These 2 dividend ETFs are a retiree’s best friend
If you are fortunate enough from a career perspective to be retired or on the brink of retirement, you’ve probably thought about what you can do to keep bringing home the bacon while you don’t endlessly spend your hours on a paycheck. Making the right investments to reach your retirement goals can be a daunting, yet extremely rewarding task.
One approach to a long-term investment strategy is to include dividend-based exchange traded funds (ETFs) in your investment portfolio. These funds can hold a variety of holdings, from government bonds to stocks of the best performing technology stocks on the market. Below are two ETFs, each with their own unique characteristics, which may grab the attention of any investor looking for a retired best friend.
1. Schwab US Dividend Equity ETF
Considering how close to retirement you might be or how far into retirement you are can help determine what type of ETF or combination of ETFs is best for you. the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) focuses on tracking stocks in the Dow Jones 100 Dividend Index, including a diverse set of evenly weighted stocks within the ETF portfolio representing its core holdings in Financials, Technology, Industrials and health. This diversification and uniform weighting provide a cushion against a significant decline in the market in a particular sector or stock.
Among its main holdings of shares are Merck, Home deposit, Texas instruments, Broadcom, and Amgen. All these companies can claim to offer investors dividends paid and increased annually for more than 10 years.
The ETF itself has performed quite well, going back five years of history. Over this period, it shows an average annual return of 16.4%, evidenced by a one-year return of 51%. It pays a dividend at a yield of 2.9% and also has a low expense ratio of 0.1% compared to the average ETF, which means the amount of your investment that is deducted annually from fees will be lower. , which could be a determining factor for some investors.
A high rate of return, combined with a diversified portfolio of stocks, a low expense ratio, and a 2.9% higher dividend yield than the 1.75% November yield of the S&P 500, is certainly what some people want. might consider it a great deal for a reliable retirement. Income.
2. Fidelity Dividend ETF for rising rates
As the Fed hints at three rate hikes in 2022, it could be advantageous for retirees to invest in ETFs that hedge against these rates. Fidelity Dividend ETF for rising rates (NYSEMKT: FDRR) can do just that. This fund focuses on tracking large and mid-cap stocks that have historically paid and increased dividends and that have a positive correlation with 10-year US Treasury yields.
The main titles include Apple, Microsoft, UnitedHealth, Pfizer, and Home deposit, offering a well-balanced group of stocks in various sectors. It is also moving away from a heavy reliance on its top holdings by investing only 30% of its total fund weighting in the top 10 holdings.
In uncertain times in the market, the Treasury yield can provide some relief to investors. The Treasury yield is linked to Treasury securities guaranteed by the US government and has guaranteed interest payments. As market volatility increases, investing in this fund may provide some stability.
To find an ETF that is suitable for a retiree, it is good to have a solid track record of performance. The Fidelity Dividend Rising Rate ETF has an average annualized return of 14% over the life of the fund. This rate is supported by a yield over one year of 24%. This shows that it can prove effective between the administrations of two different political parties and through a global pandemic.
The 2% dividend yield won’t necessarily earn bragging rights among all ETFs, but it does hit the average dividend yield of the S&P 500. In addition, the ETF also offers a low expense ratio of 0.3 % over the ETF’s average expense ratio of 0.54%, which allows more of the investor’s money to stay in the investment rather than going towards the fees paid for have the investment.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.