Vanguard has always been one of the most trusted names in investing. That probably has to do with the fact that John Bogle tried to keep things simple for investors and was correct most of the time. But what about Vanguard ETFs for retired investors?
Vanguard continues to set the bar as far as low-cost mutual funds and ETFs. Low-cost is almost synonymous with its brand. When it comes to retirement, Vanguard ETF choices hold even more sway over investors, as they should.
However, one thing retirement investors need to know is that inflation is not 3%, but closer to 10%, so retirement investors can’t just throw all their money into income funds and bonds. They have to have a broader mix, and my stock and option advisory newsletter, The Liberty Portfolio, helps retirement investors create the right mix.
That doesn’t make the choice of funds unimportant, however.
So here are three Vanguard ETFs to buy for retirement. I’ve offered three different varieties for all kinds of retirement investors.
Vanguard ETFs For Retired Investors #1: Dividend Appreciation ETF (VIG)
The Dividend Appreciation ETF (NYSEARCA:VIG) is a solid choice for both pre-retirement investors and investors who are already in retirement. And it’s a great Vanguard ETF overall. VIG aims to invest in roughly 179 stocks with 10 or more years of dividend increases that meet various size and liquidity requirements.
You’ll find all the famous large-cap names in this fund, more heavily weighted towards industrials (33%), consumer services (14%), and health care (13%). Safety is the name of the game here, although the market as a whole is overvalued.
Also, as safety goes, this is a decent but not fantastic fund. The S&P 500 has a ten-year annual average return of 8.5% vs. VIG’s 8.54%, but VIG does it with about 15% less volatility.
Vanguard ETFs For Retired Investors #2: Vanguard Small-Cap Value Fund (VBR)
Retired investors often aren’t told to invest in small-cap stocks, but that sector has outperformed large caps over the very long term. Not only that, value has led growth.
So retired investors looking for a Vanguard ETF should consider Vanguard Small-Cap Value Index Fund ETF Shares (NYSEARCA:VBR).
Morningstar gives VBR a ten-year rating of four stars, with average risk and above average returns.
You won’t find a lot of names you recognize in this ETF, but that’s the point. These are under-followed small companies that will hopefully make it big some day.
This Vanguard ETF does have more volatility than the S&P 500, which is what you would expect. But it also has a ten-year average annual return of 9.76% to the S&P’s 8.5%. Over ten years, that is a significant difference in return. It is more risky than most retired investors might want, but having some kind of small-cap investment is key.
Vanguard ETFs For Retired Investors #3: Vanguard Health Care ETF (VHT)
Finally, one of the best performing funds in history is the Vanguard Health Care ETF (NYSEARCA:VHT).
Healthcare is always going to do well over time for the simple reason that healthcare is a fundamental part of life. People need it, and research will always improve health technology. Healthcare will always be necessary, and much of it involves repeat consumption over populations of millions.
The ETF is far broader in scope than its mutual fund counterpart, carrying 374 stocks against the other’s 75. VHT has 30% in pharma, 23% in biotech, 19% in equipment, and 13% in managed health care. Its largest holdings are all the big healthcare names you know and love.
According to Morningstar, the VHT blows away the MSCI ACWI benchmark. It has an 11.5% ten-year annual average return, with a standard deviation of 14.3, but the benchmark only has a 5.3% return with a 16.8 standard deviation.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market, and has written more than 1,800 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.