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The nice thing about investing in ETFs, or exchange-traded funds, is that they make the process of building and maintaining a portfolio pretty simple.
It’s important to maintain a diverse portfolio to protect yourself from broad market downturns, as well as sector-specific meltdowns. If you put 80% of your assets into tech stocks, for example, and that sector crashes, you could be looking at serious losses.
ETFs make it easy to diversify because these funds are inherently diverse within themselves. But not all ETFs adopt the same strategy.
Some ETFs have the goal of rewarding investors with steady income over time. If the idea of that sounds good to you, here are three high-yield ETFs you may want to buy today and hang onto indefinitely.
1. The Vanguard High Dividend Yield ETF (VYM)
Vanguard has long been hailed as a pioneer in the ETF space, and its Vanguard S&P 500 ETF (VOO) tends to be a favorite among everyday investors. But if you’re looking for more income in your portfolio, there’s another Vanguard ETF you may want to buy — the Vanguard High Dividend Yield ETF (VYM).
The Vanguard High Dividend Yield ETF tracks companies that have a long history of not just paying dividends, but growing their dividends. Another nice thing about VYM is that it’s not heavily concentrated in any particular market sector, allowing it to check off the diversification box.
Plus, Vanguard is known for its low-cost ETFs, and VYM is no exception. A low expense ratio means you get to keep more of your money and lose less to fees.
2. The Schwab U.S. Dividend Equity ETF (SCHD)
If you’re looking for steady income in your portfolio, another ETF worth exploring is the Schwab U.S. Dividend Equity ETF (SCHD). What SCHD does is track the Dow Jones U.S. Dividend 100 Index, which consists of quality companies with at least 10 years of consistent dividend payments.
Not only do the companies SCHD invests in have a strong dividend-paying history, but they’re screened for financial growth. This means they’re more likely to raise their dividends than cut them going forward.
Like VYM, SCHD has a very low expense ratio. You won’t have to worry about costly fees eating into your returns.
3. The JPMorgan Equity Premium Income ETF (JEPI)
The JPMorgan Equity Premium Income ETF (JEPI) is a good option for investors who want steady portfolio income and are willing to take on a bit more risk to get it. What sets JEPI apart from the funds above is that it sells options on the stocks it already owns to generate extra income, which it then distributions to its investors.
JEPI consists of large-cap U.S. stocks, which means you’re investing in established businesses. Of course, one general drawback of investing in funds with a strategy like JEPI’s is that your upside may be limited during a strong market. On the other hand, funds like JEPI tend to yield better returns in an average or flat market.
One final thing to consider, though, is that JEPI has a considerably larger expense ratio than VYM and SCHD. The reason is that it’s a more actively managed fund than the other two. But you may find that the upside JEPI offers is worth the slightly higher cost.