified portfolio of over 1,900 bonds across sectors, issuers, and maturity, which helps reduce the default risk. With a distribution yield currently above 7%, investors are compensated for assuming the higher risk profile of these bonds while benefiting from a relatively steady passive income stream.

Lastly, the iShares Core U.S. Aggregate Bond ETF focuses on investment-grade bonds, which have a lower risk of default compared to high-yield bonds. The fund primarily holds U.S. government-backed debt, such as treasuries and mortgage-backed securities, along with bonds from industrial, financial, and utility issuers. While the yield of this ETF is lower at 3.6% over the past 12 months, it offers a stable income stream thanks to the low-risk profile of the bonds it holds.

By strategically investing in a mix of dividend ETFs, this individual is diversifying their income sources and reducing risk while working towards their goal of financial independence through passive income. This approach allows them to steadily build their portfolio and move closer to achieving financial freedom. As they continue to load up on dividend ETFs and other income-generating assets, they are taking proactive steps to secure their financial future and create a sustainable source of passive income.