Friday, 1 January 2021

Best ETFs And Index Funds For Retirement Investing


Purchasing index funds or ETFs is the easiest way to begin investing in the stock market, In begins reaping returns in the form of dividends and capital appreciation. They're not just for beginners though, a small selection of these funds has the potential to make everyday people extremely wealthy over time. 


There are so many to choose from that are offered by different companies with varying levels of expense past returns and sectors. But which funds are going to be most profitable and suit the needs of your portfolio? You might feel at a loss of where, to begin with too many options available, unable to understand which funds are geared towards your goals 


Here are some of the best funds in which to invest that will ensure the likelihood that your nest egg will be ready to hatch upon your retirement years.  




1. VOO

Warren Buffett suggests that the majority of investors put 90% of their money into a fund such as voo. Which is vanguards S&P 500 ETF. The S&P 500 is a basket of 500 of the largest U.S companies in a variety of sectors ranging from technology to healthcare which provides a substantial amount of sector diversification. Some of the criteria the stock must meet in order for a company to be selected for this index;


  • It must be a U.S company, 
  • The market cap must be 5.3 billion dollars or more, 
  • The company must report positive earnings for the past four quarters The stock must be trading at a reasonable share price


These are some of the reasons why Warren Buffett suggests an S&P 500 in most investors. A few names included in the fund are Apple, Microsoft, Exxon, and Johnson & Johnson. The dividend yield is currently less than 2%, in the fund's expense ratio is just .03%. If you're looking for the easiest ETF investment, it's hard to go wrong with a fund such as this 





2. DIA

The SPDR, Dow Jones Industrial Average ETF, tracks the 30 companies held within the Dow. These 30 companies are designed to be the best representation of the stock market. This as well as the S&P 500 is representative of the US economy. The holdings include Home Depot, McDonald's, coca-cola, Disney, and more. The Dow is one way to gain exposure to different aspects of the stock market, but if you're looking for diversification the S&P 500 would be a better bet because you'd be purchasing 500 or so companies


The Dow is more vulnerable when one company isn't performing well. The expense ratio is .17%, in the dividend is higher than the S&P 500 at just less than 2.5% 




3. VHT

VHT is a Vanguard fund comprised of healthcare stocks in relation to medical and healthcare products. Services, technology, or equipment. The three largest holdings consist of Johnson & Johnson, United Health Group, and Pfizer. Currently, there are almost 400 companies held in this fund and offered to investors at an expense ratio of 0.1%. The dividend yield is approximately 2% which will provide an average amount of income for shareholders


With the aging population in the United States, it's reasonable to assume that health care needs will be rising in the coming decades. Since the find is comprised of companies directly pertaining to the single stock sector of health care, risk will be above average. Investors can also attribute the higher than average risk due to the volatility associated with   pharmaceutical and healthcare companies  




3. VNQ

This is a Vanguard fund comprised of real estate investment trusts, which own office buildings, hotels, apartment buildings, and other income-producing properties, as well as a mortgage-backed security. REITs or real estate investment trusts are required by law to distribute 90% or more of their income in the form of dividends due to their business and tax structure which makes them great for income investors 


Vnq holds almost 200 different real estate-related stocks including American tower corporation, Simon Property Group, in Equity Residential. Investors looking to take part in real estate without owning tangible property can enjoy the benefits REITs have to offer, other than investing in property in dealing with the issues of renting, maintenance, and capital expenses. REITs offer the stability of real estate investing without the headaches. Additionally, the real estate sector has provided stellar returns in recent times, the VNQ fund has a healthy dividend yield of around 4%, which is great for retirees seeking income with an expense ratio of 0.12%




4. SPYG

SPDRs S&P 500 growth ETF owns stocks held within the S&P 500 that are geared towards growth, or stocks that are likely to appreciate in value. A growth fund is more volatile than a standard S&P 500 or high dividend fund, but long-term returns are historically higher than the overall market. If you're a younger investor who has plenty of time to wait out market fluctuations, this is a great option. However, during late market cycles when stocks are well into the longest bull run in history, it might be worth holding off on buying heavily into a more volatile fund such as this one.


