Rate Cuts Are Coming: Grab These 3 High-Yielding ETFs Now

This week is an important one for consumers and investors alike.

The Federal Reserve is sitting down for its final policy meeting of the year. And tomorrow, the central bank is very likely to announce a third consecutive interest rate cut, following similar announcements in September and October.

Of course, rate cuts aren’t necessarily a bad thing. Granted, they may not be ideal for fans of CDs who have been enjoying risk-free returns in the 4% range. But rate cuts could be a great thing for inflation-weary consumers who need relief from sky-high credit card balances.

As interest rates ease and bond rates soften to follow suit, you may be looking for ways to continue generating steady income in your investment portfolio. To that end, you may want to look at ETFs, or exchange-traded funds, which allow you to own a collection of stocks with a single investment.

If you have a reasonably healthy appetite for risk, it pays to focus on high-yield ETFs that reward you with regular income. Here are three to put on your radar as the Fed’s decision looms.

1. The JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF (JEPI) invests in large-cap U.S. stocks, which tend to be relatively stable businesses. But that’s not the only way JEPI makes money.

What JEPI also does is sell call options against its equity holdings to generate income that can be passed along to investors. The premiums those options command, along with underlying dividends, allow the fund to generate consistent income, even during periods of market turbulence.

One thing you might really love about JEPI is that it pays distributions monthly. For this reason, JEPI can be a suitable choice for retirees looking for income to supplement their Social Security checks.

2. The SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) is not a covered call fund like JEPI. Instead, it invests in the roughly 80 highest-yielding stocks within the S&P 500.

Unlike JEPI, SPYD pays investors on a quarterly basis — which is pretty common among dividend ETFs. As far as its risk profile goes, it would be fair to call it moderate.

SPYD’s diverse mix of holdings offers some protection. But because the fund is focused on high-yielding companies, it introduces volatility. Basically, if the broad market rises, SPYD should follow suit. If there’s a market downturn, expect it to fall with the broader market.

3. The Global X NASDAQ-100 Covered Call ETF (QYLD)

The Global X NASDAQ-100 Covered Call ETF (QYLD) invests in stocks from the NASDAQ-100 index. Like JEPI, QYLD pays monthly distributions to investors, making it a great option for those prioritizing cash flow.

That said, covered call ETFs like QYLD tend to sacrifice long-term growth for ongoing returns. A fund like QYLD will probably offer limited upside during a stock market rally. But if your goal is to generate steady income to help offset the lower interest rates that are likely coming, it could be a good fit for your portfolio.