3 High-Yield Fidelity ETFs Perfect For Retirement

Fidelity has a pretty impressive roster of retiree-friendly ETFs (Exchange-Traded Funds), many of which have dividend yields on the high end. Indeed, as a retiree who lives off of passive income, it’s not all about going after the income ETF with the highest yield. It’s more about finding the perfect mix of low volatility, value, upside potential, dividend appreciation potential, dividend safety, and, of course, the size of the yield.

In any case, Fidelity seems to have a slate of highly underrated dividend ETFs that may not get as much coverage as some of its peers. In this piece, we’ll look at two high-yield ETFs that may be worth buying up right here, provided you’re a fan of the names that make up the ETF and the unique traits that differentiate Fidelity’s offering from the rest of the pack.

Fidelity High Dividend ETF

Fidelity High Dividend ETF (NYSEARCA:FDVV) has to be a go-to Fidelity ETF for passive income investors. Though the yield, currently at 3.0%, isn’t towering by any means, I must say I’m a fan of the capital gains potential you’ll get from the dividend-focused fund. In the past five years, shares have nearly doubled, keeping pace with the S&P 500. How many dividend ETFs can keep up with the market while paying more to investors? Not all that many.

What separates the FDVV from other dividend ETFs is its decent weighting in tech, with nearly 24% allocated to the sector. That’s less than the S&P 500, making the FDVV technically underweight tech, but for the yield you’ll get, this is a very respectable amount of exposure that will allow the FDVV to participate in those AI-driven market rallies.

With an arguably better balance of sector weightings and a more bountiful yield, the FDVV outshines the S&P, not just for retirees but for younger growth-minded investors as well.

Fidelity Investment Grade Bond ETF

The Fidelity Investment Grade Bond ETF (NYSEARCA:FIGB) is a stellar bond ETF for retirees who are looking to offload some stocks at market highs before the next correction has a chance to hit. Indeed, it certainly doesn’t feel great to buy into stocks after they’re fresh off a V-shaped bounce, with a pace of gains that just isn’t sustainable. In any case, the FIGB boasts a nice 4.23% yield from, as the name of the ETF suggests, investment-grade U.S. bonds. You won’t find “junk bonds” in this ETF, just hundreds of high-quality debt instruments (think Treasuries and investment-grade corporate bonds).

With a fairly low net expense ratio (0.36%), the FIGB should be a top ETF to consider if you’re looking for income and yield. And while there are higher-yielding bond ETFs out there, I do think that the risks of pursuing a percentage of more yield beyond that offered by the FIGB could be too elevated for most retired investors. 

Fidelity Investment Grade Bond ETF

If you want more yield, you’ll need to take on more risk. And while retirees shouldn’t take on a considerable amount of risk, given the higher stakes, those insistent on more than 6% yields may wish to sprinkle in some riskier securities for the so-called “enhanced” yields.

Whether it’s worth taking on the extra risk for an additional 2.5% yield depends on the strength of one’s stomach. While I wouldn’t recommend backing up the truck on riskier, higher-yielding debt instruments, which can take a beating when the tides head south, I do find that younger risk-takers seeking a semi-retirement (or sabbatical) may wish to consider checking out a high-risk, high-reward type of investment such as the Fidelity Enhanced High Yield ETF (NYSEARCA:FDHY) while the yield sits at 6.66%.

With shares down 13.4% from 2021 all-time highs, though, investors must know the associated downside risks involved with the ETF that invests in high-yield bonds, also known as below investment-grade or “junk.” In any case, “enhanced high yield” sounds a heck of a lot better than junk.

And while I wouldn’t suggest forming the bedrock of a retirement foundation with “junk bonds,” I do think that those investors seasoned in diversifying into higher-yielding bonds may wish to keep the FDHY on their radar. If you’re considering higher-yielding bonds and aren’t sure what you’re getting into, I’d strongly recommend talking to a financial advisor first.