Looking for truly passive income in 2024 with just a click of a button? Look no further! Today I’m going to show you how to earn passive income with these 3 ETFs in 2024.
Each of these ETFs give you a different style of passive income, so feel free to take your pick!
SCHWAB U.S. DIVIDEND EQUITY ETF™ (SCHD)
Basic Facts:
ETF Type: Large Cap Equity
Index Benchmark: Dow Jones U.S. Dividend 100™ Index
Dividend Yield (TTM): 3.485%
Net Assets: $52.04bn
Net Expense Ratio: 0.06%
Breakdown:
The Pro’s: SCHD is one of my favorite ETFs for passive income in 2024. First, it is one of the highest in its class in net asset value and has unmatched liquidity. It also boasts an extremely low expense ratio of 0.06% which is near impossible to compete with. Finally, it has managed to track a basket of stocks that creates a respectable annual dividend yield of 3.485%. This, coupled with natural price appreciation, gives a strong dividend tilt to your total return while not sacrificing price appreciation.
The Con’s: SCHD is an equity ETF that invests mostly in higher dividend paying common stock, but does not chase yield. This means that it excludes certain types of stocks that are entirely distribution/yield based, such as REITs or bond ETFs.
Bottom Line: SCHD is the gold standard for conservative passive income coupled with price appreciation.
ISHARES BROAD USD HIGH YIELD CORPORATE BOND ETF (USHY)
Basic Facts:
ETF Type: High Yield Bond
Index Benchmark: ICE BofA U.S. High Yield Constrained Index
Dividend Yield (30-Day SEC Yield): 7.83%
Net Assets: $12.1bn
Net Expense Ratio: 0.08%
Breakdown:
The Pro’s: In the realm of high yield bond funds, look no further than USHY. With a dividend yield of 7.83% and a low expense ratio of only 0.08%(!), you will be hard pressed to find a more efficient bond ETF. This ETF is perfect for risk tolerant investors looking to maximize their monthly income, but not erode gains via expense ratios.
The Con’s: Like all bonds ETFs, USHY is sensitive to interest rate fluctuations. This will be a common issue in 2024 with the Fed set to lower interest rates. Also, investors in USHY should not expect much, if any, price appreciation. Near 100% of your gains will come from distributions derived from interest income in the ETF.
Bottom Line: USHY is great for more aggressive passive income with high distribution yields.
VANGUARD REAL ESTATE INDEX FUND (VNQ)
Basic Facts:
ETF Type: US REIT
Index Benchmark: MSCI US Investable Market Real Estate 25/50 Index
Dividend Yield (TTM): 4.01%
Net Assets: $33.59bn
Net Expense Ratio: 0.12%
Breakdown:
The Pro’s: VNQ is one of my favorite REIT ETFs with its extremely high net assets and low expense ratio. This more conservative REIT ETF also boasts a respectable dividend yield of about 4%. This REIT ETF is my go-to pick for an investor looking for conservative distributions and some price appreciation. It is also great for an investor looking for exposure to real estate without the headache!
The Con’s: VNQ’s list of con’s is quite small in my opinion, but I’ll try! As it is composed of REITs, REITs do not always maximize shareholder distributions. Many of them reinvest in the company by buying more properties, paying down debt, etc. Therefore, this can limit your distributions versus a bond fund, but also provides more price appreciation.
Bottom Line: VNQ is perfect for investors who want exposure to real estate, conservative passive income, and moderate price appreciation.
DISCLAIMER – THIS ARTICLE IS NOT FINANCIAL ADVICE. THIS ARTICLE DOES NOT CONSTITUTE A BUY, SELL, OR HOLD RECOMMENDATION ON ANY SECURITY MENTIONED HERE. THIS ARTICLE CONSTITUTES MY OPINION AND NOT A STATEMENT OF FACT. ALL INFORMATION REGARDING THE FINANCIAL SECURITIES MENTIONED IS ACCURATE AS OF JANUARY 16, 2024. DO YOUR OWN RESEARCH.