The question of how much money you'll need to retire with is a tricky one, as it's different for each of us, depending on factors such as our expected longevity, our household expenses and general cost of living, and whether we have income sources lined up besides Social Security benefits.
Many people shoot for $1 million, and that's a reasonable sum for plenty of us. If your retirement is far off, though, you might shoot for considerably more, as inflation will shrink the purchasing power of your savings over time. Here are nine ETFs (exchange-traded funds) to consider that can help you reach your goal of $1 million or more.
Image source: Getty Images.
How to achieve solid portfolio growth with ETFs
First, get a handle on how money grows and how much you might amass over time. The S&P 500 index of 500 of America's biggest companies has averaged annual returns close to 10% (ignoring inflation) over long periods, so let's be a bit conservative and assume 8% average annual growth:
|
Growing at 8% for |
$7,000 invested annually |
$15,000 invested annually |
|---|---|---|
|
5 years |
$44,351 |
$95,039 |
|
10 years |
$109,518 |
$234,682 |
|
15 years |
$205,270 |
$439,864 |
|
20 years |
$345,960 |
$741,344 |
|
25 years |
$552,681 |
$1,184,316 |
|
30 years |
$856,421 |
$1,835,188 |
|
35 years |
$1,302,715 |
$2,791,532 |
|
40 years |
$1,958,467 |
$4,196,716 |
Calculations by author.
Clearly, you can do quite well with a simple, low-fee, broad-market index fund. Here are three to consider in the table below. (Note that an expense ratio is an annual fee.)
|
ETF |
Expense Ratio |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
15-Year Avg. Annual Return |
|---|---|---|---|---|
|
Vanguard S&P 500 ETF (VOO 0.11%) |
0.03% |
15.32% |
12.90% |
14.32%* |
|
Vanguard Total Stock Market ETF (VTI 0.16%) |
0.35% |
14.36% |
12.20% |
14.23% |
|
Vanguard Total World Stock ETF (VT 0.11%) |
0.09% |
11.12% |
8.52% |
10.15% |
Source: Morningstar.com and Vanguard.com, as of June 17, 2024.
*Since inception, Sept. 7, 2010.
Here's a bit about each:
- Vanguard S&P 500 ETF: S&P 500 index funds are among the most common, for good reason. They are focused on 500 of the biggest companies in America, which together make up around 80% of the entire U.S. market.
- Vanguard Total Stock Market ETF: It's reasonable to consider this ETF, too, because it aims to include all U.S. stocks, including small and medium-sized ones.
- Vanguard Total World Stock ETF: This ETF aims to encompass just about all the stocks in the world.
The low-fee index funds above can be all you need to build a secure financial future for yourself.
Want to try to turbocharge your portfolio's growth?
If you can handle taking on more risk and volatility, consider parking some of your portfolio in more aggressive growers, such as the ETFs below, each of which is focused on a particular market sector. They have impressive track records but understand that their past results don't dictate their future ones. So think about which market sectors you're most bullish on and keep an eye on the sectors you invest in.
|
ETF |
Expense Ratio |
5-Year Avg. Annual Return |
10-Year Avg. Annual Return |
15-Year Avg. Annual Return |
|---|---|---|---|---|
|
VanEck Semiconductor ETF (SMH -0.69%) |
0.35% |
40.41% |
28.57% |
25.15% |
|
Technology Select Sector SPDR ETF (XLK 0.24%) |
0.09%: |
25.75% |
21.17% |
19.97% |
|
Health Care Select Sector SPDR ETF (XLV -0.45%) |
0.09% |
11.76% |
11.15% |
14.24% |
|
iShares US Home Construction ETF (ITB -0.24%) |
0.40% |
22.29% |
16.45% |
17.64% |
|
Vanguard Information Technology ETF (VGT 0.28%) |
0.10% |
24.17% |
21.09% |
20.12% |
|
Fidelity Cloud Computing ETF (FCLD 2.26%) |
0.39% |
N/A |
N/A |
N/A |
Source: Morningstar.com, as of June 17, 2024.
Here's a bit about each of the ETFs above:
- VanEck Semiconductor ETF: This ETF owns about 25 stocks, with nearly a quarter of its value recently in Nvidia alone.
- Technology Select Sector SPDR ETF: This ETF encompasses semiconductors, IT consultants, software, computers, and more. It recently held about 65 stocks, with top berths going to Microsoft, Apple, and Nvidia.
- Health Care Select Sector SPDR ETF: This ETF includes companies involved in everything from biotechnology and pharmaceuticals to healthcare equipment and supplies. Its 64 holdings were recently led by Eli Lilly, UnitedHealth, and Johnson & Johnson.
- iShares US Home Construction ETF: This ETF is focused on U.S. businesses that build homes. It recently held about 44 stocks, with its biggest holdings being D.R. Horton, Lennar, and NVR.
- Vanguard Information Technology ETF: This ETF recently boasted 313 stocks, with its biggest holdings recently being Microsoft, Apple, Nvidia, Broadcom, and Salesforce.
- Fidelity Cloud Computing ETF: This ETF is fairly new, having launched in 2021, so there are no long-term returns to share in the table above. Know that it lost 41% in 2022 and gained 53% in 2023. It's likely to remain volatile, but consider it if you're optimistic about cloud computing. Its 48 holdings recently featured Oracle, Microsoft, and Intuit.
Keep this in mind
As you save and invest for retirement, be sure you have an overall retirement plan and stick to it. Making good use of tax-advantaged retirement accounts such as IRAs and 401(k)s is also a good idea. Remember, too, that you might park most of your dollars in one or more broad-market index ETFs and a portion of your portfolio in a few ETFs you hope will grow even faster.
