Finding the ideal retirement investment can feel like searching for a needle in a haystack, especially when you're looking for consistent monthly income. But what if there were two ETFs that could potentially tick all the boxes? Here’s the catch: they approach this goal in completely different ways, and one of them uses a strategy that might make some investors uneasy. Let’s dive in.
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Key Takeaways:
- Two ETFs, Two Strategies: These funds aim to deliver steady monthly dividends but take distinct paths to achieve this goal.
- Bond-Focused with a Twist: One ETF invests in bonds from Australia’s 'Big Four' banks and investment-grade corporate bonds, while also employing gearing to amplify potential returns. But here's where it gets controversial: gearing can boost gains, but it also magnifies losses, making it a riskier play.
- Blue-Chip Focus with a Filter: The other ETF targets Australia’s 50 largest companies, but with a twist—it avoids companies that don’t meet its strict criteria, aiming to sidestep 'dividend traps.'
Retirees often prioritize investments that provide regular, fully-franked dividends, offering a reliable income stream with minimal risk. Betashares recently highlighted two exchange-traded funds (ETFs) in their 2026 investment outlook that align with this goal. Let’s explore these recommendations in detail.
ETF 1: Bond-Focused with Gearing
This ETF, though a bit of a mouthful in name, focuses on a portfolio of bonds issued by Australia’s 'Big Four' banks and investment-grade corporate bonds. What sets it apart is its use of gearing—borrowing funds at institutional rates to enhance income potential. According to Betashares, the gearing ratio ranges between 66.7% and 71.4%, meaning the fund’s exposure can reach up to 350% of its net asset value. And this is the part most people miss: while gearing can boost returns, it also increases volatility, making it less suitable for risk-averse investors.
The fund, ECRD, pays monthly dividends and currently boasts a running yield of 7.68% per annum. However, it’s worth noting that ECRD was launched in November, so historical data is limited.
ETF 2: Blue-Chip Focus with a Dividend Filter
This ETF takes a different approach, targeting Australia’s top 50 companies while screening out potential 'dividend traps.' These are companies with unsustainably high dividend yields or excessive volatility relative to their payout forecasts. With a monthly trailing dividend yield of 4.55% and a total return of 11.79% over the past year (compared to the S&P/ASX 200 Index’s 5.47%), this fund aims to outperform the broader market.
Its top holdings include ANZ Group Holdings, Westpac Banking Corp, and National Australia Bank, followed by mining giants BHP Group and Rio Tinto. The ETF pays fully-franked dividends in the first week of each month, making it an attractive option for income-focused investors.
Controversial Question: Is Gearing Worth the Risk?
While the bond-focused ETF’s use of gearing can amplify returns, it also introduces higher volatility. Is this a strategy you’d consider for your retirement portfolio, or does the risk outweigh the potential reward? Let us know in the comments—we’d love to hear your thoughts!
Further Reading on ETFs
- 3 Strong ASX ETFs to Buy for Your SMSF
- 3 of the Best Performing VanEck ASX ETFs in the Last Year
- 3 Strong ASX ETFs That Could Be Top Buys in 2026
- 5 Fantastic ASX ETFs for Beginners in 2026
- Own Betashares ASX ETFs? Here's Your Next Dividend
- Keen to Invest Outside the ASX? UBS Reveals 2026 Forecast for US, China, and Euro Stocks
- How to Build a Beginner Portfolio in 2026 with Just Two ASX ETFs
- 10 Excellent ASX ETFs to Buy in 2026
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