This article was written by Brian Spero, a regular
contributor for the financial resource, Money Crashers, where he
shares his tips for investing and smart money management.
Exchange-traded funds (ETFs) have often been ignored when it
comes to investing for retirement, but the latest trends suggest a
growing number of investors are quickly warming to the idea.
Previously believed to be too risky for long-term strategies, ETFs
are gaining ground, and some experts suggest they're just as good
as managed mutual funds.
ETFs have become increasingly attractive for those struggling to
ramp up their retirement savings due to their low fees, relative
simplicity, tax advantages, and dynamic growth potential. Even big
corporations are starting to see their promise, and some have even
transferred assets to exchange-traded funds for retirement
portfolios.
In the coming years, more company-sponsored retirement and 401k
plans will likely follow suit. If you're considering adding ETFs to
your retirement portfolio, it's time to speak to your financial
advisor and take a look at these solid picks:
1. iShares Barclays TIPS Bond Fund (TIP)
Bonds traditionally bring stability to a stock portfolio, and
ETFs such as the iShares Barclays TIPS Bond Fund provide a more
cost-efficient and simple way to accomplish this than populating
your portfolio with individual bond holdings or a managed bond
mutual fund.
This ETF has primary holdings in treasury inflation-protected
securities (TIPS), and currently has total net assets of $21.8
billion. It has returned 6.30% since its inception in December
2003. If you're looking for an effective way to protect your
savings against inflation, this is a steady pick.
2. Vanguard REIT Index ETF (VNQ)
A peak performer over the last few years, the Vanguard REIT
Index ETF attempts to mirror the returns of the MSCI US REIT (real
estate investment trust) index. By investing broadly in real estate
investment trusts, this riskier fund serves to diversify a
portfolio that's heavy on stocks and bonds by offering the
potential for income, as well as growth.
Launched in September 2004, this Vanguard ETF has total net
assets of $29.7 billion spread across 118 stocks. It has returned a
solid 8.96% since inception, but has delivered a strong +22.22%
over the last three years. For the investor ready to add more risk
to his or her retirement portfolio, this Vanguard fund is a top
option in real estate investment trusts.
3. Global X Silver Miners ETF (SIL)
Precious metals have long been a method to bring balance to
a portfolio during unpredictable economic times, and an ETF
provides affordable, lower-risk entry into this challenging
investment category.
The Global X Silver Miners ETF employs a strategy meant to
correspond to the performance of the Solactive Global Silver Miners
Index, and was a standout fund over the past year, posting a 14.7%
return.
The ETF has a market cap of $321 million, and directs in excess
of 80% of its assets to securities in the silver mining industry,
with top holdings in Silver Wheaton Corp. (SLW), Industrias Penoles
CP (IPOAF), and Fresnillo plc (FRES).
As a long-term strategy, this fund removes the risk of investing
in a single company, is diversified geographically, and seeks to
provide a hedge against inflation with potential for higher
dividends by capitalizing on silver's consistent attractiveness as
an asset and growing prominence for use in industrial
applications.
4. Vanguard Russell 1000 ETF (VONE)
If you see value in investing in some of the most dynamic
publicly traded companies, the Vanguard Russell 1000 Growth Index
fund is highly rated in its class. A candidate for 401k managers
diversifying with ETFs, this fund focuses on large-cap growth
stocks, featuring allocations in blue chips including Exxon Mobil
(XOM), General Electric (GE), and Microsoft (MSFT).
More than 44% of its investments are centered in technology,
financials, and consumer services. This ETF is a solution for
results-driven investors eager to gain access to the long-term
growth potential of the largest U.S. companies, and willing to take
on the associated risk.
5. iShares Dow Jones Select Dividend Index Fund
(DVY)
Many tout value in the low-cost, high-dividend yield of the
iShares Dow Jones Select Dividend Index Fund, which has come alive
over the past three years posting a favorable 13.32% market price
returns over the period. Started in November 2003, the fund focuses
on investing in U.S. stocks with the most consistent positive
dividend results, and diversifies its $10.9 billion in total net
assets across 101 holdings.
This ETF is tilted heavily to the utilities sector, which
comprises more than 30% of the fund, and has top holdings in
Lorillard (LO), Lockheed Martin (LMT), and Chevron (CVX). This fund
seeks to provide a steady income stream.
Final Thoughts
If you're looking for a solution to inject some energy and
innovation into your retirement investment strategy, ETFs may be
the answer. By researching the various types of ETFs available,
identifying those that compliment your portfolio, and picking
stand-out performers from specific categories, you have the
opportunity to accelerate your retirement savings by limiting your
expenses.
Which other ETFs would you suggest?
ISHARS-DJ DVD (DVY): ETF Research Reports
GLBL-X SILVER (SIL): ETF Research Reports
ISHARS-BR TRES (TIP): ETF Research Reports
VIPERS-REIT (VNQ): ETF Research Reports
VANGD-RUS 1000 (VONE): ETF Research Reports
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