Everybody dreams of a long, financially independent retirement, but it takes careful planning and discipline to get there: Discipline in continuing to invest; discipline in riding out market volatility; and discipline in your investment choices.
One way to set a strong foundation under your retirement portfolio is to invest in broadly diversified, low-cost ETFs. These should deliver long-term growth without the more concentrated bets that can increase volatility and put your capital at higher risk. Once you have those set as the core of your portfolio, you can always add around the edges later with higher-risk, higher-potential-reward assets like AI stocks and crypto.
Here are three ETFs that can serve as bedrock holdings in your retirement portfolio and set you on your way toward millionaire status.
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The Vanguard Total Stock Market ETF
Few ETFs do a better job of giving investors exposure to the U.S. economy than the Vanguard Total Stock Market ETF (VTI 1.28%). It covers the entire U.S. stock market and holds more than 3,500 stocks. Plus, with an expense ratio of just 0.03%, it costs next to nothing to own.
A lot of investors would prefer the Vanguard S&P 500 ETF (VOO 1.24%) in this spot. There's certainly nothing wrong with that choice. However, I prefer the ETF that provides exposure to mid- and small-cap stocks as well. They provide an important diversification benefit, and they generally have higher return potential over the long term.
NYSEMKT: VTI
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The Vanguard Dividend Appreciation ETF
Portfolios geared to meet people's retirement needs will require more than just growth. They'll need income-focused assets to help balance things out. The Vanguard Dividend Appreciation ETF (VIG 0.91%) targets companies with records of at least 10 straight years of increasing their annual payouts to shareholders. To build up a streak like that requires a company to have consistent cash flow generation and a quality balance sheet.
NYSEMKT: VIG
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VIG's current dividend yield of 1.6% probably won't turn many heads, but it's the overall risk/return profile and long-term track record of total returns that make this ETF a solid choice for retirement portfolios.
The Invesco QQQ Trust
The Invesco QQQ Trust (QQQ 1.32%) mirrors the Nasdaq-100 index, so it holds stakes in the 100 largest non-financial companies on the Nasdaq. As such, it's viewed by many as the go-to ETF for tech stocks. In reality, only 64% of its value comes from tech stocks. But there's enough exposure to this sector and the "Magnificent Seven" stocks that it behaves like a quasi-tech ETF.
NASDAQ: QQQ
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The companies held by QQQ are among the leaders in driving innovation and technological advancements. Their performances can naturally be more volatile than businesses in steadier sectors, but they also have the clear potential to be above-average performers. Given its high concentration in tech, you probably wouldn't want this ETF to be your sole holding, but it's certainly worthy of a spot in your portfolio.
Looking for a cheaper version of this fund? Consider the Invesco Nasdaq 100 ETF (QQQM 1.28%). It invests in the exact same index, but has a lower expense ratio.
