Key Takeaways:

• Emerging markets bonds lead with strong fundamentals and compelling yield.
• CLOs deliver resilient income and floating-rate protection.
• BDCs offer private-credit-like yield without the liquidity trade-off.
• Equity income adds diversification and non-bond sources of yield.
• Munis and investment grade bonds remain key selective opportunities.

Introduction to Income Investing

Income investing is a strategy that aims to generate a steady stream of income from investments, typically through interest payments or dividends. Income investing is often favored by investors who prioritize regular cash flow. Income investments include a range of assets such as bonds, dividend-paying stocks and real estate investment trusts (REITs). While income investing may offer less potential for significant capital gains, it can provide a reliable source of income and help diversify an investment portfolio.

Types of Income Investments

Below are three of the most common types of income investments:

• Bonds: Fixed income securities issued by corporations, governments, municipalities and securitized fixed income that pay a predetermined rate of interest to investors.
• Dividend-paying stocks: Stocks of companies that pay out a portion of their earnings to shareholders in the form of dividends.
• Real estate investment trusts (REITs): Companies that own and manage income-generating properties such as office buildings, shopping centers and apartment complexes.

VanEck offers a comprehensive suite of income strategies across the full spectrum of the global fixed income market. For the latest data and yields for VanEck’s income investing solutions, please refer to our Income Investing Yield Monitor.

Opportunities for Income Investing in 2026

After more than a decade of extraordinary monetary intervention that kept rates extremely low, the interest rate environment has recently started to normalize. However, with the Fed shifting back to easing, income-seeking investors are reassessing where to find yield in 2026. In our view, the Fed’s rate-cutting cycle is likely to be shallow. As inflationary pressures and fiscal concerns may persist, we expect continued volatility, and potentially higher, longer-term yields.

Income Investing in 2026: Where to Focus

In addition to uncertainty surrounding Fed policy, investors continue to face a more uncertain economic environment in 2026, with slower growth in the U.S. along with elevated geopolitical risk that is causing periods of volatility. While many areas of the fixed income market offer compelling value, two areas stand out for their ability to deliver attractive income without taking excessive duration or credit risk: collateralized loan obligations (CLOs) and emerging markets bonds.

Of course, determining the right mix of income investments for a broader strategic allocation will depend on each investor’s individual risk appetite. In a changing rate environment, success rarely comes from chasing the market’s knee-jerk reactions. Instead, investors are best served by combining long-term thinking with tactical flexibility, reassessing duration exposure, sector positioning, and alternative income sources without losing sight of overarching portfolio goals. In the sections that follow, we provide the resources you need to better understand the yield, risk and return dynamics across the full spectrum of the income investing landscape.

• Emerging Market Bonds Offer Attractive Yield and Diversification Potential
• CLOs: Engineered for Income with Built-in Risk Protections
• Gain Exposure to Private Credit (Without Sacrificing Liquidity) through BDCs
• Don’t Forget About Equity Income
• Municipal Bonds Are a Staple of Any Income Allocation
• Investment Grade Bonds Are Attractive…If You Know Where to Look
• VanEck Income Investing Solutions

Emerging Market Bonds: Attractive Yield and Diversification Potential

Emerging markets debt has been one of 2025’s strongest performers, with local currency bonds outpacing U.S. and global developed-market benchmarks by a wide margin. The asset class also offers attractive yields relative to other areas of the fixed income market. Heading into 2026, the asset class remains well positioned as it continues to be underpinned by strong fundamentals. Unlike developed markets, EM sovereigns entered this cycle with lower debt-to-GDP ratios, stronger fiscal positions, and positive current accounts. Many central banks hiked earlier and more aggressively post-COVID, leaving them with ample room to ease now.

However, while fundamentals increasingly favor emerging markets, the opportunities swing by country, currency, and cycle, and VanEck offers different ways to access the asset class. The VanEck J.P. Morgan EM Local Currency Bond ETF (EMLC) offers yield and diversification benefits within a broader portfolio, while the VanEck Emerging Markets High Yield Bond ETF (HYEM) delivers exposure to EM corporates that can provide several benefits within a broader high yield portfolio, including yield pickup, higher quality and diversification. The actively managed VanEck Emerging Markets Bond ETF (EMBX)\ invests across sovereigns, corporates and both hard- and local-currency EM debt.

CLOs: Engineered for Income with Built-in Risk Protections

CLOs are securitized pools of senior secured loans, and the asset class has become one of the most resilient sources of credit income in the market over the past decade. CLOs’ unique structure channels cashflows through a “waterfall” that prioritizes payments to the most senior tranches first, while lower tranches absorb risk. The built-in risk protections of CLOs have resulted in a very strong track record of low defaults that compares favorably versus other corporate credit investments with the same ratings.

