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Freetrade thinks these income-focused ETFs and investment trusts are worth a second look

Freetrade thinks these income-focused ETFs and investment trusts are worth a second look
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One of the first decisions investors make is whether they’re looking for income or growth. If you happen to be an income-focused investor, Freetrade has put together some potential options that may have slipped under your radar. Let’s take a look at the suggestions.

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What is income investing with Freetrade?

Income-focused investing does what it says on the tin. It’s an investing strategy based on generating income. This income usually comes in the form of dividends, where shareholders are rewarded with a payment every quarter, so four times a year.

This investing style often suits those who’ve already managed to build some wealth, because investing this way means less emphasis on growth. More attention goes towards preserving money, beating inflation, and earning some income.

What’s interesting is that if investors choose to reinvest these income payments, it can really help to generate long-term wealth using compound interest.

Which are the top income investment trusts available on Freetrade?

Sometimes, picking the best dividend-paying stocks and shares can be tough work. Using an investment trust means that you can let experts do all the homework and find some great companies for you. Some trusts have consistently increased their dividend payments for at least 20 years. The AIC calls these dividend heroes. Let’s take a look at the top three.

1. City of London

This is often one of the most popular investment trusts available on Freetrade. The focus of their investing strategy is to provide long-term growth and steady income. They do this by mainly investing in equities listed on the London Stock Exchange (LSE).

2. Bankers

More globally focused, this trust aims to provide more growth than the FTSE World Index and an annual dividend growth greater than inflation. Investors’ money is put into companies listed around the world. This trust has a lower dividend yield (the percentage paid as income) but it aims to create more wealth for investors by growing.

3. Alliance Trust

Another trust with a global focus, this one also aims for both capital growth and a rising dividend. However, the main difference between this trust and Bankers is that with Alliance, there is more emphasis on dividends paying a higher yield.

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Which income ETFs does Freetrade suggest?

Along with investment trusts, there. are some excellent ETFs (exchange-traded funds) for investors to choose from. The main difference between these and trusts is that generally, they are not actively managed. They just focus on an index or a list. Let’s take a look at a couple of the top income-focused funds recommended by Freetrade.

1. SPDR S&P US Dividend Aristocrats ETF

This fund tracks the 60 highest-yielding US stocks that also have 25 consecutive years of growing dividends. It’s worth noting that this ETF is based purely around US companies, so there’s not much international diversity.

2. SPDR S&P UK Dividend Aristocrats ETF

With this fund, investors get exposure to the 30 highest-yielding dividend companies in the UK. This ETF is based purely around UK companies, so it’s worth taking that into account when looking at this as a potential investment.

What other options are there for Freetrade investors?

There are so many investment options available. Setting yourself up with a share dealing account with access to lots of choices is always helpful. This way you can find suitable investments no matter what type of investor you are.

It’s also worth considering that your needs will probably evolve throughout your life. So even if you’re not thinking about things like income right now, you might want to adjust your strategy later down the line.

Keep in mind that past performance of investments doesn’t guarantee future results. So just because a trust or fund has performed well historically does not mean there is no risk involved.

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