Whether you're in retirement and living off of your portfolio or decades away from calling it a career, there are ETFs which are suitable regardless. Asset allocation may differ depending upon where you are in the life cycle, but funds that feature broad diversification, low fees and smart strategies fit in just about any portfolio.
Your personal retirement plan allocation may be on either end of the spectrum, but most portfolios should consist of both stocks and bonds to some degree. Vanguard focuses heavily on those tenets of diversification & low cost and doesn't drift into niche or specialty offerings, so it makes an ideal spot to fill out your core retirement portfolio.
Whether you're building your IRA (Vanguard charges no transaction fees on thousands of ETFs on their platform) or investing through a workplace retirement plan, these 6 ETFs are options that you can plug into your portfolio and hold forever.
Vanguard Dividend Appreciation ETF (VIG)
VIG is one of the best dividend growth ETFs in the business. It targets mostly large-cap companies that have a minimum 10-year history of consecutive annual dividend increases.
Targeting dividend growers is one of the most popular strategies for generating portfolio income. Dividend growth was easily the best-performing equity dividend strategy of 2020 (defeating quality dividends and high yield) and nearly managed to keep pace with the S&P 500 despite the market's preference for growth.
VIG will likely never pay a huge yield (it's currently right around 1.6%), but its focus on large, successful, cash-rich companies makes for an ideal portfolio cornerstone.
Vanguard Total World Bond ETF (BNDW)
This isn't necessarily one of the more well-known ETFs in the Vanguard lineup, but it makes a lot of sense. It's simply a roughly 50/50 combination of the Vanguard Total Bond Market ETF (BND) and the Vanguard Total International Bond Market ETF (BNDX), two of Vanguard's other core bond offerings. Better yet, owning BNDW instead of the BND/BNDX combination comes at virtually no additional cost.
If there's a downside to this fund, it's that it's heavily tilted towards government and sovereign debt. If you're looking to balance things out a bit and add a little more corporate bond exposure to your portfolio, consider adding the Vanguard Total Corporate Bond ETF (VTC) to the mix.
Vanguard Total World Stock ETF (VT)
If I'm offering up BNDW as a bond ETF, it makes sense to discuss VT as a stock ETF. This might be one of the most complete stock fund offerings in the marketplace. It tracks the FTSE Global All Cap Index, which includes a total of approximately 7,400 stocks located in 47 countries and covering large-, mid- and small-caps.
For just 0.08% annually, VT offers a portfolio that contains 60% North America, 17% Europe, 13% Asia and 10% emerging markets.
Vanguard Real Estate ETF (VNQ)
Market watchers and financial advisors generally recommend that all investors have some exposure to real estate. The sector's low correlation with other asset classes and comparatively high yields make them an ideal addition for yield-focused portfolios and portfolios in general. The general guideline that 10% of your portfolio should be in REITs is appropriate, although that percentage can vary depending on your income needs.
VNQ has healthy allocations to residential, healthcare and industrial REITs, but its largest allocation goes to specialty REITs. Those could include things, such as prisons, casinos, farmland and hospitality businesses.
Vanguard Short-Term Inflation Protected Securities ETF (VTIP)
While inflation hasn't been a significant consideration for many years, there's always a need for portfolio protection from rising consumer costs. With trillions of dollars of stimulus injected into the economy (and trillions more potentially to come), the likelihood that all of this cheap money spiking inflation rates is very real.
VTIP is one of the highest rated funds in this space. It targets the shorter end of the maturity spectrum by focusing on notes with remaining maturities of less than five years. It's perhaps the better strategy in the current low rate environment as it reduces a lot of potential volatility and helps minimize interest rate risk.
Vanguard ESG U.S. Stock ETF (ESGV)
Socially conscious investing has been a rapidly growing trend among investors and ETF issuers have capitalized on their increasing popularity. ESGV is just one of Vanguard's entries into this space and at 0.12% is also one of the cheapest.
This fund starts with an all-cap universe of U.S. stocks and eliminates those engaged in adult entertainment, alcohol, tobacco, weapons, fossil fuels, gambling, and nuclear power. It can make a great core portfolio holding while allowing you to avoid some of those morally questionable businesses that many investors would prefer to avoid.