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ETFs That Boost Your Income

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Not every income-oriented investor can commit to a 10-year investment. But if you can, there is a strategy that uses exchange-traded funds (ETFs) that may earn you more income than 10-year Treasuries, which recently had an annual yield of just 2.2%.

Although the ETFs are likely to be more volatile than Treasuries, they are likely to provide capital appreciation in addition to income if you hold them for 10 years, as similar investments have done over past decades.

To try this strategy, consider allocating up to 5% of your fixed-income portfolio to any one or several of the following ETFs, depending on how each fits with your existing fixed-­income investments and risk tolerance.

iShares Edge MSCI Minimum Volatility Emerging Markets ETF (EEMV) invests in shares of relatively low-risk dividend-paying companies in emerging-market countries such as China and Chile. Since its 2012 inception, it has offered a much higher yield and better overall performance than its benchmark index. Recent yield: 2.5%.

Vanguard FTSE Developed Markets ETF (VEA) focuses on shares of foreign, dividend-paying large companies mostly in Europe and Japan. Recent yield: 2.7%.

Schwab US Dividend Equity ETF (SCHD) invests in stocks of large, consistently profitable US companies that have paid dividends for at least 10 consecutive years. Recent yield: 2.8%.

Real Estate Select Sector SPDR ETF (XLRE) invests in shares of about 30 companies, mostly large real ­estate firms that own income-producing commercial properties such as malls, apartment and office buildings, and distribution warehouses. Many of these companies are structured as real estate investment trusts (REITs) that pay out most of their profits as dividends. Recent yield: 3.2%.

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Source: Ben Johnson, CFA, editor of the ETFInvestor newsletter and director of global ETF research at Morningstar Inc., Chicago. Morningstar.com Date: August 1, 2017 Publication: Bottom Line Personal
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