Tosecure a million dollars in retirement, consider investing in these straightforward index funds and maintain a long-term stance:
Eager to become a millionaire before retirement, even with a modest income? It's achievable! By exercising discipline to save and being smart with your investments, you're on the right track. This isn't about engaging in risky ventures or constant stock trading. In fact, simplicity and patience often yield the best results.
Let's delve into three straightforward, high-potential exchange-traded funds (ETFs) perfect for your portfolio. In no particular order:
Vanguard Dividend Appreciation ETF (VIG)
The Vanguard Dividend Appreciation ETF's goal is to hold stocks that offer consistently increasing dividends. It mirrors the performance of the S&P U.S. Dividend Growers Index, focusing on U.S. companies that have increased their dividend payments continuously for at least the past decade.
A twist: the index excludes the 25% highest-yielding tickers. While this reduces the current yield (1.7%), it also weeds out potentially risky stocks with inflated dividends.
Even if you don't require income immediately, reinvest those dividends. Your best-dividend payers often lead the market in terms of capital appreciation. Over 1973-2023, S&P 500 constituents with consistent dividend increases reported an average annualized net gain of over 10%, compared to 5% for non-dividend-increasing or non-paying stocks.
iShares Core S&P Mid-Cap ETF (IJH)
The SPDR S&P 500 ETF Trust (SPY) mirrors the S&P 500 index, focusing on the market's largest companies. However, smaller companies that make up 20% of the market's total value are not included.
The iShares Core S&P Mid-Cap ETF takes care of this gap, tracking the S&P 400 Mid Cap Index. These are mid-cap companies with market caps between $2 and $10 billion. S&P 400 stocks have outperformed S&P 500 stocks by two to one since the beginning of the current century.
Invesco QQQ Trust (QQQ)
The Invesco QQQ Trust offers access to the top tech companies' growth, even if they're risky or volatile. The ETF's top holdings (10 holdings represent half of the underlying Nasdaq-100 index's total value) typically include major tech giants like Apple, Nvidia, Microsoft, Amazon, and Meta.
While tech stocks have their challenges, they also promise substantial returns. By investing in the Invesco QQQ Trust, you gain convenient access to most of the tech sector’s best-growing names without worrying about managing individual stocks' entries and exits. This ETF has an added advantage of excluding financially-intense stocks like banks, brokers, asset managers, which may show weaker growth compared to other sectors.
To further boost your retirement savings, consider investing in low-risk ETFs like the Vanguard Dividend Appreciation ETF. By investing in this fund, you're supporting companies that consistently increase their dividend payments, potentially boosting your long-term returns. Remember, even if you're not in need of immediate income, reinvesting those dividends can lead to significant capital gains over time.
Moreover, diversifying your portfolio with ETFs such as the iShares Core S&P Mid-Cap ETF could yield even better results. This ETF focuses on smaller mid-cap companies that have often outperformed larger ones, offering an opportunity for higher returns with a lower risk profile compared to individual stocks.
