3 Vanguard ETFs That Can Provide a Lifetime of Passive Income

There are many ways to generate passive income. Investing in exchange-traded funds (ETFs) might take the least effort. Buying high-quality ETFs from a leading fund manager like Vanguard allows you to sit back and collect passive income for the rest of your life.

Here are three excellent Vanguard ETFs to buy and hold for a lifetime of passive income.

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Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) tracks a diversified index of high-yielding dividend stocks (excluding real estate investment trusts (REITs)), making it an excellent source of passive dividend income. It currently has a dividend yield of 2.5%, more than double the S&P 500's level (1.2%).

The Vanguard High Dividend Yield ETF currently holds over 560 stocks, including some of the world's best dividend-paying companies. One of its top holdings, ExxonMobil, currently yields 3.5% and has increased its dividend payment for 42 consecutive years -- a distinction achieved by only 4% of companies in the S&P 500. With its 2030 plan aiming to increase earnings capacity by $20 billion and cash flow by $30 billion by 2030, ExxonMobil should have plenty of fuel to continue growing its high-yielding payout.

Given its focus on higher-yielding dividend stocks, this fund should provide investors with an above-average stream of stable and steadily rising dividend income in the decades to come.

Vanguard Real Estate ETF

The Vanguard Real Estate ETF (NYSEMKT: VNQ) holds REITs and other companies that invest in real estate. REITs have historically been an excellent source of income. They own commercial real estate and other income-generating real estate investments, providing them with stable income to pay higher-yielding dividends. The Vanguard Real Estate ETF currently has a dividend yield of over 3.5%.

The fund holds over 150 REITs, most of which pay higher-yielding dividends that steadily grow. For example, leading REIT Prologis, one of the fund's top holdings, currently yields 3.3% and has increased its payout by 13% annually over the past five years -- much faster than the S&P 500's 5% annual dividend growth rate. Prologis is in a strong position to continue growing its dividend due to the robust and growing demand for warehouse space, which should drive above-average rent growth and new expansion opportunities.

Investing in REITs is an excellent way to generate a lifetime of passive income from real estate, and Vanguard makes it easy to invest in this space through one simple fund.

Vanguard Total Bond Market ETF

The Vanguard Total Bond Market ETF (NASDAQ: BND) provides investors with broad exposure to the U.S. dollar-denominated bond market. Bonds are excellent income-generating investments as they make fixed interest payments to investors. Bonds also help investors diversify their portfolio by lowering their risk profile.

This fund holds over 11,400 bonds. The fund only holds bonds with an investment-grade bond rating, which indicates a low default risk. Most of its holdings are backed by the U.S. government (over 69%). The rest are either corporate bonds or U.S. dollar bonds issued by foreign entities. It holds bonds with a range of maturities (the average is over eight years). This large and diversified portfolio by both issuer and maturity date helps lower the fund's risk profile.

The Vanguard Total Bond Market Fund has a current yield of 4.1%. The income yield generated by this fund will fluctuate in response to changes in interest rates over time. As bonds mature or get paid off, the fund needs to reinvest the cash into new bonds. Yields on new bond investments will be higher when rates rise and lower when they fall. Overall, it will provide investors with a relatively steady stream of interest income over the long term.

A great Vanguard trio for generating passive income

These three Vanguard ETFs are great complementary income holdings to own for the long haul. VWM generates dividend income from higher-yielding stocks, VNQ provides passive income from real estate, and BND generates interest income from bonds. Investors can combine these three for a diversified passive income stream that should last their lifetime.

Matt DiLallo has positions in Prologis and Vanguard Total Bond Market ETF. The Motley Fool has positions in and recommends Prologis, Vanguard Real Estate ETF, Vanguard Total Bond Market ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.