In recent years, ultra-high-yield exchange traded funds (ETFs) have opened the door to new possibilities for aggressive income harvesters. If you pick your ETFs carefully, you can practically turn your portfolio into a passive income machine.
Using high-yield ETFs to generate steady income is a smart strategy, but it takes time and research to build a reliable income machine. So, to save you some of the trouble, I’ve hand-picked these four fantastic funds with big yields. Furthermore, if you give these four ETFs a try, you can cover different market sectors to diversify your portfolio.
NEOS NASDAQ-100 High Income ETF (QQQI)
If you’re on the hunt for tech-sector exposure, big yield, and frequent payouts, look no further. Truly, the NEOS NASDAQ-100 High Income ETF (NASDAQ:QQQI) is an ambitious income investor’s dream fund.
First and foremost, the QQQI ETF offers a huge distribution yield (i.e., the annualized cash payout to your portfolio) of 13.92%. This positions the NEOS NASDAQ-100 High Income ETF among the most generous high-yield funds available today.
Plus, there’s another reason why the QQQI ETF is a dividend achiever. Specifically, the NEOS NASDAQ-100 High Income ETF pays its cash distributions on a monthly basis instead of making you wait three months for the next payout.
Granted, you’ll have to pay an expense ratio, which is the annualized management fee that’s automatically deducted from the fund’s share price. When it comes to the NEOS NASDAQ-100 High Income ETF, the expense ratio is 0.68%, which is slightly high but not outrageous.
Just as importantly, the NEOS NASDAQ-100 High Income ETF invests in components of the technology-heavy NASDAQ 100 index. With roughly 100 holdings, the QQQI ETF includes well-established tech winners like Apple (NASDAQ:AAPL | AAPL Price Prediction), NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), Amazon (NASDAQ:AMZN), and Meta Platforms (NASDAQ:META).
In other words, the NEOS NASDAQ-100 High Income ETF isn’t only a passive income powerhouse with a sizable yield. It’s also an easy way to diversify your portfolio across dozens of tech-market standouts, and this can add an extra layer of safety.
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
In some ways, the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ) is similar to the NEOS NASDAQ-100 High Income ETF. Yet, with the JEPQ ETF you’ll get the peace of mind that comes with prestigious management from financial giant JPMorgan Chase (NYSE:JPM).
Like the NEOS NASDAQ-100 High Income ETF, the JPMorgan Nasdaq Equity Premium Income ETF focuses on the NASDAQ 100. JEPQ has 108 stocks in its holdings, and the fund is strongly weighted toward large-cap technology stocks (Apple, Amazon, Microsoft, and so on).
Also, just like the QQQI ETF, the JEPQ ETF pays out its distributions on a monthly basis. However, the JPMorgan Nasdaq Equity Premium Income ETF has a rolling 12-month dividend yield of 11.01%, which isn’t quite as high as the NEOS NASDAQ-100 High Income ETF’s gigantic 13.92% distribution yield.
On the other hand, the JPMorgan Nasdaq Equity Premium Income ETF brings you active management from the one and only JPMorgan Chase. That’s a safety feature to consider, and the fund’s expense ratio is only 0.35%. Therefore, you might consider leveraging the expertise of a legendary asset manager with the comparatively low-fee JEPQ ETF.
NEOS S&P 500 High Income ETF (SPYI)
Mind you, I didn’t turn my portfolio into a passive income machine by only investing in NASDAQ 100 based funds. Indeed, I diversified my holdings even further with a very broad-based fund known as the NEOS S&P 500 High Income ETF (BATS:SPYI).
Like QQQI and JEPQ, SPYI pays out its distributions each and every month. Yet, unlike those other two funds, the NEOS S&P 500 High Income ETF is based on the S&P 500 rather than the NASDAQ 100.
With around 500 stocks in its holdings, the NEOS S&P 500 High Income ETF is more diversified than QQQI and JEPQ. You’ll get exposure to tech names like Apple and NVIDIA with the SPYI ETF, but you’ll also participate in the growth of non-technology-sector businesses like Coca-Cola (NYSE:KO), Bank of America (NYSE:BAC), Home Depot (NYSE:HD), and Occidental Petroleum (NYSE:OXY).
For active management and the enhanced safety that comes with wide portfolio breadth, the NEOS S&P 500 High Income ETF charges an expense ratio of 0.68%. However, the fund’s hefty 12.11% annual distribution rate more than makes up for the management fees, so SPYI is a great choice for monthly income seekers.
YieldMax MSTR Option Income Strategy ETF (MSTY)
Finally, after focusing on safety and diversification with the first three ETFs, now we can ramp up the risk-and-reward profile with a fourth fund. I’m referring to an aggressive but fascinating fund known as the YieldMax MSTR Option Income Strategy ETF (NYSEARCA:MSTY).
You won’t get much diversification with the YieldMax MSTR Option Income Strategy ETF. Instead, you’ll get an annual expense ratio of 0.99% and an eye-watering distribution rate of 143.11%.
The fund achieves this through actively trading U.S. Treasury bonds and options on Microstrategy (NASDAQ:MSTR) stock. As you may be aware, Microstrategy stock is volatile and involves a great deal of risk. You’ll get sizable monthly distributions with MSTY, but a downturn in MSTR stock could be problematic for your portfolio.
Because this fund is very risky, my passive income machine only includes a few shares of the YieldMax MSTR Option Income Strategy ETF. For a more favorable safety-and-yield mix, consider taking a larger position in SPYI, a smaller stake in QQQI and JEPQ, and a tiny position in MSTY.
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