The top 10 income funds and ETFs in 2023 as voted by Livewire readers (2024)

You could say it’s never been a better environment for income. Fixed income in particular is having its time in the sun. Term deposits are offering around 5% and yields on the Australian 10-year are pushing towards 4%.

Of course, that income is having to compete with persistently high inflation and aggressive tightening activity from global central banks. The RBA is no exception to this with 12 increases since May 2022.

We asked Livewire readers to tell us their income stalwarts in this challenging environment. Over 1000 of you participated.

It may surprise you to know there wasn’t a massive change in the top funds and LICs, though somewhat more movement in the nominated ETFs.

And while the old saying claims cash is king, that certainly isn’t the case when it comes to the top-rated funds, LICs and ETFs. In fact, Australian equities continue to reign supreme.

Our franking credit regime is likely to be no small contributor when it comes to the reasons why.

Despite the improving fortunes of fixed income, only 2 LICs and 2 ETFs in this category made the lists compared to equities. There are a range of reasons for this. Fixed income still needs to keep up with 7% inflation, and it’s only been in the last few months that traditional bonds and term deposits have started to look appealing.

Before we dive into the lists, here are a few interesting stats.

Important Disclaimer: The lists presented below are based on responses from Livewire readers to our 2023 Income Series survey. These lists are not and should not be construed as recommendations or advice.

Top 10 Income Funds/LICs/LITs for 2023

Source: Livewire Income Series Survey 2023

Of the top 10, 55.7% of the votes went to Wilson Asset Management and Metrics Credit Partners. Both fund managers were also ranked in the top 10 in 2022, which suggests something about the consistency of strategy and returns.

WAM Leaders (ASX: WLE) took out the top position this year with 20% of the top 10 votes. It has offered an annualised fully franked dividend of 6.2% as of 31 May 2023. WAM Capital (ASX: WAM) also made the list again, while WAM Microcap (ASX: WMI) was a new addition for 2023.

Just under 80% of votes in the top 10 were directed towards Listed Investment Companies (LICs), with Listed Investment Trusts (LITs) taking the remainder of the votes.

The top 10 also remained largely consistent with 2022, with only 4 new additions to the list in the form of WAM Microcap (ASX: WMI), Washington H Soul Pattinson & Co (ASX: SOL), Qualitas Real Estate Income Fund (ASX: QRI) and the Australian Foundation Investment Co (ASX: AFI).

It’s worth noting that some of the top 10 are amongst the oldest LICs in Australia with decades of experience, being Washington H Soul Pattinson & CO, Australian Foundation Investment Co and Argo Investments (ASX: ARG).

There were a few key themes in the top 10:

1. Dividend income (including franking)
2. Use of alternative assets for income such as private credit or real estate

Top 10 ETFs for 2023

Source: Livewire Income Series Survey 2023

Just over half of the votes in the top 10 went to Vanguard issued ETFs, with 29.5% going to the top-ranked ETF Vanguard Australian Shares Index ETF (ASX: VAS). Both the Vanguard Australian Shares Index ETF and the Vanguard Australian Shares High Yield ETF (ASX: VHY)were rated as the top two in 2022 as well.

As at 31 May 2023, VAS had offered 4.5% in equity yield, while VHY had offered 6.1%.

Just as in the top-ranked funds, dividend income from Australian equities from a dominant theme. In fact, close to 70% of the top 10 votes were directed to ETFs focused on Australian equities.

The ETF list was also largely consistent with last year, with only 3 new additions: iShares S&P 500 ETF (ASX: IVV), BetaShares Nasdaq 100 ETF (ASX: NDQ)and Vanguard Australian Fixed Interest Index ETF (ASX: VAF). This represented greater interest in exposure to US equities for income, while the addition of a vanilla Australian fixed interest index suggested the improved appeal of fixed income this year compared to last.

As in 2022, the BetaShares Global Cybersecurity ETF (ASX: HACK) retained a place in the top 10. It is a thematic ETF invested in global cybersecurity companies, with the bulk of its investments focused on systems software and has generated a 12-month distribution yield of 7.3% as at 31 May 2023.

A final word

The top 10 funds and ETFs are typically quality investments with consistent track records. Many of the funds have performed over a number of market cycles and deserving of their selection by Livewire readers.

Equity income continues to remain important in a world of high inflation, despite the improving fortunes of fixed income. Will we see fixed income take a greater place in the top rankings in 2024? It remains to be seen.

What did we miss? Let us know in the comments below if you have a favourite income investment that didn't make the top 10.