In retirement, there's perhaps nothing more important than a steady income. After all, you're not collecting a paycheck anymore, so you need a reliable way to pay your bills on an ongoing basis. And while Social Security can pick up some of the slack, you need a solid portfolio to supplement those monthly benefits.
It's important to load your portfolio with investments that can generate reliable income without exposing you to excessive risk. Dividend-paying stocks often do the trick, but choosing those individually can be time-consuming.
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For this reason, you may want to focus on ETFs, or exchange-traded funds, that focus on steady income while offering underlying growth potential. And one ETF in particular stands out in that regard.
Why the Schwab U.S. Dividend Equity ETF works for retirees
The Schwab U.S. Dividend Equity ETF (SCHD 0.50%) invests in high-quality U.S. companies with stable financials and a strong history of paying dividends. It does so by tracking the Dow Jones U.S. Dividend 100 Index, which consists of well-established companies that fit this profile.
NYSEMKT: SCHD
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It's this approach that makes the Schwab U.S. Dividend Equity ETF a great fit for retirees. There are funds out there with higher yields. But the Schwab U.S. Dividend Equity ETF reduces some of the risks associated with investing in dividend stocks by focusing on quality and stability. That allows the fund to generate consistent income for investors.
Plus, the Schwab U.S. Dividend Equity ETF has an expense ratio of just 0.06%. This means investors won't be paying hefty fees that eat into returns.
Is the Schwab U.S. Dividend Equity ETF right for you?
If you're in the process of saving for retirement and are looking for growth-focused investments, the Schwab U.S. Dividend Equity ETF may not be an optimal fit. But if your goal is to generate predictable retirement income without taking on a load of risk, it's a fund worth considering.
Retirees are often encouraged to minimize risk in their portfolios. And that makes sense. When you've reached the point where you need to live off of your investments, you can only afford to expose yourself to so much volatility.
The Schwab U.S. Dividend Equity ETF isn't a no-risk investment. Like other equity ETFs, its value can dive during market downturns. But if you're looking to strike a balance between moderate risk and income you can bank on, it may be a great fit, especially if it's part of a balanced, diversified portfolio.
