Everyone wants to make a better return – whether it’s through stock dividends or interest generated via bond investments, higher yields are always a major attraction to investors worldwide.
This guide will discuss the Best High Yield ETFs UK, analysing their performance and providing crucial information you need to know before investing. We’ll also show you the step-by-step process of how to invest in a high yield ETF so that you can start making returns today.
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Best High Yield ETF UK 2021 List
Below you will find a list of the ten best high yield ETFs UK. In the following section, we will delve into each of these exchange-traded investment funds in detail, providing a comprehensive overview of their features and performance.
- Iboxx $ High Yield Corporate Bd iShares (HYG) – Overall Best High Yield ETF UK – Invest Now
- iShares Core High Dividend ETF (HDV) – Best High Yield ETF UK for Dividends – Invest Now
- Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) – Best ETF with Low Risk – Invest Now
- SPDR Bloomberg Barclays High Y (JNK) – Best High Yield ETF UK for Bond Investing
- Alerian MLP ETF (AMLP) – Best High Yield ETF UK for Investing in the Energy Sector
- iShares Preferred & Income Sec (PFF) – Best High Yield ETF UK for Preferred Stocks
- Vanguard FTSE Emerging Markets (VWO) – Best High Yield ETF UK for Emerging Markets
- InfraCap MLP ETF (AMZA) – Best High Yield ETF UK for Monthly Income
- JPMorgan Ultra-Short Income ETF (JPST) – Best High Yield ETF UK for Ethical Investments
- Global SuperDividend US ETF (DIV) – Best High Yield ETF UK for Exposure to the US Market
Best High Yield ETFs UK Reviewed
Researching what the best high yield ETFs UK are can be a tricky proposition. You have to consider various factors, ranging from the annual yield they pay to the type of returns they have experienced in recent years.
This guide will ease the burden of doing all of this research yourself by discussing the ten best ETFs for high yield returns for UK investors. This section will provide an overview of each fund, touching on past performance and discussing the assets they invest in and what kind of yield you can expect.
1. Iboxx $ High Yield Corporate Bd iShares (HYG) – Overall Best High Yield ETF UK
One of the best high yield ETFs for UK investors is the Iboxx $ High Yield Corporate Bd iShares. This fund aims to track an index composed of high yield corporate bonds from US firms. These bonds are considered riskier than Treasury bonds; however, they provide a greater interest rate which translates into an increased level of current income.
Looking at its performance, this bond ETF fund has returned an average of 7.11% to investors over the past five years alone, highlighting incredible consistency. Not only that, but it also pays a monthly dividend, equating to an annual dividend yield of 4.86%. This is one of the highest yield ETFs out there that also provides consistent capital growth. So, if you are looking for one of the best ways to invest money, the Iboxx $ High Yield Corporate Bd iShares might be worth looking into.
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2. iShares Core High Dividend ETF (HDV) – Best High Yield ETF UK for Dividends
If you are looking for a solid high dividend yield ETF, look no further. The iShares Core High Dividend ETF provides exposure to 75 of the best dividend stocks based in the US. In turn, this provides investors with a steady stream of income whilst also remaining at an acceptable level of volatility.
With similar performance levels to the fund above (an average of 7.48% over the past five years), the iShares Core High Dividend ETF can be considered one of the best high yield ETF funds out there. Furthermore, it also pays a quarterly dividend to investors, with a yield of 3.98%. So if you invested $1000 into the fund, you’d likely receive $39.80 in dividend payments; however, this is before fees, so double-check what your net income would be. If you are interested in this fund, you can invest with eToro without paying any commissions whatsoever!
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3. Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) – Best High Yield ETF UK with the Lowest Risk
There are many types of investors out there; some are more risk-seeking, whilst others are more risk-averse. For the investors in the latter camp, the Invesco S&P 500 High Dividend Low Volatility ETF may be one of the best high yield, low risk ETF funds for you. Tracking the performance of the S&P 500 Low Volatility High Dividend Index, this best S&P 500 ETF is made up of 52 of the highest dividend stocks that are also low volatility.
With a very low expense ratio of 0.30%, this fund is one of the list’s cheaper options. What’s more, this ETF also provides a yield of 4.19% to investors, spread out through monthly payments. Finally, over the past year, it has made a return of 9.44%, which is remarkable considering the impact of the Coronavirus pandemic. If you are looking for a solid high yield fund that is less risky than other high risk ETFs, the Invesco S&P 500 High Dividend Low Volatility ETF is an investment worth considering.
