Passive income can be built in a few different ways on the ASX.
One way is with exchange traded funds (ETFs) that focus on dividend-paying Australian or international shares.
But which ones could be buys for passive income?
Here are three ASX ETFs that could be worth looking at:
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The first ASX ETF to look at is the Vanguard Australian Shares High Yield ETF.
This fund provides exposure to ASX-listed companies with higher forecast dividends than the broader Australian share market.
Its portfolio includes many of the country's best-known income shares, including banks, miners, energy companies, and telecommunications businesses. Holdings include BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Telstra Group Ltd (ASX: TLS).
The attraction here is simplicity. Instead of trying to choose individual dividend shares, investors can gain diversified exposure to a basket of high-yielding Australian companies in one trade.
The Vanguard Australian Shares High Yield ETF could suit investors who want income from familiar ASX names without relying on just one or two companies.
Betashares Global Royalties ETF (ASX: ROYL)
Another ASX ETF to look at is the Betashares Global Royalties ETF.
This fund takes a less conventional path to income. It invests in global companies that earn royalty-style revenue from assets such as commodities, intellectual property, infrastructure, and other long-life sources.
Royalty businesses can be attractive because they may benefit from the use or production of an asset without carrying the same operating burden as the company running it directly.
Its holdings include Franco-Nevada Corporation (NYSE: FNV), Texas Pacific Land Corporation (NYSE: TPL), and Wheaton Precious Metals Corp (NYSE: WPM).
This gives the Betashares Global Royalties ETF a different income profile from a traditional dividend ETF. Its distributions are linked to businesses that can generate cash from assets, rights, or agreements rather than everyday operating activity alone. It was recently recommended by the team at Betashares.
Betashares S&P 500 Yield Maximiser Complex ETF (ASX: UMAX)
A third ASX ETF that income investors may want to look at is the Betashares S&P 500 Yield Maximiser Complex ETF.
It provides exposure to the US share market while using an options strategy to help generate passive income.
This means its distributions are not driven only by dividends from the underlying companies. A key part of the income comes from selling call options and collecting the premiums from those contracts.
Its underlying exposure includes major US companies such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN).
The trade-off is important. This type of strategy can lift income, but it may limit some upside if the US market rises strongly.
For investors focused more on cash flow than maximising capital growth, the Betashares S&P 500 Yield Maximiser Complex ETF offers a different way to turn global equity exposure into regular income.
The post Which ASX ETFs could be buys for passive income? appeared first on The Motley Fool Australia.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, and Microsoft. The Motley Fool Australia has positions in and has recommended BetaShares S&P 500 Yield Maximiser Fund and Telstra Group. The Motley Fool Australia has recommended Amazon, Apple, BHP Group, Microsoft, and Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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