Best ETFs to invest in to sleep well at night

By:
on Feb 23, 2023
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  • Having a good ETF portfolio can help you sleep well at night.
  • The iShares Core High Dividend fund is a good way to earn regular dividends.
  • Investing in growth, value, and inflation-protected ETFs can provide value.

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Investing in passive income can be a better way of growing your wealth compared to individual stocks and bonds. As we have seen with companies like Carvana and Bed Bath & Beyond, single stocks can have significant swings. Here are the best ETFs to buy for an income rich retirement.

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iShares Core High Dividend ETF | HDV

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HDV rating

HDV is a major ETF with over $11.6 billion in assets and an expense ratio of 0.08%. The fund is made up of companies that have a strong dividend yield. Most of the constituent companies are in the energy and health care sectors. 

Other firms in the fund are in the technology, communication, and consumer defensive sectors. The biggest firms in the fund are Exxon Mobil, Verizon, Chevron, AbbVie, Philip Morris, and Broadcom among others. 

According to SeekingAlpha, the fund has an expense and liquidity rating of A+ and dividends of B+. It has a trailing dividend yield of 3.64% and an average yield of 3.61%. Therefore, for this portfolio, this fund will be responsible for bringing regular income.

Vanguard Growth ETF | VUG

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VUG Rating

Growth stocks are important to have in any portfolio. In the past few decades, growth stocks like Apple and Microsoft have outperformed value stocks. The Vanguard Growth ETF is one of the biggest funds in the industry with over $75.4 billion in assets. It is a cheap fund with an expense ratio of 0.04%.

40% of all companies in the VUG fund are technology firms like Apple, Microsoft, Amazon. Alphabet, and Tesla. Other firms are in the technology, consumer cyclical, communication, and health care. For this income portfolio, this fund will provide exposure to companies investing in future technologies. Also, it has a dividend yield of about 0.64%.

iShares TIPS Bond ETF | TIP

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Inflation has risen in the past few years. After staying near zero for years, consumer inflation surged to a 40-year high of 9.1% in June last year. And data published this month showed that inflation dropped at a slower pace than expected, as we wrote here

Therefore, one way of protecting your portfolio from inflation is to buy a Treasury Inflation-Protected Securities (TIPS). These are bonds that offset the impact of inflation. Its only holdings are US Treasuries, which adjust for inflation. While TIPS has historically underperformed, it makes sense to have it in your portfolio. 

iShares Core S&P 500 ETF | VOO

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VOO ETF

The iShares Core S&P 500 ETF (SPY) is the best alternative to the widely-followed SPDR S&P 500 ETF (SPY). It tracks the S&P 500 and has about $300 billion in assets. It is a better alternative because of its lower expense ratio. VOO has an expense ratio of 0.03% compared to SPY’s 0.09%. Also, in terms of its ETF grade, the fund has a risk grade of A compared to SPY’s B-.

The VOO ETF is a good way to bet on the American economy because stocks always rise over the years. It has made a strong recovery after the past major crashes, including the dot com bubble and Global Financial Crisis.

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