If you're not keen on stock picking but want to build an income portfolio, then ASX exchange-traded funds (ETFs) could be the answer.
Instead of having to pick individual stocks to buy, ETFs allow investors to snap up large groups of income shares in one easy investment.
This can provide near instant diversification for a portfolio, reducing risk and removing the stress of deciding which shares to buy.
But which ASX ETFs would be good for income? Three quality options to consider buying are listed below:
BetaShares S&P 500 Yield Maximiser (ASX: UMAX)
The first ASX ETF for income investors to look at buying is the BetaShares S&P 500 Yield Maximiser.
It is an actively managed fund that provides investors with access to the top 500 companies listed on Wall Street's S&P 500 index. It uses a covered call strategy to target quarterly income that is significantly greater than the dividend yield of the underlying share portfolio.
For example, thanks to the clever way that this strategy works, its units currently trade with an attractive 4.5% distribution yield. This is far greater than the average yield on the S&P 500 index at present.
Betashares FTSE RAFI Australia 200 ETF (ASX: QOZ)
A second ASX ETF to look at for passive income is the Betashares FTSE RAFI Australia 200 ETF. It was recently recommended by BetaShares as a way to counter falling dividend yields.
This ETF uses a fundamental indexing strategy designed to screen stocks based on their merits rather than their market capitalisation. It judges ASX shares on their sales, cash flow, dividends, and book value. After which, it ranks these stocks and invests in them accordingly.
BetaShares points out that this strategy ultimately leads to investors holding stocks that have healthier balance sheets and a greater capacity to pay dividends. At present, the Betashares FTSE RAFI Australia 200 ETF currently trades with a trailing dividend yield of 4.6%.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
A third and final ASX ETF for passive income investors to look at is the Vanguard Australian Shares High Yield ETF.
This popular ETF offers investors low-cost exposure to a group of 70+ ASX shares that analysts are forecasting to have larger than average dividend yields. This includes all the well-known big dividend payers such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), as well as smaller names.
The Vanguard Australian Shares Index ETF currently trades with a trailing dividend yield of 5%.
