1 ETF I Wouldn't Touch With a 10-Foot Pole

Every investor has their preferences. Some folks chase the highest dividends, while others prefer slow and steady price appreciation. The income-focused investment approach of a retiree is different from the growth-chasing Wall Street exploits of your younger years.

But there are some investments come with attractive features, but also carry enough red flags to warrant a "thanks, but no thanks." Today, I'm talking about one exchange-traded fund (ETF) in this category. I simply can't imagine putting real money in the VanEck BDC Income ETF (NYSEMKT: BIZD) .

The allure of high dividends

Let's get one thing straight: The VanEck fund's dividend yield is impressive. At a whopping 10.4%, it's like the ETF is waving a giant "Free Money!" sign in the faces of income-focused investors. And the ETF has been pretty consistent with those payouts over the last couple of years.

It's easy to see this ETF's appeal for anyone looking to generate a steady income stream. Consistent high dividends are a rare find, and the VanEck BDC Income ETF definitely delivers on that front. I mean, good luck finding a savings account with a 10% annual interest rate. Even speculative high-yield bonds seldom soar this high.

The expense ratio elephant in the room

But there's a catch, and it's a big one.

The VanEck ETF comes with an expense ratio of 11.2%. That's not just a cover charge -- that's more like a VIP ticket fee every year just to hold onto your investment.

Compare that to something like the Vanguard S&P 500 ETF (NYSEMKT: VOO) , which has a rock-bottom expense ratio of 0.03% and offers a solid total return matching the overall stock market, and it's clear that the VanEck ETF's exorbitant fees can eat into those juicy dividends pretty quickly. High fees can significantly affect long-term returns, and in a world where every basis point counts, this is a major drawback.

The fund's fees are high for a reason. It's a passively managed index tracker with a modest management fee of 0.4%, but VanEck is investing in a risky group of stocks and funds. The VanEck fund's components carry a 10.8% ratio of acquired fund fees and expenses, which are passed on to the ETF's shareholders. Still, I'd rather dodge these secondhand fund fees and rely on other income-generating ETFs.

Better options for extreme-dividend hunters

For those who are determined to hunt down extreme dividends, there are other options out there that don't come with such a hefty price tag.

Take the Global X Russell 2000 Covered Call ETF (NYSEMKT: RYLD) and NEOS S&P 500 High Income ETF (NYSEMKT: SPYI) , two funds seeking high income by selling call options on broad market-tracking index funds . These ETFs offer generous yields of 13.2% and 12.1%, respectively. They also have expense ratios below 0.7%. Sure, their price gains might be mediocre, but at least you're not losing a chunk of your returns to fees.

When you're investing for income, the last thing you want is to see a big portion of your earnings gobbled up by high costs. Disappointing market returns may not be a big deal if you don't intend to sell your shares, and these high dividend yields are not burdened by massive expenses.

Assessing the risks

Another point to consider is the risk associated with the VanEck ETF's high yield. High yields often come with higher risk, and this ETF is no exception.

The fund focuses on business development companies (BDCs) , which can be more volatile and riskier than your average ETF. Their business model centers on providing capital to small or distressed companies. Investors need to be aware that while the dividends are high, so is the potential for price fluctuations. This added risk might not be suitable for all investors, especially those with a lower risk tolerance.

Finding the right high-income ETF for your portfolio

The VanEck ETF isn't all bad. For some investors, especially those who prioritize income above all else, the high dividend yield can make up for the high fees. And if you're reinvesting those dividends , you might still come out ahead in the long run.

But for my money, I'd rather not touch this ETF with a 10-foot pole. Instead, I'd consider low-fee ETFs like the Global X and NEOS funds mentioned above, which offer similar yields with lower costs. It's hard to come out ahead when facing a hurricane-strength headwind of extreme fees.

So if you're an extreme dividend hunter, keep your eyes open and consider all your options before making a decision. After all, a penny saved is a penny earned, especially when it comes to those pesky expense ratios.

And that's why I'm not touching this VanEck BDC Income ETF with a 10-foot pole. Your mileage may vary, but I see better income ETF options out there with lower fees and comparable yields.

Anders Bylund has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy .