Long-Term Income Options Are Available in the Right ETFs

Yield can come in many forms and that’s exactly what fixed-income investors need nowadays, especially when it comes to venturing outside of bonds. As such, there are a few exchange-traded fund (ETF) options investors can use as long-term income options.

Getting Real Estate

One fund to consider, especially if investors want exposure to real estate is the Vanguard Real Estate ETF (NYSEArca: VNQ). VNQ seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index that measures the performance of publicly traded equity REITs and other real estate-related investments.

“This is a top-heavy fund, however. Of its 183 holdings, the top 10 account for nearly 40% of the fund’s assets. Those larger holdings include the likes of American Tower (AMT), Prologis (PLD), and Equinix (EQIX),” wrote Will Ashworth in a Kiplinger article.

“There are a few restrictions keeping VNQ from being too lopsided, however,” Ashworth added. “The ETF tracks the performance of the MSCI US Investable Market Real Estate 25/50 Index, which keeps VNQ from investing more than 25% of its assets in a single stock. Further, the stocks weighted at more than 5% can’t add up to more than 50% of the portfolio. This provides diversification while limiting the exposure to a single real estate investment.”

A Small Cap Opportunity

Another income option is the WisdomTree International SmallCap Dividend Fund (DLS). DLS seeks to track the price and yield performance of the WisdomTree International SmallCap Dividend Index, which is comprised of the small-capitalization segment of the dividend-paying market in the industrialized world outside the U.S. and Canada.

“At WisdomTree, we believe that dividends provide an objective measure of a company’s health and profitability – one that cannot be affected by accounting methods or government decisions,” WisdomTree notes. “We have been weighting by dividends since WisdomTree launched its first ETFs in 2006.”

A High Yield Option

Investors who do wish to stay in bonds can opt for a high yield option like the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

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