Key Points
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The RSPA ETF will immediately turn the bulk of your $25,000 account into a diversified income machine.
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Smaller allocations into SCHD, JEPQ, and FDVV will help you build a low-fee passive income foundation.
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How far can $25,000 get you? If you have a well-considered plan in place, you can actually turn your small account into a passive income factory.
This can be done with a carefully selected group of high-yield, low-fee exchange traded funds (ETFs). With just $25,000, you can build a super-low-cost portfolio that consistently pays you cash dividends/distributions.
Plus, you can de-risk your portfolio through multi-sector diversification and investment in famous large-cap companies. So, let’s start right now with a smart-money plan to extract sizable cash payouts from a small but growing account.
Start With RSPA for Extra Diversification
Out of a $25,000 account, you can confidently put $10,000 into just one ETF. That’s because the Invesco S&P 500 Equal Weight Income Advantage ETF (NYSEARCA:RSPA) checks all of the right boxes for a small-sized high-growth portfolio.
To populate a small-sized portfolio, I would want to use funds that invest in successful, blue-chip business. I would also insist that the ETFs should be diversified and need to have annual operating expenses below 0.5%.
With a focus on companies in the prestigious S&P 500 index, the Invesco S&P 500 Equal Weight Income Advantage ETF has 525 stocks in its holdings. Suffice it to say, then, that the RSPA ETF is widely diversified.
When you examine the fund’s holdings list, you’ll find established large-cap leaders across multiple economic sectors. Some examples are Coca-Cola (NYSE:KO), Johnson & Johnson (NYSE:JNJ), JPMorgan Chase (NYSE:JPM), and Consolidated Edison (NYSE:ED).
An interesting feature of the Invesco S&P 500 Equal Weight Income Advantage ETF is that each of the holdings has a small, roughly equal weighing to the other stocks in the fund. That way, you won’t over-invest in any single stock.
In addition, the RSPA ETF is low-cost as it only deducts annualized operating fees of 0.29%. And for all of you yield hunters out there, the Invesco S&P 500 Equal Weight Income Advantage ETF currently features a 12-month distribution rate of 9.42%. All in all, this ultra-diversified fund is ideal for a $25,000 account and I would feel comfortable dedicating $10,000 toward RSPA.
Expand Your Portfolio With SCHD and JEPQ
Even though the RSPA ETF would already expose you to 500+ stocks, you still probably wouldn’t want to toss your entire $25,000 into just one fund. Consequently, we will now explore three more ETFs and, after conducting your own due diligence, you could invest $5,000 in each one of them.
The first of these three intriguing funds is the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD). This ETF tracks the Dow Jones U.S. Dividend 100 Index and has a portfolio comprising 103 stocks.
Again, we’re looking for famous large-cap names and multi-sector diversification. The Schwab U.S. Dividend Equity ETF meets these expectations with recognizable stocks like Home Depot (NYSE:HD), Merck (NYSE:MRK), Lockheed Martin (NYSE:LMT), and Chevron (NYSE:CVX).
Moreover, the Schwab U.S. Dividend Equity ETF serves up a trailing 12-month distribution yield of 3.87% but only deducts 0.06% worth of annual operating expenses. Therefore, investors should have no objections to allocating $5,000 toward the SCHD ETF.
Next up is the JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ:JEPQ), which is centered around the technology-focused NASDAQ 100 index. This fund includes 107 stocks so you can participate in the growth of tech’s heavy hitters, such as NVIDIA (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN).
Committing $5,000 of your $25,000 portfolio to the JEPQ ETF will unlock extra share-price appreciation potential from a variety of top tech firms. You’ll also get access to substantial cash distributions as the JPMorgan Nasdaq Equity Premium Income ETF features an impressive 11.52% annual yield.
We’re still sticking to the low-cost theme here since JEPQ only deducts operating fees of 0.35% per year. So, why not add some technology-fueled firepower to your small portfolio with the JPMorgan Nasdaq Equity Premium Income ETF?
Round It Out With FDVV
To round out your $25,000 passive-income plan, you could assign $5,000 toward the Fidelity High Dividend ETF (NYSEARCA:FDVV). Instead of concentrating on the Dow Jones Industrial Average, S&P 500, or NASDAQ 100, the FVDD ETF corresponds to the Fidelity High Dividend Index.
Among the holdings list of the Fidelity High Dividend ETF, you’ll find large-cap superstars like Exxon Mobil (NYSE:XOM), Visa (NYSE:V), Procter & Gamble (NYSE:PG), and Bank of America (NYSE:BAC). Overall, you’ll get exposure to plenty of consistent dividend deliverers with FDVV.
The other need-to-know stats are that the Fidelity High Dividend ETF offers a trailing 12-month distribution yield of 3.07% but only deducts 0.16% in annualized operating expenses. With all of those benefits in mind, you can proudly add $5,000 worth of FDVV shares to your $25,000 account.
Now, you’ve got a four-pack of funds with RSPA as your anchor as well as SCHD, JEPQ, and FDVV for extra diversification. That’s a savvy plan to keep the fees to a minimum while turning your $25,000 account into a low-risk regular income producer.
The post How to Build a Super Low Cost Passive Income Fund for Only $25,000 appeared first on 24/7 Wall St..
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Author: David Moadel
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