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4. SPDR Bloomberg Barclays High Y (JNK) – Best High Yield ETF UK for Bond Investing
If you are looking to get exposure to the bond market, specifically the US bond market, the SPDR Bloomberg Barclays High Y ETF is an attractive investment to consider. This fund aims to provide diversified exposure to high yield corporate bonds that are denominated in USD. The fund manager in charge of this ETF will also actively rebalance the portfolio’s allocations on the last day of each month, ensuring the highest levels of performance possible.
Although the securities within this bond ETF are not investment grade, this fund is still an excellent option for investors who are happy to take on a little extra risk to make a higher return. Even though the bonds the fund invests in are considered ‘junk bonds’, it still has a fantastic track record over the past decade, only displaying a negative return in two of the last ten years. Finally, with a very impressive yield of 5.08%, this fund remains an attractive investment opportunity for people looking to get exposure to the bond market.
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5. Alerian MLP ETF (AMLP) – Best High Yield ETF UK for Investing in the Energy Sector
If you are looking for the best high yield ETF for UK investors that operates in an alternative field of investments, then the Alerian MLP ETF might be worth considering. This fund tracks the return of a benchmark index composed of firms that generate cash flow from operations within the energy sector. These firms tend to be mid-cap and are all located in the US. With total net assets of $4.57billion, the Alerian MLP ETF is a favourite of both retail and professional investors worldwide.
It is worth noting that this fund had a rough 2020, ending the year down 32.39%. Again, the disclaimer that the fund was affected by the COVID-19 pandemic still applies. However, since January, the Alerian MLP ETF is up approximately 13.68%. Most notably, this fund provides one of the highest percentages of income to investors, sporting an annual yield of 10.16% that spread across quarterly cash payments. If you are interested in gaining some exposure to the energy sector whilst obtaining a passive stream of income, the Alerian MLP ETF might be worth thinking about. If you decide to invest, we recommend using eToro – you can invest as little as $50 to begin with, and you also do not have to pay any commissions fees whatsoever!
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6. iShares Preferred & Income Sec (PFF) – Best High Yield ETF UK for Preferred Stocks
Preferred stocks are a specific type of stock with superiority over common stock – this means that they receive dividend payments before any other type of stock does. If a company were to go bankrupt, preferred stockholders would be the first to be paid before anyone else. As they pay a dividend and also act as an equity, these stocks are often referred to as hybrid securities. This characteristic makes them an attractive investment for many investors.
The iShares Preferred & Income Sec is one of the best high yield investments for getting exposure to preferred stocks. Through this exposure, investors into the fund can expect to receive a solid return whilst also acquiring an attractive passive income stream. This fund pays an annual yield of 4.57% and is distributed to investors via monthly cash payments. What’s more, it also displays robust returns in the face of market shocks; using 2020 as an example, the fund still returned 7.94%, which is impressive considering the volatility in the market. With income levels that match high yield corporate bonds, the iShares Preferred & Income Sec is another of our favourite high yield ETFs UK.
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7. Vanguard FTSE Emerging Markets (VWO) – Best High Yield ETF UK for Emerging Markets
More and more investors are looking to gain exposure to emerging markets due to the potential for incredible returns over the next decade. The Vanguard FTSE Emerging Markets ETF provides this exposure through investing in mid-cap and large-cap firms that operate in various emerging markets. Some of the countries the fund invest in are China, Taiwan, India, and Brazil.
Through these investments, this Vanguard ETF aims to provide a high yield to investors in the fund. It has returned 19.66% and 14.66% in 2019 and 2020, respectively, making it a better performer than the FTSE 100 over the same period. This fund also pays a small dividend to investors every quarter, with a current yield of 1.74%. Although not as large as some of the others on this list, when you combine it with the above-par performance and potential for significant growth over the coming years, this fund is a great choice for investors from both ends of the risk spectrum.
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8. InfraCap MLP ETF (AMZA) – Best High Yield ETF UK for Monthly Income
If you are looking for a fund that provides a steady income stream each month, then this may be the one for you. The InfraCap MLP ETF provides an excellent yield of 12.95% annually and is spread across 12 monthly payments. However, this fund does have one of the higher expense ratios on the list, clocking in at 2.01% annually.
