Which ETFs Are Good For Roth IRA?
An ETF portfolio comprised of low-cost ETFs such as VTI, VOO, VBLT and VXUS is an ideal option for your Roth IRA investment portfolio. They provide long-term growth in retirement accounts.
ETFs offer broad exposure to stocks, bonds and international investing at an economical cost. Furthermore, ETFs may fit easily into other accounts such as taxable brokerage accounts.
1. Vanguard Total Stock Market ETF (NYSEARCA:VTI)
Vanguard’s Total Stock Market ETF (NYSEARCA:VTI) provides comprehensive exposure to global economic forces. With an expense ratio of just 0.03% and 10-year average annual return rates in excess of 12%, this fund makes an ideal foundation for your Roth IRA.
This ETF tracks the CRSP US Total Market Index, meaning that it covers an even wider array of stocks than found in the S&P 500 index. This broadened focus may help lower risks while increasing long-term growth prospects.
Investors seeking to diversify their portfolio should consider Vanguard’s Core Bond Fund (NYSEARCA:BND). With relatively low volatility and annual expenses at only 0.07%, this fund offers tax-deferred earnings on interest payments held within Roth IRA accounts.
2. iShares Core S&P 500 ETF (NYSEARCA:IVV)
Roth IRAs are intended for long-term wealth building for retirement, so investors in these accounts should focus on using long-term buy-and-hold investing strategies such as ETFs. ETFs offer cost-effective access to large market segments like stocks, bonds and global investing.
IVV provides Roth IRA investors with an accessible, low-cost way to gain exposure to the S&P 500 index – making this fund an essential core holding in any portfolio.
IVV has a low expense ratio that will help your returns increase over time, which is especially important as fees can add up quickly when investing for retirement. Furthermore, its bond-like security will offer some downside protection to your portfolio as well. IVV is home to numerous popular stocks including Activision Blizzard (NASDAQ:ATVI) and Albertsons (NYSE:ABVS). Furthermore, it boasts an impressive dividend yield of 1.5%.
3. iShares Core Dividend ETF (NYSEARCA:IVD)
The iShares Core Dividend ETF (NYSEARCA:IVD) is a popular fund among income and dividend-focused investors, as it follows the Morningstar US Dividend Growth Index with only a 0.05% fee charged.
Investopedia Explains iShares Core Dividend ETF
Although market cap weighted index strategies dominate the ETF industry, some investors believe they can beat the market through superior stock selection and opt for non-cap weighted products like smart beta funds instead. One such product that debuted on June 10, 2014 is iShares Core Dividend, which offers large cap value exposure with its debut date set as June 10, 2014.
Roth IRA investors looking to diversify their portfolio may wish to consider purchasing foreign dividend stocks; however, this process is more involved than investing in domestic shares and may require further research or consultation with an expert.
4. iShares Core REIT ETF (NYSEARCA:ICF)
Real estate investment trusts (REITs) are known for their high dividend yields; however, their returns can be unpredictable and fluctuate substantially over time.
Investors looking to avoid the volatility associated with REITs should consider investing in an exchange-traded fund like this one that tracks the FTSE NAREIT Equity REITs Index. Top holdings include Prologis, an REIT that invests in logistics facilities; American Tower, which invests its assets in telecom infrastructure; and Equinix which offers data center real estate.
This ETF boasts a low portfolio turnover rate, helping keep expenses low and aftertax returns high. Additionally, its diverse portfolio provides investors exposure to all types of REITs–including commercial mortgage REITs which have historically outshone equity REITs when interest rates increase.
5. iShares Core U.S. Aggregate Bond ETF (NYSEARCA:AGG)
Roth IRAs provide investors with tax-free withdrawals in retirement. Investors who have reached the max in their 401(k) contributions might consider opening one to invest their remaining money in stocks and bonds.
AGG stands out for its conservative portfolio and low expense ratio, making it a reliable way to gain exposure to investment-grade bonds at an attractive cost. However, investors could obtain similar exposure through BND or LAG with lower fees.
Growth ETFs may also make an excellent fit in Roth IRAs for young investors with ample time before their planned retirement date to accommodate any short-term volatility. Although these ETFs tend to be riskier, patient investors can reap great rewards for taking on additional risk. Target date funds offer another option by selecting stocks and bonds according to an investor’s expected retirement year.
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