A different phase for investing. If you’re at or near retirement, the time has come to think about your investment portfolio differently. It’s as much about saving what you’ve built as it is about finding…
A different phase for investing.
If you’re at or near retirement, the time has come to think about your investment portfolio differently. It’s as much about saving what you’ve built as it is about finding a way to pay the bills with what you have in your nest egg. This demands a lower-risk approach to investing, and one that focuses on income from regular interest payments from bonds or dividend stocks. Such approaches will allow you to keep more of what you’ve saved, and reliably provide the comfortable retirement for which you’ve worked and saved. Here are nine exchange-traded funds that fit that description.
Early in your investing life, it’s OK to be aggressive and chase capital appreciation. However, retirement investors place a priority on preserving the cash they’ve worked so hard to save over the course of their working life. For retirement investors, then, being conservative is the way to go. This iShares fund offers a way to embrace that approach with a balanced fund that holds both stocks and bonds — with stocks currently representing less than half of the portfolio. You leave some growth potential on the table with this strategy, but you protect more of your nest egg.
Invesco S&P 500 High Dividend Low Volatility ETF (SPHD)
The SPHD fund is very careful about avoiding fast-moving stocks that can cause stress — or worse, cause big losses if things go south. It takes that strategy one step further with a focus on big dividends as well to provide income to retirees. This low-volatility fund focuses on 50 of the S&P 500 stocks with the lowest trailing 12-month volatility ratings. Sure, they aren’t quite as safe as bonds, but these companies include telecom AT&T (T) and REIT Realty Income Corp. (O) that are very stable and pay substantial dividends. That gives this ETF a current yield north of 4 percent right now, which is better than many bond funds.
The name may look like alphabet soup at first glance, but it’s easy to unpack: this is an iShares “minimum volatility” fund that uses an MSCI-curated list of Europe, Australia and Far East corporations. In other words, it’s an international fund that looks for low-risk global investments — the perfect way for a retirement investor to diversify without getting into risky small-time corporations in uncertain markets. It’s no surprise, then, that top investments of this fund are multinationals that are just as bulletproof as your favorite U.S. blue chips, including Swiss consumer giant Nestle and Japanese telecom NTT DoCoMo.
With an expense ratio of just 0.07 percent annually, or $7 on a $10,000 investment, this Vanguard fund keeps with the firm’s philosophy of rock-bottom fees. Interestingly, unlike many vanilla index funds offered by Vanguard, this fund isn’t your typical cookie cutter ETF, with a bias toward the biggest U.S. stocks and holdings that exhibit strong value. This could be a very wise bet for investors looking for stable retirement ETFs, because value stocks tend to be less volatile. That combination of massive scale plus inherent value means a portfolio with heavyweights like health care giant Johnson & Johnson (JNJ) that are sure to be around across your retirement journey.
“Hedge” may conjure impressions of an aggressive fund that seeks to replicate the returns of a private equity firm or hedge fund. But QAI is a “multi-strategy” approach to the market — because the hedging is a way to mitigate risk, not take extra risk on in pursuit of massive returns. This ETF seeks uncorrelated returns — meaning it’s not at the whims of the broader market, which as an element of a retirement portfolio can help smooth things out. And the fund’s top position now is holding about 20 percent of all assets in low-risk, short-term Treasury bonds, proving it’s not designed for aggressive bets in exotic assets.
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (TFI)
While some investors may have been swayed by hysterical headlines about a handful of cities defaulting on their municipal bonds, this asset class is one of the most stable in the long term — and with a diversified ETF like TFI, you can be sure to reduce that risk even further across some 3,800 different bonds. Why go with muni bonds? Well, they tend to offer a better income stream than U.S. Treasurys while still offering much lower risk than alternatives like dividend stocks. There can also be some local tax advantages based on your income and state of residence, which is an even bigger bonus to retirees on a budget.
The Pimco Total Return Bond Fund was once the world’s largest bond fund at a peak of $292.9 billion in assets, under iconic manager Bill Gross. The fund has waned and Gross has moved on, but the power of this actively managed bond strategy remains attractive, and is now offered in ETF form. Why would you want an active bond fund? In a rising interest-rate environment, many investors see the principal value of their bond investments generally decline. But a manager can make decisions to avoid that pressure — presuming the experts behind BOND make the right choices to protect your money in a way you couldn’t on your own.
As the name implies, this is a dividend fund tailor-made for a rising interest-rate environment. As mentioned before, if rates keep rising then you might have to consider an alternative to a traditional bond fund — and this Fidelity offering is worth a look. FDRR is very much a dividend stock fund, with a focus on mid-sized and large companies that continue to grow their payouts and “have a positive correlation of returns to increasing 10-year U.S. Treasury yields” based on past data. Now, those picks include tech stocks like Apple (AAPL) and some banks like JPMorgan Chase & Co. (JPM) that benefit from higher rates.
You could do worse than simply buying a broad market fund in retirement like the SPY from State Street Global Advisors. After all, the stock market consistently goes up over the long-term — and the sad reality is that most investors simply don’t have enough saved, even in retirement. If this sounds like you, that means you can’t afford to sacrifice growth — particularly for retirees who can’t rely on wages or employer contributions to their 401(k) anymore. This ETF, benchmarked to the S&P 500, has almost $280 billion in assets under management and is a mainstay of investors for good reason.