One of the first questions I think many income investors ask about exchange-traded funds (ETFs) is simple.
How much passive income can they actually produce?
The answer depends on the type of ETF you choose. Some focus purely on yield, while others aim to balance income with diversification and stability.
To give you a clearer idea, let's look at three popular income-focused ETFs and what a $100,000 investment in each could generate.
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Vanguard Australian Shares High Yield ETF (ASX: VHY)
The Vanguard Australian Shares High Yield ETF is one of the most well-known income ETFs on the ASX.
It focuses on high-dividend-paying Australian shares, which means it has significant exposure to banks and resource stocks.
Its top holdings include BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and ANZ Group Holdings Ltd (ASX: ANZ).
That concentration can lead to solid income, but it also means returns are influenced by how those sectors perform.
With a trailing dividend yield of around 3.9%, a $100,000 investment would generate approximately $3,900 per year in passive income.
Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
The Betashares S&P Australian Shares High Yield ETF takes a slightly different approach.
It also focuses on high-yielding Australian shares, but places a strong emphasis on consistent income and monthly distributions, which can be appealing for investors seeking regular cash flow.
Its largest holdings currently include NAB, Westpac, ANZ Bank, BHP Group, and Woodside Energy Group Ltd (ASX: WDS).
The HYLD ETF has been paying around 11.9 cents per share each month since inception last year, which annualises to approximately $1.42 per share and equates to a yield of about 4.4% at current prices.
At that level, a $100,000 investment would generate roughly $4,400 per year, or about $366 per month in passive income.
Vanguard Diversified Income ETF (ASX: VDIF)
The Vanguard Diversified Income ETF offers a more balanced approach.
Instead of focusing only on high-yield shares, it blends Australian equities, global shares, and fixed income investments.
Its largest exposures include the Vanguard Australian Shares High Yield ETF, Vanguard FTSE All-World High Dividend Yield ETF (LSE: VHYL), and a range of international and fixed interest funds.
This diversification can help smooth income and reduce reliance on any single sector or market.
With a dividend yield of around 3.7%, a $100,000 investment would generate approximately $3,700 per year in passive income.
Foolish takeaway
A $100,000 investment in income-focused ETFs could generate roughly $3,700 to $4,400 per year, depending on the strategy you choose.
For me, the more important question isn't just how much income you can generate today, but how sustainable that income is over time.
That's where diversification, quality, and long-term thinking start to matter just as much as the yield itself.
