Nathan Slaughter, the chief investment strategist for The Street Authority, says putting your money only in individual stocks sets you up for “repeated sucker punches.”

This sucker-punch effect is even stronger as US stocks whipsaw mercilessly because of continued concerns over the housing and credit crises.

Diversifying into the 150 available exchange-traded funds - ETFs - paying double-digit yields can change that.

This from Nathan:

Why shift to income? Simply put, companies that pay dividends tend to be very stable and represent mature industries. Many do business in non-cyclical sectors like utilities and these “defensive” companies pull in steady sales, even during tough times.

And dividend-paying investments fare much better during bear markets. For example, during 2000, 2001 and 2002, the dividend-paying stocks in the S&P 500 actually rose 10.46% while others sank 33.19%. And other 10-year periods have seen dividends provide the only return for the S&P.

So you can take a chance and continue to bet against the market. Or you can collect double digit yields on investments proven to weather the storm. I know which approach I’m taking - and ETFs offer dozens of outstanding choices for income investors.

In this area, high yields are the norm, not the exception. As of the end of July 2008, 198 ETFs sported yields of more than 10%. Only 132 common stocks can say the same.

And ETFs are particularly convenient those who simply invest to pick up some consistent, extra income. Why? Because more than 500 ETFs pay distributions on a monthly basis, rather than a quarterly or yearly rate.

Score Your Own K.O. With These ETF Choices

Take a look at these three high-yielding ETFs, all of which are generating double-digit income streams:

• • One “flexible” ETF we found boasts a 12.0% yield and has an impressive track record of adjusting its strategy to capture the best gains the market has to offer in high-yield bonds, royalty trusts and other equities. That strategy - which includes buying stocks with low P/E ratios while shortening stocks with high P/E ratios - has really paid off over the last year.
  • Another appealing choice invests in real-estate investment trusts (REITs) - entities required by law to pass along 90% of their earnings to shareholders. Our favorite in this space owns a portfolio that’s double-diversified by both property type and geography. It’s an approach that is paying off with a yield of 14.8%.
  • The third ETF focuses on Asian stocks, which owns mature, dividend-paying companies such as telecoms, financials and utilities. And it pays a 21.5% yield. This fund has increased its dividend payout by 200% in the past three years.

P.S. Slaughter has put together in-depth report that will show you the three best ways to profit from ETFs right now. This special report will reveal more on how to use ETFs to capture double-digit dividend yields - including more information about some of my favorite picks - and how to profit from today’s most promising sectors and foreign markets. For more information, just click here.

Source: How to Box Clever Against a Hostile Market and Score ‘Knockout’ Yields of 21.5%