When the economy suffers, growth stocks tend to get hit the hardest. The fund holds nearly 300 different stocks including names like Microsoft, Amazon, Facebook, and Google. Which are all fast-growing and evolving businesses. The dividend yield does less than 1.5 % in the expense ratio is 0.04% 




5. IVE

iShares sp500 value ETF owned stocks that are potentially undervalued in relation to other companies. In other words, stocks that are missed priced by the market in out trading at a discount. These ishared funds hold almost 400 different companies. The largest holdings consist, Bank of America, Chevron, Wells Fargo, and Walmart.


Value investing is the same strategy that Warren Buffett has implemented throughout his career and has provided him the ability to achieve an astonishing net worth of over 80 billion dollars. So if you enjoy the sale opportunity and believe that prices will eventually return to retail, adding this position will align with your beliefs. The expense ratio is 0.18%, in the dividend yield is just over 2%




6. SPHD

The Invesco S&P 500 high dividend low volatility ETF is a great fund for older investors or those nearing retirement. This fund holds about 50 different companies, many of which are real estate investment trusts which are designed to provide higher income and lower capital appreciation. Kymco Realty, iron mountain in AT&T are some of the largest holdings 


The dividend yield is currently over 4.5% which makes it desirable for those seeking income to pay bills. Buying that with lower volatility and can be a great holding for retirees who are able to live off their dividend payments without touching the principle of their investments.  What's most preferable about this fund compared to other high dividend alternatives is that the dividend is paid out monthly instead of quarterly. It's much easier to budget income received on a monthly basis instead of trying to plan three months ahead when your next diffident payment will arrive   


The expense ratio is slightly higher at 0.3%, but the monthly dividend payments might be worth the added cost. Unless you're simply reinvesting the dividends. Regardless, it can be very rewarding seeing payments come in every month instead of waiting for quarterly payments




7. VDC 

Vanguard consumer staples is a position to hedge against a poor economy due to the fact that the stocks held are non-discretionary. Consumer staples include companies like Procter & Gamble, which makes laundry detergent, dish soap, paper products, and related products. Philip Morris in Altria sells tobacco products in Walmart and Costco. You can expect to receive a tolerable amount of risk because the products sold by these companies are going to sell during all economic conditions


Some of these companies even tend to perform better during poor markets. In other words, more people will be buying food at Costco instead of eating out when times are tough. The dividend yield is just over 2.5% with an expense ratio of 0.1% which is extremely competitive




8. VT

The vanguard total world stock fund is an easy inexpensive way to gain exposure to global stocks comprised of the US and foreign companies. The fund owns an amazing amount of shares of over 8,000 different companies ranging from micro or a large-cap with most of the fund consisting of US stocks in a smaller combination of global markets. Holding companies such as Nestle, Berkshire Hathaway, and Apple. This fund is a great way for investors to add shares of global companies to their portfolios to avoid being invested in only US companies 


The expense ratio is .09%, in the dividend yields of approximately 2.5%





9. MJ

The alternative harvest marijuana ETF is a fund that holds companies related to the legal cannabis industry. There are currently 37 global holdings related to the marijuana industry including Aurora Cannabis, Canopy Growth, Tilray.


With the legalization of marijuana products in many locations, this can be a good opportunity to add some risk and excitement to your portfolio. Obviously, you want to assume a sizable amount of risk due to the volatile nature of these companies and their regulations, but if you're a younger investor and see potential in this industry, it's a good allocation for some fund money 



It's probably not a good idea to dedicate too much money to risky investments such as these, and how your risk might not even align with your plan. But a small amount of riskier investments is something to consider. The expense ratio is 0.75%, in the dividend yield is around 1%    






Conclusion 

There are so many different funds available at a reasonable cost. While many of them don't experience the day-to-day fluctuations that individual stocks are susceptible to, but allow investors to pick them up at a discounted price. Decreased volatility can be a good thing for most. However, it's been said that the exact investment isn't what's going to make you rich. It's the act of setting the money aside on a regular basis in receiving returns for a long period of time.


It's possible to build a well-diversified portfolio with just a small selection of these ETFs. So there's no reason to be overwhelmed by the number of options. If they're seemingly too many choices, take Warren Buffett's advice and put your money in a low-cost sp500 fund. Which will provide diversification among many different sectors and many different companies.


If you're the type of investor who enjoys doing more research on various sectors in making decisions based on what you think is likely to outperform, that's also possible with ETFs. A seemingly infinite amount of exchange-traded funds makes it possible to build a portfolio that will align with nearly anyone's investing goals  


No comments:

Post a comment