5 ETFs Everything You Need for Retirement | Smart Change: Personal Finance
If you don’t buy ETFs in your retirement account, you should probably consider it. There are hundreds of popular and reputable ETFs designed to offer different types of performance. Whether you’re trying to maximize growth in your Roth IRA or trying to limit volatility in your 401(k), there are ETFs that can provide everything you need to meet your retirement goals.
1. SPDR S&P 500 ETF Trust
The SPDR S&P 500 ETF Trust (NYSEMKT: spy) It is the quintessential index fund of the ETF world. It is one of the oldest, largest and most popular financial products of its kind. The fund doesn’t do anything crazy – it only holds stocks that aim to replicate the performance Standard & Poor’s 500. This makes this ETF a useful cornerstone of almost any strategy when combined with other, more specific investments.
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This passive strategy allows for a very negligible 0.09% expense ratio, which means that returns for investors are not eroded year after year. The popularity of the fund leads to high trading volume, which makes it highly liquid with low trading costs. These are all great features that make this a great part of any retirement ETF strategy.
2. Vanguard Fund
The Vanguard Fund (NYSEMKT: VUG) It is a straightforward investment tool for investors seeking growth above a typical stock market index. The Vanguard Growth Fund is passively managed and aims to provide higher upside exposure without excessive risk. Its selection criteria include multiple screens to expand profits and sales across multiple time frames, so it maintains an ever-growing inventory. It currently has about 250 holdings.
Unlike ETFs that track the S&P 500, the Vanguard Growth ETF also owns mid-sized stocks. This helps investors mix in some performance and potentially outperform the market. The expense ratio of 0.04% for the ETF is low as it gets, so this is great for net returns. Younger investors who are building assets for retirement after a few decades down the road should consider a growth-heavy portfolio in their IRA or 401(k).
3. iShares Russell 2000 ETF
IRussell shares 2000 ETF (NYSEMKT: IWM) It is one of the most efficient investments for a diversified exposure to small business stocks. Small caps tend to be more volatile than their larger counterparts, but they can also provide more upside. Many of tomorrow’s dominant industry leaders are currently in their formative stages, and the investors who join in today will see huge returns. Small companies are also very popular among factor investors and the intelligent beta crowd, as research indicates that smaller companies tend to outperform larger companies in the long run.
The iShares Russell 2000 ETF has a relatively high expense ratio among index funds at 0.19%, so you have to pay a premium for it. This is still significantly lower than the typical fee for managed and specialized funds.
4. Schwab US Dividend Equity Fund
The Schwab Dividend Equity Fund (NYSEMKT: SCHD) It is one of the best options available to investors who want to get income from their investment portfolio. The fund owns 100 shares, all of which have at least 10 years of cash distribution to shareholders. The fund’s selection criteria target financial soundness, operational efficiency, profit growth and return. The resulting portfolio consists of companies with sustainable and reliable profits.
It currently boasts a distribution yield of 3.42%, which is well above the market average. This also comes with a very low expense ratio of 0.06% and great liquidity. Dividends are especially important for investors who are retired (or nearing retirement), so the Schwab Dividend Equity ETF can be a great option for older families looking to sell some of their growth assets.
5. iShares MSCI International Quality Factor ETF
The iShares MSCI International Quality Factor ETF (NYSEMKT: IQLT) It is another option for investors who prioritize stability. This fund examines its potential holdings based on return on equity, debt-to-equity ratio, and earnings variability. Then it weighs the portfolio based on its quality score rather than market value, so its biggest holdings are the stocks that fit it best. The ETF is made up of consistent and profitable stocks. This is not a recipe for higher growth or dividends, but it can be very attractive to retirees and other risk-averse investors.
Although the fund does not specifically target dividend stocks, its selection methodology tends to favor dividend-paying companies. Distribution yield of 3.57% is high. It is also a global fund, so it provides significant exposure to economies outside the United States. Investors may not be happy with the 0.3% spending rate, but it’s still manageable.
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Ryan Downie holds positions at the iShares Edge MSCI Intl Quality Factor ETF. Motley Fool has positions with and recommends a Vanguard Growth ETF. Motley Fool has a disclosure policy.