Investors in Houston, Texas who are seeking long-term passive income strategies may find it challenging to keep up with the returns of the S&P 500 index due to its skewed allocations towards technology companies. Diversification is key for income investors, with the goal of earning a decent income that grows over time while outpacing inflation rates. One way to achieve this is by investing in funds such as ETFs, CEFs, or Mutual funds, which offer diversification across various asset classes and sectors.

One recommended fund for a passive income portfolio is the Schwab U.S. Dividend Equity ETF (SCHD), known for its high dividend yield and consistent growth. Investors can benefit from the fund’s exposure to large-cap holdings while maintaining a focus on dividend income. Another option is the Alerian MLP ETF (AMLP), which invests in master limited partnerships in the energy sector, providing a stable income stream through essential energy infrastructure activities.

For exposure to the utility sector, the Reaves Utility Income Trust (UTG) offers a reliable dividend income with the potential to match S&P 500 returns in the long term. Additionally, the Cohen & Steers REIT & Preferred Income Fund (RNP) provides a balance between real estate and preferred asset classes, offering investors a diversified income source.

JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) is another fund that focuses on large-cap growth stocks from the NASDAQ index, offering significant income with exposure to technology companies. By utilizing covered call options, the fund aims to provide investors with a high monthly income stream while managing volatility.

In creating a well-balanced portfolio, investors may consider allocating funds across these five recommended options to achieve diversification across various sectors. By adjusting allocations based on sector exposure, investors can tailor their portfolios to meet income and growth objectives while minimizing risk.

Moving towards fund-based investments can offer a more passive and manageable approach for investors, particularly those looking for a worry-free income stream. With the potential to hold these funds for a five-year period, investors can benefit from a diversified income portfolio while minimizing the need for constant monitoring and adjustments.