Looking at returns in isolation, the InfraCap MLP ETF does fall short of other funds on this list, generating a negative return in three of the last five years. However, this can be put down to the energy sector’s performance, in which this fund invests heavily. Overall though, even though this fund is more volatile relative to others on the list, it does have one of the highest annual yields. So if you are content to invest in a riskier fund but gain a consistently high yield in terms of dividend payments, then this fund might be an attractive proposition for you.
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9. JPMorgan Ultra-Short Income ETF (JPST) – Best High Yield ETF UK for Ethical Investments
The JPMorgan Ultra-Short Income is one of our favourite high yield ETFs due to its consideration for ethical investments. These investments lean towards assets that have are attractive in terms of environmental, social, and corporate governance elements. As such, the fund aims to deliver an appropriate yield to investors whilst also providing a morally-correct investment vehicle.
With a low expense ratio of 0.18%, this fund is an attractive prospect to retail investors worldwide. Furthermore, the fund has only been in operation for under five years and has displayed a positive return in each year of its existence thus far. Finally, due to holding a mix of US and non-US bonds, the JPMorgan Ultra-Short Income fund provides a yield of 1.15% to investors. Although not as high as other yields in this list, it’s one of the best income funds as it offers a solid return for people who wish to create another source of income and want to invest in a morally responsible way.
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10. Global SuperDividend US ETF (DIV) – Best High Yield ETF UK for Exposure to the US Market
The final ETF we will discuss is the Global SuperDividend US ETF, which invests in 50 of the highest dividend-paying equities in the US market. Furthermore, this fund makes income distributions monthly and utilises equities with low betas – meaning you get a fund that provides a passive equity income stream in a low-volatility manner.
This fund focuses on many areas, with the top three being consumer staples, energy, and real estate. Through investments into these sectors, this ETF provides a great deal of exposure to the US market. Furthermore, it offers an incredibly attractive yield of 6.64% – meaning if you invested £1000, you would generate income of £66.40 across the year (minus the ongoing charge due to the expense ratio). With a year-to-date total return of 14.40%, the Global SuperDividend US is one of the best high yield ETF for UK investors.
If you’d like to invest in this ETF (or any of the other ones on this list), it’s worth checking out eToro. You can invest for as little as $50 (around £36), so you can test the waters before committing. What’s more, you don’t have to pay any commissions at all, meaning the only fees you will need to pay are the expense ratio charged by the fund provider.
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Are High Yield ETFs a Good Investment?
Now that we’ve touched on a variety of the best high yield ETFs UK, you might be wondering whether they would be an appropriate investment decision for you. Well, depending on your investment goals, these funds may be precisely what you are looking for. Some of the key reasons that high yield ETFs are considered a good investment for income investors include:
Provide a Passive Income Stream
Everyone wants more money – that’s a given. A high yield ETF (such as the Iboxx $ High Yield Corporate Bd Ishares) is a type of financial instrument focused on current income, derived from either dividend payments from stocks or interest payments from bonds. Due to this focus, investors can expect to receive a consistent passive income stream paid monthly, quarterly, or annually, depending on the specific fund. The fund’s yield determines this income stream – so make sure to research the historic yield that your chosen fund pays to determine how much income you can expect to receive.
Diversification for your portfolio
Another significant reason why high yield ETFs can be considered a good investment is their diversification benefits. This refers to their ability to spread your portfolio risk across various asset classes, thereby reducing your investment pool’s overall risk. To provide an example of this, if you were predominantly invested in equities, you could invest in an asset such as a gold fund to diversify, as gold funds tend to be negatively correlated with equities. Thus, if your stocks suffered a price decrease, there is a good chance that the increase in the share price of the gold fund would compensate for this in some way.
Relating this to high yield ETFs, these funds would offer a similar level of risk-reducing benefits. Holding a portfolio of different asset classes, and ensuring an appropriating weighting of each, is an effective methodology to optimise your risk/return profile. So, if you had a portfolio made up of equities, bonds, REITs, or any other asset class, you could add a high yield ETF investment into the mix to add to the diversification level.
