Market Overview

Grandpa's ETF Portfolio


One thing I've noticed over the past couple of years when I meet older investors or get emails from those that are retired is a lot apprehension about ETFs. They're curious about ETFs, but they've fallen vicitim to misinformation about the asset class and the mainstream media's penchant for focusing on only the most volatile funds on the market.

Retirees hear things about how crazy the action is in an ETF like the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) and they wind up ignoring the asset class altogether. I tell them this is a big mistake because ETFs have something for everyone, including more seasoned investors that are want to keep things tame while earning better returns than what they get with CDs or money markets.

In an effort to build a five-ETF portfolio perfect for retirees we looked for funds that offered decent liquidity, low fees and above-average yields. Here's what we came up with on the equity side. We'll explore bond funds at a later date.

1) PowerShares Financial Preferred (NYSE: PGF):
We profiled PGF yesterday as a good yield/technical play and it is a preferred way for conservative investors to get some exposures to financials. A yield above 6.6% doesn't hurt either. The knock is an expense ratio that is a tad high at 0.65%.

2) Vanguard Value ETF (NYSE: VTV):
Now this an ETF grandpa will love as it is chock full of stocks he already knows and loves such as General Electric (NYSE: GE) and Exxon Mobil (NYSE: XOM). Plus the expense ratio is a meager 0.14% making this ETF an ideal way for retirees to get involved with ETFs.

3) Utilities Select Sector SPDR (NYSE: XLU):
XLU isn't going to win any awards for excitement, but that's life with utilities. It's hard to complain about an expense ratio of 0.2% and XLU is optionable, so covered calls can be employed for additional income.

4) Pharmaceutical HOLDRs (AMEX: PPH):
Seniors seem to be big fans of big pharma stocks and PPH helps get their Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE) fix. Plus the yield is decent at 3.5%.

5) Vanguard REIT ETF (NYSE: VNQ):
It's starting to get safer and safer to dip toes back into REIT waters and with an expense ratio of just 0.13%, VNQ is a great way for a conservative investor to get some real estate exposure.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas Dividends Dividends Specialty ETFs


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