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Retirement investing is different from regular investing. You want to go for more conservative choices – investments that are designed to grow, but more slowly, and that pay dividends of some kind.
ETFs are a very cost-efficient way to provide diversification and safety for your retirement portfolio. ETFs give you exposure to an entire sector without having to pick and choose individual stocks, which can carry a higher degree of risk.
These 5 ETFs provide diversification, safety, slow growth, and some dividends to help anchor your retirement portfolio.
Vanguard Consumer Staples ETF (NYSE:VDC) yields 2.08% with an expense ratio of only 0.14%. Consumer staples always are a good place to be invested because they are product that people don’t simply buy — they actually have to buy them.
They are things most people can’t live without, and whether sold in grocery stores or dollar stores, these companies should hold up better than most in any economy. Not surprisingly, VDC’s top three holdings are Proctor & Gamble (NYSE:PG), Coca-Cola (NYSE:KO) and Philip Morris International (NYSE:PM).
Energy Select Sector SPDR (NYSE:XLE) is another vital choice for your retirement portfolio. The world will always want, need, and use oil. No matter how much the Greenies protest, no matter how much government tries to stifle drilling, the black stuff always will be needed.
In fact, the more difficult government makes it for oil companies, the higher the price of oil, the more money these producers will make, and the better off XLE is. It pays 1.72% yield and costs a mere 0.16%.
Vanguard MSCI Emerging Markets ETF (NYSE:VWO) is another important play. While the West struggles through sovereign debt problems and high unemployment, emerging markets have a lot to look forward to.
What’s great about emerging markets is that there have nowhere to go but up. Although occasional nerves about regional stability will move these markets, the long-term trend is up and you should have some kind of growth element in the retirement portfolio. It yields 2.39%.
IShares S&P Preferred Stock Index Fund (NYSE:PFF) is a great choice for retirement because of the dividend yield and safety of preferred shares. Preferred stocks are stock-bond hybrids.
They provide the relative price stability of bonds but have significantly higher yields than most stocks, often in the 6% to 9% range. By resting above common stock in the capital stack, if a company should go bankrupt, preferred holders have a better chance of getting money back.
It’s a good way to diversify a bit away from just holding bonds, particularly during periods of low interest rates. The fund itself yields a very generous 6.67%.
The last ETF I suggest owning for retirement is the Financial Select Sector SPDR ETF (NYSE:XLF). There are two big reasons for this choice. First of all, financial services are a critical aspect of our global infrastructure. Think about it.
Nothing happens in the world that doesn’t involve a transaction of some kind, and all those transactions have to be handled by someone on each end, plus a bevy of processors in-between. That doesn’t even speak to the necessity for banks, investment banks, insurance companies, and all kinds of non-bank services. Second, financial stocks pay dividends. This ETF pays 1.56% in yield.
Lawrence Meyers owns shares of PFF.
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