In addition to its strong track record from a risk perspective, CLOs offer a yield pickup versus similarly rated bonds, and have historically offered a consistent and significant spread pickup. These attractive yield levels and built-in risk protections make CLOs a compelling source of relative value. VanEck offers investment grade exposure to this asset class through the VanEck CLO ETF (CLOI) and more targeted exposure to the mezzanine tranches of CLOs through the VanEck AA-BB CLO ETF (CLOB).

CLOs are also floating rate instruments, and while the risk of significantly higher rates has decreased with long-term yields at current levels, investments with less sensitivity to rate movements are still an important part of any broader fixed income allocation. In addition to CLOs, investors can turn to investment grade floating rate notes (FRNs) to gain floating-rate exposure. FRNs have coupons that are based on a short-term base rate, typically the Secured Overnight Funding Rate (SOFR), which reflect short-term funding costs, and an additional fixed spread that reflects the credit risk of the issuer. In our view, investment grade corporate FRNs may be an attractive complement to a cash-like portfolio that investors can access via the VanEck IG Floating Rate ETF (FLTR).

Gain Exposure to Private Credit (Without Sacrificing Liquidity) Through BDCs

Demand for private credit is surging. The market size has nearly doubled since 2020, exceeding an estimated $1.5 trillion in 2024. This growth is expected to continue, with projections suggesting it could hit $3 trillion by 2028.¹

For investors, private credit offers the potential for higher yields and diversification. However, traditional private credit investments come with a drawback: illiquidity. Unlike publicly traded stocks or bonds, these investments often involve long lock-up periods, typically several years. This means your money is tied up for the duration, inaccessible for immediate needs or strategic portfolio adjustments.

Business development companies (BDCs) are another floating rate option for investors and can be a compelling way to gain exposure to the potential benefits of private credit without sacrificing the ability to access capital when necessary. BDCs generate income by lending to, and investing in, middle market companies. BDCs provide capital to small businesses, and in turn, give investors access the high-income potential of middle market loans that are generally exclusive and difficult to access. While not without risk, BDCs have historically offered yields well above other high yielding asset classes. VanEck offers access to this liquid area of the private credit market through the VanEck BDC Income ETF (BIZD).

Don’t Forget About Equity Income

Equity-income investing offers several compelling benefits within a broader income-oriented playbook and can serve as a diversifier since equity income allocations often respond differently than bonds during economic and rate-cycle shifts.

In the context of this framework, the VanEck Mortgage REIT Income ETF (MORT) and VanEck Preferred Securities ex Financials ETF (PFXF) illustrate how equity-income tools can be deployed tactically:

• MORT delivers access to the high-yield potential of U.S. mortgage REITs and offers a yield‐enhancement overlay within an income-seeking portfolio.
• PFXF provides exposure to preferred shares (a hybrid between equity and debt) issued by non-financial corporations, offering higher income than many common stocks, greater diversification and lower banking sector concentration risk.

Together, these strategies illustrate how equity-income tools can complement a broader income playbook by layering sources of yield beyond traditional bonds, while also offering differentiated equity-risk exposures.

Municipal Bonds Are a Staple of Any Income Allocation

Municipal bonds present a compelling opportunity for income investors in 2026 due to their tax-exempt interest income. With the U.S. national debt exceeding $36 trillion and annual interest payments surpassing $1 trillion, fiscal pressures may lead to higher taxes or reduced government spending, further enhancing the appeal of these bonds. The Fed's ongoing rate-cutting cycle, expected to continue in 2026, historically increases demand for fixed income assets like municipal bonds. Additionally, President Trump’s policies aim to reduce tax burdens but could also increase the national deficit, potentially leading to higher long-term interest rates. In this context, municipal bonds offer a stable and tax-advantaged option for income-focused investors navigating fiscal uncertainty and shifting tax policies.

VanEck offers broad exposure to the municipal bond asset class through the VanEck CEF Muni Income ETF (XMPT), and more targeted exposure via the VanEck Long Muni ETF (MLN) and VanEck High Yield Muni ETF (HYD).

Investment Grade Bonds Are Attractive…If You Know Where to Look

With investment grade corporate bond yields providing meaningful income while corporate bond spreads remain tight, we believe focusing on attractively valued bonds will continue to be important in 2026. In particular, this approach has historically provided significant outperformance relative to the broader corporate bond market, driven by price gains as bond spreads compress as well as risk management as this strategy avoids bonds that don’t offer enough compensation for the risks involved. The market is not homogenous, and there is significant scope for mispricing to exist, particularly as market volatility continues and as we continue to navigate an uncertain economic environment. Investors can access investment grade corporate bonds through the VanEck Moody’s Analytics BBB Corporate Bond ETF (MBBB) and the VanEck Moody’s Analytics IG Corporate Bond ETF (MIG).

VanEck Income Investing Solutions

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