When it comes to long-term investments designed to increase your account balances over time, there is no reason to complicate things with expensive sector bets or speculative SPAC positions. While the final decision on how to invest your money is ultimately yours, it is best to consider funds that tip the odds in your favor for long-term success. These funds share common characteristics: they are low-cost, widely diversified, actively traded, require little or no maintenance and tend to be easy to understand. In this article, we will see five exchange-traded funds (ETFs) prepared to increase your retirement account.
1. Vanguard Total World Stock ETF
THE Vanguard Total World Stock ETF (NYSEMKT: VT) offers global exposure to the main companies in the world. If you want to keep this fund – and just that fund – from the first 20 years until retirement, there is a good reason to do so. It is quite cheap, with an expense rate of 0.08%, offers exposure to a weighted average of the world economy and does not require manual maintenance or rebalancing of any kind.
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It would be difficult to find a fund with better ease of use, although a disadvantage here is that you have no control over the underlying portfolio. Basically, you will receive a 60% American / 40% international stock basket that you can safely hold in the long run. If you are approaching retirement, you should supplement that fund with a bond fund to cushion any short-term volatility.
2. Vanguard FTSE All-World ex-US ETF
If you want more control over your international holdings (say, if you believe 40% is a lot), you can consider Vanguard FTSE All-World ex-US ETF (NYSEMKT: VEU). The fund has an expense rate of 0.08% and is traded in a highly liquid market, but only invests in companies outside the United States. If you hold a S&P 500 fund in your IRA or other investment account, you may want to look at this fund as a potential pairing option. This fund can also make sense if you only want 20% or 30% exposure to international companies, as opposed to the 40% prescribed found on Total World Stock ETF.
3. Vanguard ESG US Stock ETF
For those concerned with climate change, natural resources and corporate governance (hint: you should be), the Vanguard ESG ETF (NYSEMKT: ESGV) it is a lower rate option for broad investment in environmentally conscious businesses. A significant portion of younger investors value the message behind their investments, and many strive to invest only in companies that align with their deep beliefs about the world and their way forward.
Many of the major holdings in this fund are similar to those of a standard S&P 500 index fund. However, the fund leaves out companies that harm the environment (oil and coal) or that operate in the so-called “sinful actions” industries (tobacco, alcohol and games of chance).
4. Schwab Emerging Markets ETF
The outlook for growth in emerging markets in the 2020s is generally quite positive, and the Schwab Emerging Markets ETF (NYSEMKT: SCHE) is one of the most tax-efficient ways to access this segment. This ETF invests mainly in China, Taiwan, India and Brazil and aims to capitalize on what appears to be a promising decade for emerging economies. It is recommended to use this ETF as part of a broader portfolio that already has positions in the United States and in developed foreign economies. Still, you will enjoy minimal fees and passive management, just like most Schwab ETFs.
5. A Bitcoin ETF – whenever one is available
We witness Bitcoin (CRYPT: BTC) take off to almost $ 50,000 in a matter of weeks. Therefore, it can be argued that keeping Bitcoin in a retirement portfolio is simply insurance against a fully digitized money future.
So far, no Bitcoin ETF is available in the United States, with regulators citing cryptocurrency volatility as prohibitive for daily investors. However, it is not difficult to imagine a not-too-distant future in which Bitcoin is a very significant part of how the world operates and, on that basis, a 1% allocation could be advisable. A Bitcoin ETF would provide ongoing, lower-rate access to cryptocurrency at major brokerages.
Less is better
The advantages of minimalist investment are many. It is much easier to select some funds with a high chance of long-term performance than to have dozens of funds spread across accounts and brokerage platforms. Investing is also an exercise in “leaving everything alone” and having the discipline to follow your long-term plan. You do not need to keep all funds on Vanguard, but you should keep funds at low rates, widely diversified and requiring little maintenance. If you commit to these ideas, you have the best chance of achieving a relaxing retirement.