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Top ETF Picks for Your IRA

Neena Mishra
Investors have more money parked in such funds compared to the actively managed ones.

With the tax filing deadline of April 15 a few days away, investors still have some time to make contributions to their individual retirement accounts (IRAs) for the 2018 tax year.

IRAs allow investors to buy stocks, bonds, ETFs and mutual funds.  ETFs are excellent tools for retirement investors as well since they provide an easy way to build a diversified portfolio at a low cost. Further, income paying ETFs are better placed in an IRA as income is sheltered from taxes.

Before investing for retirement, investors need to assess their investing goals, time horizon and risk tolerance. Low-cost, broad, diversified funds are more suitable for retirement investors as core, long-term investments rather than costly, narrow-focused or niche ETFs.

Expense ratio of an ETF should be an important consideration in retirement investing, as in the long-term, cheaper funds can significantly outperform their more expensive counterparts.

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) is a convenient way to get exposure to the entire US stock universe, ranging from some of the smallest to largest companies at an extremely low cost of just 3 basis points.

It holds more than 3,600 stocks in its basket and should be a core holding in any long-term focused portfolio. Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) are its top holdings.

The Schwab U.S. Large-Cap Value ETF (SCHV) provides broad exposure to large-cap U.S. stocks with value style characteristics. It has an expense ratio of just 4 basis points, while the dividend yield is 2.9%.

Numerous academic studies have shown that value stocks have delivered higher returns with lower volatility compared with growth stocks over the long term in almost all the markets studied. Thus value stocks and funds should be a part of any ‘core’ portfolio.
 

The Vanguard Real Estate ETF (VNQ), the most popular REIT ETF, has a juicy dividend yield of 3.3%. REITs are generally rate sensitive and are benefitting a lot from the Fed’s dovish stance. Further, REITs have low correlation with stocks and provide some diversification benefits to the portfolio.

To learn more about these ETFs, please watch the short video above.

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Schwab U.S. Large-Cap Value ETF (SCHV): ETF Research Reports
 
Vanguard Real Estate ETF (VNQ): ETF Research Reports
 
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
 
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