Learn which two Vanguard ETFs provide retirees with a suitable mix of growth and income.
Not all investors are the same. What is appropriate for investors in their 20s is unlikely to fit the goals and risk tolerance for investors in their 60s, 70s, or 80s. Similarly, not all retirees are the same. Some are focused squarely on income generation, while others might need a more aggressive mix of income and growth.
Here, I’ll explore two Vanguard exchange-traded funds (ETFs) that provide a helpful mix of both income and growth.
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Vanguard Real Estate ETF
Let’s start with the Vanguard Real Estate ETF (VNQ -0.57%). This fund retirees a cheap and easy way to invest in real estate investment trusts (REITs). REITs are companies that own, finance, or operate real estate properties that generate income. By law, REITs must invest at least 75% of their assets into real estate and distribute 90% or more of their annual-taxable income to shareholders.
There are many varieties of REITs. For example, Public Storage owns and operates self-storage facilities. Meanwhile, VICI Properties operates leisure, gaming, and hospitality properties, including iconic locations on the Las Vegas strip like Caesars Palace and The Venetian.
This Vanguard fund counts both of those REITs among its holdings, along with many others. The fund could be particularly appealing to retirees who don’t have direct exposure to real estate — in other words, for those who do not own a house, apartment, condo, etc. By investing in this fund, retirees gain some exposure to the real estate market and can benefit from rising prices while not taking on the risk and costs of directly owning a real estate property.
The fund has a current dividend yield of 3.6% and a low expense ratio of 0.12%. Over the past 10 years, the fund has achieved a compound annual growth rate (CAGR) of 7.2%, meaning that $10,000 invested in 2014 would be worth $20,350 today.
Vanguard Utilities ETF
Next up is the Vanguard Utilities ETF (VPU -0.26%). What’s compelling about this fund is its focus on a commonly underappreciated sector. Simply put, the utility industry is critical to the American economy. However, given its nature as a highly regulated, slow-growth industry, it’s often overlooked by investors.
Yet, that’s changing, especially when it comes to electricity producers. That’s because the world is desperate for more power. In particular, advancements in artificial intelligence (AI) and electrical vehicles (EVs) have led to greater demands on the power grid. In response, some utility providers are boosting supply by opening new facilities or reopening shuttered power plants.
In any event, what retirees should know is this this Vanguard fund is a great way to capitalize on such trends. The ETF boasts holdings in large regional utilities, including Duke Energy, Southern Company, and Dominion Energy, among many others.
The fund’s low expense ratio of 0.10% means that investors only pay $10 per year for every $10,000 invested in the fund. Moreover, its dividend yield of 2.8% provides a solid amount of annual payments for income-seeking retirees.
Finally, the fund’s 10-year performance is excellent. It has generated a 10-year CAGR of 10.1%, meaning a $10,000 investment made in 2014 would have grown to $26,100 today.
In summary, these two ETFs offer retirees a blend of income and growth — something that’s worth considering for many in this stage of life.
Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Real Estate ETF. The Motley Fool recommends Dominion Energy, Duke Energy, and Vici Properties. The Motley Fool has a disclosure policy.