A third reason why high yield ETFs can be considered a good investment is their low cost. When you invest in a high yield ETF, the fund provider will always charge what is known as an expense ratio. The good thing is that these expense ratios are often very low relative to other assets and are expressed as a percentage charged annually on your position size. So, if you invested £1000 into a high yield ETF with an expense ratio of 0.25%, you would only pay £2.50 per year in fees! This highlights how cost-effective these ETFs are, especially when you consider the returns they can make – check out the image below for a snapshot of the InfraCap MLP ETFs performance in recent years as an example.
However, depending on who you invest with, you may also have to pay a commission to open a position in a high yield ETF. With eToro, you do not have to pay this commission, reducing the total amount of fees you have to pay. What’s more, you can invest in high yield ETFs for as little as $50 (approximately £36), meaning that opening a position in a high yield ETF is both cost-effective and accessible when using eToro.
Best High Yield ETF UK Investment Platforms 2021
Up to this point, we have discussed a selection of the best high yield ETFs for UK investors, along with a variety of reasons why they can be considered a good investment. In this section, we will examine two of our recommended brokers when it comes to trading high yield ETFs so that you can begin investing today.
1. eToro – Best Overall Platform to Invest in High Yield ETFs with 0% Commission
eToro is considered one of the most popular brokers in the UK, and for a good reason. Boasting over 20million users, eToro has been providing brokerage services for over 13 years to customers worldwide.
One of the best things about using eToro’s trading platform is its attractive fee structure. As mentioned earlier, trading high yield ETFs incurs an annual charge related to the expense ratio and also incurs a commission when you invest too. With eToro, you do not have to pay this commission whatsoever, meaning they are one of the most cost-effective investment platforms to trade high yield ETFs.
Furthermore, eToro also lets users invest in ETFs for as little as $50 (around £36). This ensures high yield ETFs are accessible to a range of investors, as investing directly with the fund provider typically requires a much more significant initial investment. In addition to this, if you’re looking to construct a portfolio of different assets, eToro offers a wide selection of securities. With over 2000 stocks available to trade, along with commodities, FX, and even cryptocurrency, eToro ensures there is something for everyone.
Finally, the account opening process with eToro is quick and easy, only taking around ten minutes to complete. You can make your first deposit through various methods, including credit/debit card, bank transfer, or even e-wallet. Once you’ve funded your account, you can begin trading right away.
- Super user-friendly online trading platform
- Invest in high yield ETFs without paying any commission or share dealing charges
- Trade CFDs in the form of stocks, indices, commodities, forex, and more
- 2,400+ stocks listed on the UK and international markets
- 150+ ETFs
- Deposit funds with a debit/credit card, e-wallet, or UK bank account
- Ability to copy the trades of other users
- FCA and FSCS protections
- Not suitable for advanced traders that like to perform technical analysis
- No ISAs or SIPPs
67% of retail investors lose money trading CFDs at this site
2. Libertex – Best CFD Broker to Invest in High Yield ETFs with Zero Spread
If you are looking for an alternative option to eToro, look no further than Libertex. As our second favourite broker to trade high yield ETFs with, Libertex offers various CFD instruments that allow you to speculate on market movements.
CFD trading works slightly differently than regular trading, as you won’t own the underlying asset. Instead, you’ll possess a contract based on the assets price, and this contract’s value will fluctuate as the asset’s price changes. These CFDs are a great way to get involved in the market without holding the actual security.
What’s more, Libertex offers zero spread trading on their CFD offering. This means that they do not have a difference between their bid and ask prices as most other brokers do. Thanks to this fee structure, Libertex ensures you get market-leading prices when you buy shares or invest in ETFs with them.
Finally, if you trade ETFs with Libertex, you have access to leverage of up to 1:5, being one of the best high leverage brokers UK. This leverage allows your position size to be multiplied up to 5x, opening up the possibility of much larger returns. So, if you invested £200 in an ETF with 5x leverage, your position size would essentially equate to £1000!
- Can make a return from high yield ETFs using CFDs
- Zero spread between the bid and ask price
- Low commission when trading other markets
- Opportunity to trade CFDs associated with indices, cryptocurrencies, forex, metals, and more.
