Smart Investment Strategies: 3 ETFs for Monthly Dividends
Written on
Understanding Investment Trends
The COVID-19 pandemic sparked a meme stock phenomenon that skewed many people's perceptions of standard investing practices. Captivated by stories of rapid wealth accumulation, numerous novice traders placed risky bets on options and penny stocks, often resulting in significant financial losses as their pandemic relief funds vanished.
Here's a crucial insight: traders who frequently engage in high-risk activities and invest in low-cap stocks typically face long-term losses. So, what should a regular investor do with cash that's losing value to inflation?
Let’s dive into several lower-risk ETFs that consistently provide monthly cash payouts.
The Shift from Bonds to ETFs
Back in the 1980s, bonds were a popular investment choice, but their appeal has waned over recent years. Many investors find themselves distracted by the latest trends—like the current enthusiasm for artificial intelligence or the Bitcoin surge. However, I've recently turned my focus to bonds, a sentiment echoed by numerous institutional investors and pension funds that are shifting their strategies from stocks to bonds.
If you're curious about investing in monthly dividend bonds but are unsure where to begin, let me share my approach and suggest some options based on varying risk tolerances.
How I Invest in Bonds
I utilize Exchange Traded Funds (ETFs) to purchase bonds. ETFs are liquid assets that can be bought and sold on the stock market, similar to shares of major companies like Apple or Amazon. With platforms like Robinhood offering fractional trading, you can start investing with as little as $1 daily.
Below are examples of bond ETFs I personally own, each representing different risk levels. It's important to note that these examples are meant for educational purposes; I am not a financial advisor, and I recommend consulting a qualified professional before making any investment decisions.
Exploring Low-Risk Bond ETFs
If your goal is to securely park your cash while earning dividends, the SPFR Bloomberg 1–3 Month T-Bill ETF (ticker: BIL) might be an ideal choice. This ETF invests in ultra-short-term U.S. government debt, making it one of the safest options available, with minimal price fluctuations.
The index tracks public obligations of the U.S. Treasury that have a remaining maturity of at least one month but less than three months. Given the current high-interest rates, BIL boasts a dividend yield of 5.09% and disburses dividends monthly.
Examining Medium-Risk Options
For those seeking the safety of U.S. government debt with the potential for capital gains, consider the iShares 10–20 Year Treasury Bond ETF (ticker: TLH). While it similarly invests in treasury bonds, these have longer maturities. Though the yield is slightly lower at 4.02%, if interest rates decrease, the value of these bonds could appreciate. However, with persistent inflation, there's also a chance that these bonds could lose value if the Federal Reserve opts for further rate hikes.
Higher-Risk Bond Investments
If you're after higher yields and are willing to embrace more risk, the iShares J.P. Morgan USD Emerging Market Bond ETF (ticker: EMB) may suit your needs. This fund invests in sovereign debt from emerging markets, which might not offer the same stability or credit ratings as U.S. government securities. Currently, EMB yields 4.77% and, like the previous options, pays dividends monthly.
Embracing a Diverse Investment Approach
Many investors adopt a "stocks-or-nothing" mindset, but those who ignore alternative investment avenues may be limiting their long-term potential. It’s essential to recognize that conditions aren't always favorable for stock purchases, just as they aren’t always right for bonds or other assets.
By broadening your investment strategy, you can diversify your portfolio and seize opportunities when market conditions align.
What are you currently investing in? Are you still focused solely on stocks, or are you exploring other options? Share your thoughts in the comments!
Looking for additional insights? Check out my top 5 trending stories today:
- Happiness secret Anne Hathaway discovered after quitting alcohol at 40.
- Leading doctor names one food as the 'holy grail' for longevity — do you consume it?
- One crucial action to take if you want to make money writing online.
- Three alarming ways Google Gemini could impact your blog.
- Tired of losing money? Build a straightforward dividend portfolio you can trust.
Disclaimer: The figures presented in this article were accurate at the time of writing and may not hold true upon reading. This commentary is for general informational and entertainment purposes only and should not be interpreted as financial or investment advice. Always consult with your financial advisor before making investment decisions.