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Transcript
Have you ever heard the phrase: “Don’t work for your money, make it work for you”?
Well, today we’re going to learn how to do just that with ETFs.
If your goal is to make income from your investing, ETFs might be a good way to do it.
Let’s explore the three types of ETFs you might want to consider if this is your goal; Bond, dividend, and international stock ETFs.
First up are Bond ETFs which can include government bonds, corporate bonds, and more, all bundled together in one diversified fund.
Investing in bonds can generate income through capital appreciation if the bond’s market value increases over time and through regular interest payments.
The amount of interest payments on bonds can vary depending on a number of factors:
How likely is the bond issuer to pay you back and when?
Bonds with a longer term maturity date typically carry higher interest rates.
Is the bond issuer creditworthy?
Less creditworthy issuers have typically higher interest rates.
In other words, higher risk usually equals higher potential reward.
Next up, let’s talk about dividend ETFs.
Dividend ETFs are baskets of stocks that typically pay a portion of a company’s earnings to its shareholders on a regular basis, either as cash or as additional shares of stock.
In order to estimate how much a dividend ETF might pay out, you can divide the annual dividend per share by the current share price.
But, remember that is just an estimate and overreliance on this metric alone can be risky.
Last but not least, there are international stock ETFs which are a basket of stocks from various countries that allow you to spread your investment across multiple regions, sectors, and markets.
Plus, they have historically offered higher dividend yields compared to their domestic counterparts.
Of course, international ETFs can also carry higher risks than domestic funds given regulatory and political risks, among others.
So, make sure to stay up to date on whichever region in which you choose to invest.
As you can see there are more than a few ways to help generate long-term income through ETFs, but remember all investing carries risk and income is not guaranteed.
In the next lesson we’ll talk about a hot topic: investing in volatile times – see you there.
eToro encourages its customers to carefully consider the funds’ investment objectives, risks, and charges and expenses carefully before investing. This and other information can be found in the funds’ prospectuses or, if available, the summary prospectuses which may be obtained by visiting each fund company’s website or www.sec.gov/edgar/search. For iShares funds please visit www.iShares.com/prospectus. Read the prospectuses carefully before investing.