Transitioning from earning active employment income to living off a pension and an investment portfolio is one of the most critical financial shifts a retiree will ever make. While the willingness to take on capital risk naturally declines in retirement, the need for reliable, recurring cash flow increases dramatically. Relying on liquidating equity positions every month to pay for monthly living expenses can be nerve-wracking during periods of market volatility. Fortunately for Canadian retirees who want to make passive income without losing sleep over market swings, the low-risk fixed-income space offers a compelling investment option through the Purpose Global Bond Fund (TSX: BND).

A smarter way to make monthly passive income in retirement

Incepted in 2015, the Purpose Global Bond Fund is an exchange-traded fund (ETF) structured specifically as a stable cash-flow generating portfolio. The fund currently pays a regular monthly distribution of $0.08 per share, translating to an attractive annualized dividend yield of roughly 6%.

The monthly dividend ETF’s track record of payout stability and dividend growth is what makes the BND particularly appealing for retirees looking to make passive income. Monthly distributions have expanded from $0.05 per share in early 2020, even navigating a raise to $0.06 during the height of the pandemic, indicating the portfolio design expertise of its manager, the strength and resilience of its underlying holdings, and proving the effectiveness of its all-weather income strategy.

BND Dividend data by YCharts

Boasting over $2.7 billion in assets under management in October, the ETF pools together hundreds of fixed-income instruments across international credit markets. Rather than taking speculative bets, the portfolio prioritizes credit quality and steady income generation. The fund maintains a moderate portfolio duration of 5.85 years, striking a balance between yield capture and interest rate risk.

Geographically, the fund allocates 80% of its capital to the United States, 12% to emerging markets, and 5% to Canada, offering Canadian investors instant international credit diversification.

How active management helps ETF investors make passive income safely

Profitably navigating global fixed-income markets usually requires institutional-grade credit expertise, deep exposure, and wide global information sources that individual investors often lack.

The Purpose Global Bond Fund is actively managed by Purpose Investments, supported by Neuberger, an employee-owned private, independent investment manager founded in 1939. A global credit research team of professionals conducts deep fundamental analysis on every credit issuer.

To support this active mandate, the fund charges a Management Expense Ratio (MER) of 0.43%. While this expense ratio is higher than that of passive index-tracking bond funds, this fee is well justified by the team’s hands-on credit research, active duration positioning, and ability to navigate changing credit cycles.

A look under the hood reveals a well-calibrated, defensive fixed income asset mix. Investment-grade corporate credit forms the primary pillar at 35.9% of the portfolio. Cash and cash equivalents comprise a substantial 32%, providing ample liquidity and capital protection. High-yield corporate credit accounts for 15.5% to enhance overall yield, while the remainder spans government bonds, collateralized loan obligations (CLOs), mortgage-backed securities (MBS), and asset-backed securities (ABS). From a sector standpoint, exposure is anchored in strong, cash-generating industries led by financial services at 21.1% and real estate at 19.6%.

How to make monthly passive income tax-efficiently with the BND ETF

For Canadian retirees, account selection is just as crucial as security selection. In 2025, about 90.2% of BND’s distributions were classified as foreign income for Canadian tax purposes. Because the U.S. tax code does not recognize the Canadian Tax-Free Savings Account (TFSA) for foreign tax treaty exemptions, holding the BND ETF in a TFSA can expose your income to unrecoverable foreign withholding taxes.

To make passive income as tax-efficiently as possible, retirees should consider holding the ETF inside a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF), where foreign tax treaty benefits remain fully intact.

Ultimately, the Purpose Global Bond Fund delivers a powerful combination of institutional credit selection, global diversification, and a durable 6% monthly payout. The monthly income ETF deserves a closer look for retirees seeking a conservative, yield-focused cornerstone for their portfolio.

The post This Monthly Income ETF Yields 6% and I Think Retirees Should Give it a Closer Look appeared first on The Motley Fool Canada.