- Can trade through the MetaTrader 4 platform or Libertex platform
- Up to 1:5 margin available on a number of assets
- Low minimum deposit
- Multiple payment methods (Credit/debit card, Neteller, Bank transfer, SEPA, e-wallets)
- Regulated by the CySEC
- Only CFDs are available for trading
83% of retail investors lose money trading CFDs at this site.
How to Buy the Best High Yield ETFs UK
So, if you’ve decided you want to invest in high yield ETFs and would like to understand the actual process to do so, this section is for you. In the paragraphs to follow, we will provide a quick and easy step-by-step guide that shows you precisely what you need to do to invest in a high yield ETF with eToro – all in under ten minutes!
Step 1: Sign Up for an eToro Account
To begin the process, simply head to the eToro website (you can also do this on their investment app) and click the ‘Join Now’ button. After this, you’ll be asked to enter some personal information, contact information, and your National Insurance number.
Step 2: Verify your Identity and Address
As eToro are an FCA-regulated broker, you’ll need to verify yourself before you can trade. Luckily, this is very easy and can be completed in minutes. Simply upload proof of ID (a copy of your passport or driver’s license) and proof of address (a copy of a bank statement or utility bill), and you’ll be good to go!
Step 3: Add Funds to your Account
You’ll now be able to make your first deposit into your account to trade high yield ETFs. If you want the quickest method, you can deposit through a credit/debit card, as the funds will arrive instantly. Alternative methods include bank transfer or e-wallets such as PayPal or Skrill.
Step 4: Search for your chosen High Yield ETF
Now it’s time to search for your investment. Simply click on the search bar at the top of the screen, and type in the name of your chosen ETF. In the example provided here, we want to invest in the Iboxx $ High Yield Corporate Bd iShares. Once you see your chosen ETF in the drop-down menu, click ‘Trade’.
Step 5: Invest in a High Yield ETF UK
Now you should see an order box similar to the image below. Simply enter the amount you wish to invest (minimum of $50), double-check everything is correct, and click the ‘Set Order’ button.
Congratulations! You are now officially an investor in a high yield ETF, all without paying a penny in commissions!
To wrap up, this guide has highlighted just how attractive high yield ETF funds can be to a variety of investors. Whether you are looking for low volatility or you are more risk-seeking, the multitude of high yields ETFs you can choose from ensures there is always an option that suits your investment goals.
However, if you’ve decided you want to invest in the best high yield ETF for UK investors and are wondering what to do next, we’d recommend using eToro to make your investment. As an FCA-regulated broker, eToro must follow the strictest security guidelines to ensure your money is protected. In addition to this, eToro also do not charge any commissions when investing in high yield ETFs – perfect for investors who wish to save some money when entering the market! Finally, with a minimum investment of only $50, you can test the waters first before opening a more significant position size.
eToro – Invest in High Yield ETFs with 0% Commission
67% of retail investor accounts lose money when trading CFDs with this provider.
What is the best high yield ETF to invest in?
One of the best high yield ETFs overall is the Iboxx $ High Yield Corporate Bd iShares ETF. This fund invests in high yield US corporate bonds, intending to provide investors with steady cash payouts in a low-volatility manner. Also, this fund pays a monthly dividend which adds another passive income stream for investors.
How can I buy high yield ETFs in the UK?
You can buy high yield ETFs either through the provider's website or through a broker regulated by the Financial Conduct Authority (FCA), such as eToro. We recommend the latter, as investing through a provider's website is often more complicated and requires a more significant initial investment. With eToro, you can invest for as little as $50 – and you won't have to pay any commissions either.
Are high yield ETFs expensive?
The fees associated with high yield ETFs will fluctuate depending on the provider. The expense ratio is essentially the annual fee you have to pay to invest in an ETF, and this is shown as a percentage of your investment. Some funds are as cheap as 0.25% per year, whilst others can be more than 1.5%. So, make sure you know exactly what you will be charged before investing.
How do high yield ETFs work?
High yield ETFs work by pooling investments from retail and professional investors and investing this pool of capital into various assets to make a return. In the case of high yield ETFs, these assets tend to come in the form of securities that provide a significant stream of income, such as corporate bonds or high dividend-paying stocks.
What is the minimum investment for high yield ETFs?
This depends on who you invest with – if you invest directly with the provider, it tends to be a larger minimum investment amount. With eToro, you can invest for as little as $50 (around £36), which means you can start small and build your position up over time when you feel comfortable doing so.