5 ETFs For Retirement Planning (MUB, PGF, VTV)
Watch enough CNBC, visit enough financial blogs and Web sites, read enough print periodicals and you're sure to notice that retirement planning is a popular theme among advertisers. Whether its a brokerage firm, mutual fund sponsor or a company hawking annuities, retirement planning is big business in the U.S.
That stands to reason. The baby boomers started retiring in January 2011 and by some estimates they do so to the tune of 10,000 per day. Logically, it can be said more retirees creates increased demand for conservative investment options that can protect invested capital while generating income.
Even younger investors should consider such options for parts of their portfolios. Defined-benefit pensions have gone the way of the dodo bird for most private sector workers. Just a third of workers under age 35 are even eligible for such a plan and just 8% expect such a pension to be their primary source of financial security, according to Time.
Market Vectors Long Municipal Index ETF (NYSE: MLN) There has been plenty of chatter regarding municipal bonds lately and much of that talk centers around the dire fiscal situations many states, California being one prime example, find themselves in. That hasn't scared investors away from muni bonds. Investors have added $11.4 billion to U.S. municipal mutual funds this year, the best start since 1993, Bloomberg reported, citing Lipper data.
It should be noted that California munis account for almost 19% of MLN's weight, but the fund has still returned over 6% year-to-date. Low fees of 0.24%, a trailing 12-month yield of almost 4.2% and a monthly dividend make this fund a compelling retirement planning option.
Vanguard Value ETF (NYSE: VTV) When it comes to equity-based value ETFs, the Vanguard Value ETF is one of the kings of the group. Home to 414 stocks, nine of VTV's top-10 holdings are Dow components with Wells Fargo (NYSE: WFC) being the exception. The biggest risk to VTV's value ways is the fact that financials accounted for 24.6% of the fund's weight as of April 30. That compares with 23.6% a year earlier. Long-term investors will love VTV's 0.1% expense ratio, which Vanguard says is lower than 92% of comparable funds.
First Trust Large Cap Value AlphaDEX Fund (NYSE: FTA) The First Trust Large Cap Value AlphaDEX Fund just celebrated its fifth birthday and while this fund doesn't grab a lot of headlines, it is by no means small. Flying under the radar, FTA has accumulated almost $232 million in assets under management.
Home to 220 stocks, FTA is a different type of value play than VTV. We're paraphrasing here, but essentially what FTA's index methodology does is employ a screen of the S&P 500 Value Index based on growth factors including three, six and 12-month price appreciation, sales to price and one year sales growth, and separately on value factors including book value to price, cash flow to price and return on assets
What that leads to are holdings that include stocks that may be value plays, but don't necessarily have the "blue chip" designation. For example, American International Group (NYSE: AIG) and Baker Hughes (NYSE: BHI) are top-10 holdings in the ETF. In other words, FTA could prove to be a good ETF to hold over the long-term leading up to retirement, but it's probably a tad too risky to actually be held during retirement.
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