The Australian share market can be a great place to generate a passive income. However, if you're not confident about stock picking, it can be intimidating.
But don't let that stop you from earning income from the share market.
Especially when there are ASX exchange-traded funds (ETFs) available that can make your life easy by giving you access to large groups of dividend-payers with a single click of a button.
Three such ASX ETFs that could be worth considering are listed below. Here's what you need to know about them:
BetaShares S&P 500 Yield Maximiser (ASX: UMAX)
The first ASX income ETF for investors to look at is the BetaShares S&P 500 Yield Maximiser.
This fund gives investors access to the top 500 companies listed on Wall Street. These are many of the world's most recognisable brands and the titans of our age.
However, with a clever covered call strategy, the actively managed fund has the potential to earn quarterly income that is significantly greater than the dividend yield of the underlying share portfolio.
For example, at the last count, its units were providing income investors with a trailing 4.8% distribution yield. This is much greater than the current average yield (1.35%) of the S&P 500 index.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
Another ASX income ETF that could be used to generate passive income is Vanguard Australian Shares High Yield ETF.
It gives investors access to a group of ASX-listed shares that have higher-than-average forecast dividends based on broker research.
Importantly, it does this with diversity in mind. While you will inevitably be buying a slice of miners and banks such as BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA), you won't just end up owning these types of companies. The ETF has strict limits on the proportion it will invest in any one industry or company.
At present, the Vanguard Australian Shares High Yield ETF has 72 holdings and trades with a dividend yield of approximately 5.2%.
Vanguard Australian Shares Index ETF (ASX: VAS)
Finally, income investors may also want to check out the very popular Vanguard Australian Shares Index ETF.
It is a low-cost, diversified, index-based exchange-traded fund that aims to track the ASX 300 index.
The ASX 300 index is home to Australia's leading 300 listed companies. This includes the big players like BHP and CBA but also smaller names such as Dicker Data Ltd (ASX: DDR) and Rural Funds Group (ASX: RFF).
And while not all companies in the fund pay dividends, the ETF still trades with an attractive dividend yield of 3.9% at present.
