4 Types of ETFs to Help Grow Your Retirement Portfolio
There are many investments available to help you grow your retirement portfolio, but exchange-traded funds (ETFs) continue to be one of the most popular options. ETFs function very similarly to mutual funds in the sense that ETFs are used to buy bonds, stocks, and other securities to form a diversified portfolio. However, unlike mutual funds, ETFs are usually traded actively, so their long-term potential earnings can be higher - although they also come with associated risks.
But with so many ETFs available to choose from, how do you know which ones to consider? Here is a list of a few of the top ETF funds:
The Vanguard Group is one of the pioneers of index fund investing. Formed in 1975, they offer an extensive portfolio of index funds in the US with some of the lowest share prices available. For example, the Vanguard Dividend Appreciation tracks the performance of successful companies, like Microsoft and Walmart. Each unit is worth around $150 (at current rates) and guarantees a yield of at least 1.6%.
If that’s too big of an investment, there are also cheaper options like the Vanguard Short-Term Inflation-Protected Securities ($52 per unit) and Vanguard Total World Bond ($79 per unit). Their yields are much lower, however.
The Vanguard Dividend Appreciation is a great example of a dividend ETF, which is a fund that invests in big, dividend-paying corporations like Amazon. Therefore, top dividend ETFs like S&P 500 Dividend Aristocrats and iShares International Select Dividend are usually not the cheapest options around. However, they typically have the highest yields. S&P 500, for instance, currently has a yield of 2.57% and is priced at around $87 per unit. The large size of this fund helps to mitigate risk, as while some stock prices may drop, the other stocks in the fund can help to provide balance and reduce volatility.
If there’s one commodity that is likely to continue to increase in value over time, it’s gold. Indeed, despite the volatility caused by the pandemic, market researchers have predicted that the price of gold will increase by 11.5% at the end of 2021. However, purchasing gold directly may prove too big of an investment for most, so the next best thing is gold ETFs. Some of the best gold ETFs are those that invest directly in physical gold, like the SPDR Gold Trust and iShares Gold Trust, as the mineral is traded daily. Between the two, the iShares Gold Trust has a lower cost ($16 per unit) — making it a better option for someone who wants to invest in more than one security.
The tech industry has long been on the rise, but the recent pandemic has accelerated its growth. For example, a recent study by Research and Markets testifies that the global IT services market will reach $1.1 trillion by 2026. This is a year-over-year growth rate of 8.02%. Other tech fields like AI, gaming, and software development show a similar increase. As such, tech ETFs like the Technology Select Sector SPDR Fund, ARK Innovation, and Invesco QQQ Trust are investments that may continue to grow substantially over time.
For many individuals, ETFs such as those mentioned above are an easy and reasonably low-cost way to invest for retirement. In fact, many ETFs are worthwhile investments — it’s just a matter of how much you’re able to invest and how much risk you’re willing to take to grow your money.
For more retirement planning tips, check out our post on preparing for a successful retirement.
This content is developed from sources believed to be providing accurate information at the present time. The information provided is not written or intended as tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. Information provided here contains links and information from third-party sources which may not reflect the opinions of our individual financial professionals.