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Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

When stock markets go on a wild rollercoaster ride, keeping your cool is easier said than done. While stocks and pure equity exchange traded funds (ETFs) can offer roaring growth, the occasionally sharp drawdowns along the way can test even the most resilient investor. If you are looking to smooth out the ride without parking your cash entirely on the sidelines, the iShares Diversified Monthly Income ETF (TSX: XTR) is a magnificent monthly-dividend fund built for relative safety.

Managed by BlackRock, the world’s largest asset manager, overseeing more than US$15.3 trillion, the XTR ETF combines the safety of fixed income with the capital growth potential of dividend-paying stocks, while geographically diversifying your investment across two great economies in North America: Canada and the United States.

A Canadian ETF with a built-in defence system

The iShares Diversified Monthly Income ETF deservedly carries a low-to-medium risk rating, making it a sensible core holding for conservative investors or anyone looking to dampen capital volatility in their portfolio.

Rather than picking individual assets manually, the XTR ETF splits its $380 million multi-asset portfolio across several ETF holdings to form a balanced mix of 50.9% fixed income and 49.1% equities.

The fund takes a “fund-of-funds” approach, investing in an impressive 10,167 underlying securities through 12 direct iShares ETFs. This gives Canadian investors instant geographic and asset-class diversification, allocating 62.2% of assets into Canada and 35.7% into the U.S. economy.

Its top three underlying ETF holdings do the heavy lifting for both growth and stability.

• The iShares U.S. High Dividend Equity Index ETF (18% weighting) provides exposure to high-yielding U.S. dividend stocks for passive income and international growth.

• The iShares Core Canadian Short Term Corporate Bonds Index ETF (13.8% weighting) contributes predictable income with low risk of capital losses.
• The iShares MSCI Minimum Volatility Canada Index ETF (12% weighting) softens capital losses during market downswings while capturing upside during bull runs.

Rounding out the portfolio are nine other ETF holdings that add high-yield corporate bonds, Canadian government and provincial bonds, and dividend stocks to boost overall portfolio cash flow.

Historical safety during markets dowturns

The true test of a safe-haven ETF is how it behaves during market panics. When the 2020 pandemic crash hit, the all-equity iShares S&P/TSX Capped Composite Index ETF (TSX: XIC) suffered a stomach-churning maximum drawdown of 33.9%. By comparison, the XTR held up far better, experiencing a maximum drawdown of 23.9%.

That relative safety is a consistent trend. Over the past three years, XTR’s maximum drawdown was capped at 5.7%, whereas the XIC suffered a larger 11.6% drop from prior highs. Having that cushion helps calm nervous investors when market jitters take hold.

The XTR ETF combines monthly income with steady asset growth

Safety doesn’t mean entirely sacrificing equity returns. The XTR pays a reliable monthly dividend payout of $0.04 per share, yielding roughly 3.9% annually. It is fully eligible for registered retirement accounts, and setting up a Dividend Reinvestment Plan (DRIP) allows long-term investors to compound payouts automatically.

Despite its high fixed-income allocation, the ETF hasn’t given up its ability to steadily grow assets over time. Over the past decade, total annual returns have been respectable, delivering double-digit total gains in four of those years and posting negative total returns in only two.

XTR ETF Historical Total Returns (2016-Ytd 2026)

To be transparent, there is a trade-off: fixed-income protection creates a drag during fiery bull markets. Over the past 10 years, a pure-equity XIC surged 225.7%, while the XTR delivered a more modest 78% total gain, dividends included.

Foolish bottom line

With a reasonable management expense ratio (MER) of 0.6% – costing about $6 per year for every $1,000 invested – the XTR ETF offers professional multi-asset management in one simple package. If you want consistent monthly passive income, reduced downside risk, and peace of mind during market storms, this ETF is an outstanding option for relative safety.

The post A Magnificent ETF I’d Buy for Relative Safety appeared first on The Motley Fool Canada.

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Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool recommends BlackRock. The Motley Fool has a disclosure policy.