Many investors -- especially those close to retirement -- want to collect income. They don’t care so much about growth.
Asset managers know this; it’s exactly why balanced funds are so popular. These funds provide dependable income without a whole lot of volatility. They’re typically split pretty evenly between bonds and stocks, and the stocks they do own always pay dividends.
There’s just one problem. These funds can come with big expenses. Some charge investors more than 2% annually, which can be a big drag on returns.
There’s a better way. These ETFs can provide good income, low volatility, and low management fees.
Take the BMO High Yield U.S. Corporate Bond ETF (TSX:ZHY). This ETF has invested in 451 different U.S.-based high-yield bonds and has more than $1 billion in assets.
It pays a dividend of 5.8% and charges investors a 0.62% management expense ratio. Junk bonds are volatile, but history has shown diversification does significantly reduce the sector’s risk.
Another ETF that pays generous dividends is the iShares Diversified Monthly Income ETF (TSX:XTR). It has a management expense ratio of 0.57%, and pays a 5.25% dividend on a monthly basis. This ETF owns a number of underlying ETFs, which cover asset classes like preferred shares, REITs, and corporate bonds.
Finally, there’s the BMO Equal Weight REITs Index ETF (TSX:ZRE), which holds approximately equal positions in 19 different Canadian REITs. It currently yields 5.4% and pays a $0.088 per share monthly dividend. This ETF has a management expense ratio of 0.61%.
