One of these ETFs produces regular income. The other is a growth machine.
Many retirement portfolios are focused on income generation. This strategy makes a lot of sense. In retirement, past sources of income may not be available. And investment portfolios must be relied on to help satisfy life’s expenses.
But don’t forget about growth. If you’re lucky, your retirement will last decades. So if you want a well-rounded retirement portfolio, you’ll want to include investments that focus on both growth and income. For that purpose, these two ETFs will have you mostly covered.
This ETF is a reliable way to generate retirement income
One of my favorite ETFs of all time is the Vanguard Utilities ETF (VPU -0.10%). As its name suggests, this ETF is focused on utility businesses — a perfect option for retirement portfolios.
That’s because most utility companies don’t see huge swings in demand or pricing during market downturns. In a recession, for example, few people cut back on their water or heating needs. And because many utility operators are rate regulated — meaning that their pricing is determined in advance by regulators — they’re not affected by sudden downturns in pricing, either.
Let’s take a look at this ETF’s history during bear markets. In 2018, the S&P 500 lost around 7% of its value. The Vanguard Utilities ETF, meanwhile, rose in value by 4.4%. Then in 2022, when the S&P 500 lost roughly 19% of its value, VPU’s value rose by 1.1%.
Clearly, this ETF can insulate your retirement portfolio from losses during market volatility. Meanwhile, this fund regularly delivers a dividend yield between 3% and 4% — although that yield has recently fallen below 3% after a strong run-up in 2024.
In total, the Vanguard Utilities ETF can provide stability and income for your portfolio over the long term. But you’ll also need to include investments with greater growth potential. For that, you’ll want to consider the next ETF.
Go for growth with this retirement ETF
Most retirees have little to no exposure to cryptocurrencies. And that’s for good reason. Crypto can be a confusing and complex topic. And the volatility in crypto markets isn’t necessarily what retirees are looking for.
Yet, there’s a sound reason to invest at least a small part of your portfolio — even as little as 1% — into this category that is capable of truly massive growth. Over the past decade, for instance, Bitcoin‘s value has skyrocketed by more than 17,000%. The S&P 500, meanwhile, grew in value by just 278% over the same time period. Of course, we can’t know what the next decade will bring.
But if you want to get instant exposure to crypto, simply buy shares of the iShares Bitcoin Trust ETF (IBIT 2.13%). This ETF has a reasonable expense ratio of 0.12%, and it simply seeks to track the price performance of Bitcoin versus investing in a Wild West-like ecosystem of crypto start-ups that may or may not create long-term value. A decade from now, Bitcoin will likely still be around. The same cannot be said of the hundreds of blockchain start-ups today.
As history has proven, even a small 1% allocation to the iShares Bitcoin Trust ETF could potentially add huge growth potential for your retirement portfolio. And if you want your nest egg to last for decades, you’ll need more than just income and stability. Most retirement portfolios ignore the potential of crypto, but you shouldn’t.
