Constructing a frugal retirement portfolio? Two budget-friendly ETFs might prove beneficial:
Investing wisely can significantly impact your returns, especially over long periods. For instance, the gap between earning a 9% versus a 10% return on a $50,000 investment spans over $209,000 in 30 years! That's why it's crucial to consider low-cost investment options, particularly when saving for retirement.
Enter exchange-traded funds (ETFs)! These investment vehicles can be your savior, especially those with minimal fees. Long-term investors should focus on these budget-friendly ETFs. Two fantastic choices are the Vanguard S&P 500 ETF (VOO) and the Schwab U.S. Broad Market ETF (SCHB). Let's dive into why you should consider them as backbones for your retirement portfolio.
Vanguard S&P 500 ETF (VOO)
If you're aiming to mirror the S&P 500, the Vanguard S&P 500 ETF is a plain and simple solution. It provides exposure to the broad index, containing over 500 prominent and secure investments. The cherry on top? The fund's expense ratio is a meager 0.03%, meaning you won't burn a hole in your pocket for this market participation.
The fund's returns have closely resembled the S&P 500's performance over the past decade. This makes VOO an attractive option for investors seeking to ride the coattails of the market's long-term growth.
Though the index has hit record highs lately, it's generally a safe bet for investment. Over time, the S&P 500 has averaged an annual return of approximately 10%. While there might be phases of sluggish growth ahead, investing in the index is typically a smart bet for the economy's overall growth.
Schwab U.S. Broad Market ETF (SCHB)
Another option for investors is the Schwab U.S. Broad Market ETF. This fund tracks the Dow Jones U.S. Broad Stock Market Index, providing access to a vast range of stocks – a whopping 2,400 holdings! Its expense ratio is as appealing as VOO, ticking in at 0.03%.
The downside? Overwhelming diversification may result in less thrilling returns in some instances. Top stocks make up a smaller portion of SCHB's overall holdings, with tech stocks leading the pack at 30%, while financials, healthcare, and consumer discretionary follow closely behind.
However, if you prefer a fund with broad market exposure that doesn't lean heavily on tech stocks, SCHB might be your go-to choice. Although tech giants like Apple, Nvidia, and Microsoft rank atop its holdings, no single stock dominates the ETF with more than 6% of its overall portfolio.
For a well-balanced investment strategy, SCHB offers a fantastic, low-cost option for long-term portfolios.
Incorporating low-cost investment options like exchange-traded funds (ETFs) can help maximize your returns over the years, especially when focusing on retirement savings. For instance, the Vanguard S&P 500 ETF (VOO) with a minimal expense ratio of 0.03% can provide significant financial gains by mirroring the S&P 500's performance and reaping its average annual return of around 10%.
