7 Dependable Mutual Funds for Retirement

Retirement is a stage in an investor's life for diverse, reliable mutual funds

By Kent Thune, InvestorPlace Contributor

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Mutual funds can be smart investments at any stage of life but their greatest attributes may be best leveraged when investors get into their 60s, as they begin to seriously consider retirement.

7 Dependable Mutual Funds for Retirement
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Investing in retirement can be more challenging than in the pre-retirement years because there are at least three objectives — growth, income and preservation — that need to be met simultaneously.

The versatility and diversification of mutual funds enable them to meet any or all investment objectives for the retired investor. Some types of mutual funds meet one specific objective while other meet a combination of two or three objectives. But not all mutual funds have the kind of flexibility and reliability to meet the needs of retirees.

With these unique needs of retired investors in mind, we put together a list of seven dependable mutual funds for retirement.

Dependable Mutual Funds for Retirement: Vanguard Total Stock Market Index (VTSMX)

Dependable Mutual Funds for Retirement: Vanguard Total Stock Market Index (VTSMX)Expenses: 0.15%, or $15 annually per every $10,000 invested
Minimum Initial Investment: $3,000

A well-diversified, low-cost core holding is a must-have in retirement, as it is in almost every stage of an investor’s life, and Vanguard Total Stock Market Index (MUTF:VTSMX) is arguably the best of mutual funds to fill this space.

VTSMX is the world’s largest mutual fund, as measured by assets under management, for a reason: It’s a cheap way to get diversified exposure to the entire U.S. equity market.

The fund’s benchmark index, the CRSP US Total Market Index, is cap-weighted, which means you’ll get a heavy dose of quality large-caps like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), but also some U.S. small- and mid-cap stocks to balance out the mix.

Dependable Mutual Funds for Retirement: Fidelity Capital & Income (FAGIX)

Dependable Mutual Funds for Retirement: Fidelity Capital & Income (FAGIX)
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Expenses: 0.73%
Minimum Initial Investment: $2,500

If you believe that dependable mutual funds for retirement mean investments with long track records of top-notch growth and income, you’ll want to check out Fidelity Capital & Income (MUTF:FAGIX).

Since the retirement can be considered a long-term investment objective, especially for those in their 60’s, a high-quality mutual fund that can grow the nest egg while kicking off high yields is a wise holding.

The FAGIX portfolio consists of roughly 20% stocks, 70% bonds and 10% cash. The equity side is mostly growth stocks like GOOGL, Skyworks (NASDAQ:SWKS) and Facebook Inc (NASDAQ:FB), and the fixed income mix consists primarily of high-yield bonds.

Dependable Mutual Funds for Retirement: Vanguard High-Yield Tax-Exempt (VWAHX)

Expenses: 0.19%
Minimum Initial Investment: $3,000

It’s not easy to get decent yields while minimizing taxes, which are both crucial for retirees with taxable accounts, but Vanguard High-Yield Tax-Exempt (MUTF:VWAHX) can accomplish the dual objective.

Retirees need income but they also want to effectively manage one of the biggest of investor enemies — taxes. By holding municipal bonds with lower credit quality, VWAHX can provide high relative yields to produce income that is not taxable at the federal level.

This high-yield, tax-efficient combination will be especially attractive to investors in high-income tax brackets.

Dependable Mutual Funds for Retirement: Dodge & Cox Stock (DODGX)

Dependable Mutual Funds for Retirement: Dodge & Cox Stock (DODGX)Expenses: 0.52%
Minimum Initial Investment: $2,500

Any list of retirement mutual funds worth noting should include rock-solid Dodge & Cox Stock Fund (MUTF:DODGX).

You’d be hard-pressed to find a top-notch, actively managed fund like DODGX with such low expenses. The portfolio focuses on high-quality large-cap value stocks like Charles Schwab Corp (NYSE:SCHW), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC).

The large-value focus has the fund leaning toward financial stocks (more than one-fourth of the portfolio) but the experience and depth of the Dodge & Cox management team make DODGX one of the most dependable stock funds on the market.

Dependable Mutual Funds for Retirement: Vanguard Tax-Managed Balanced (VTMFX)

Dependable Mutual Funds for Retirement: Vanguard Tax-Managed Balanced (VTMFX)Expenses: 0.09%
Minimum Initial Investment: $10,000

Vanguard has a strong selection of balanced funds and Vanguard Tax-Managed Balanced (MUTF:VTMFX) is one the best in the lineup for retired investors with taxable brokerage accounts.

With VTMFX, retired investors can combine the crucial retirement investment objectives of growth, income and tax-efficiency, all in one low-cost fund.

The portfolio consists of roughly 50% stocks and 50% bonds. For growth and income, the portfolio relies on stocks, which are mostly large-caps like AAPL, GOOG, and MSFT. The bond style is mostly high-quality with nearly all of the securities above investment grade.

Dependable Mutual Funds for Retirement: Vanguard Managed Payout (VPGDX)

Dependable Mutual Funds for Retirement: Vanguard Managed Payout (VPGDX)Expenses: 0.34%
Minimum Initial Investment: $25,000

Investors looking for a consistent withdrawal rate in retirement should take a close look at Vanguard Managed Payout (MUTF:VPGDX).

As the name implies, the Managed Payout fund is an actively managed mutual fund that distributes a target percentage payout to shareholders. Portfolio managers target an annual distribution rate of 4%.

VPGDX mimics a complete portfolio because its holdings consist of a set of other Vanguard funds, including Vanguard Total Stock Market Index (MUTF:VTSMX), Vanguard Total International Stock (MUTF:VGTSX) and Vanguard Total Bond Market II (MUTF:VTBIX).

Dependable Mutual Funds for Retirement: Vanguard Wellesley Income (VWINX)

Dependable Mutual Funds for Retirement: Vanguard Wellesley Income (VWINX)Expenses: 0.34%
Minimum Initial Investment: $3,000

Retirees needing a rock solid, conservative allocation fund need look no further than Vanguard Wellesley Income (MUTF:VWINX). VWINX does a good job of balancing income and growth while minimizing market risk.

The portfolio consists of roughly two-thirds bonds and one-third stocks, which is conservative, but the fund’s long-term returns rival those of the best-balanced funds with moderate allocations.

The fixed-income side consists of nearly 1,000 bonds that are diversified across a wide range of duration and credit quality. The stocks are mostly quality large-caps like MSFT, JPMorgan Chase & Co. (NYSE:JPM) and Philip Morris (NYSE:PM).

As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. However, he holds VTSMX and VWINX in some client accounts. Under no circumstances does this information represent a recommendation to buy or sell securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/09/7-dependable-mutual-funds-for-retirement/.

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