These days, building a passive income stream does not have to mean picking individual dividend ASX shares.
ASX exchange trade funds (ETFs) make it possible to access diversified income streams in a simple, low-maintenance way. By combining different income styles, investors can spread risk while still targeting regular payouts over time.
Here are five ASX ETFs that could be worth considering for passive income investors.
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Vanguard Australian Shares Index ETF (ASX: VAS)
The first ETF to consider is the Vanguard Australian Shares Index ETF. While it is not designed specifically for income, this ASX ETF provides exposure to the broad Australian share market, which has historically been one of the more generous dividend markets globally. Banks, miners, and industrials all contribute to a steady stream of distributions, often with franking credits attached.
Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
Another ASX ETF to look at is the Betashares S&P Australian Shares High Yield ETF. It focuses on higher-yielding Australian shares, using a rules-based approach to tilt the portfolio toward companies paying above-average dividends. It offers a more income-focused alternative to broad market ETFs. It was recently recommended by analysts at Betashares.
Betashares S&P 500 Yield Maximiser Complex ETF (ASX: UMAX)
A different style of passive income comes from the Betashares S&P 500 Yield Maximiser Complex ETF. Rather than relying purely on dividends, this clever fund uses an options-based strategy over the S&P 500 to generate income. This can result in higher cash distributions than you would expect, but it also means capital growth may be more limited compared to traditional equity ETFs.
Betashares Global Royalties ETF (ASX: ROYL)
The Betashares Global Royalties ETF offers an unconventional source of passive income. The ASX ETF invests in global stocks that earn royalties from assets such as music, energy infrastructure, and intellectual property. These revenue streams are often contract-based and less sensitive to economic cycles. For income investors, the Betashares Global Royalties ETF can provide diversification away from traditional dividend sectors like banks and resources. It was also recently recommended by analysts at Betashares.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
A final ASX ETF to consider is the popular Vanguard Australian Shares High Yield ETF. It concentrates on Australian shares with higher forecast dividend yields, offering an income-focused alternative to the Vanguard Australian Shares Index ETF. But it does this with diversification in mind, limiting how much is invested in individual shares and sectors.
