Picking the “perfect” exchange traded fund (ETF) or stock to hold in retirement really isn’t possible for most investors. There’s always some pros and cons with holding any security for an extended period of time. But finding the right low-cost (and highly diversified) ETF to invest in over a long time frame can provide a much smoother ride to portfolio gains. At the end of the day, that’s what we’re all after.

There are a myriad of ETFs out there that can provide the sort of (relatively) smooth returns over long periods of time so many investors are after for retirement. In my view, the following three ETFs are among the best options for those who are considering retirement in 2025. 

Vanguard Utilities Index Fund ETF (VPU) 

Every time I begin to look at sector-specific ETFs, I keep coming back to the Vanguard Utilities Index Fund ETF (VPU). That’s partly due to the fact that the utilities sector as a whole has actually outperformed some stock market benchmarks over the past three decades. In other words, no matter how well growth stocks have performed relative to value over the past decades, utilities stocks have been the steady performers that provide the sort of (relatively) straight line higher investors are looking after.

As a sector-specific ETF, VPU does come with an expense ratio of 0.09%, which is higher than other comparable ETFs that track broader indices. However, the difference between such funds is nominal, and to some extent, any expense ratio below 0.1% is one that I’m not too concerned about.

With exposure to a range of utilities companies spanning the electricity, gas, and water utilities space, VPU provides exposure to companies that service residential and commercial clients’ essential needs. Thus, in good times or bad, these are companies that tend to produce earnings growth (and healthy profits, which are often passed onto investors in the form of dividends). For those nearing or entering retirement this year, take a close look at VPU. 

Vanguard Growth Index Fund ETF (VUG)

Another Vanguard ETF I continue to focus on for the growth portion of my portfolio is the Vanguard Growth Index Fund ETF (VUG). This fund comes with a very attractive expense ratio of 0.04%, which is remarkable considering the quality of growth stocks included in this fund.

Now, what VUG provides investors in terms of quality it may give up in terms of breadth. This fund tracks only the largest and most successful U.S. growth stocks, with its main holdings focused on the tech, consumer discretionary and healthcare sectors. That said, this fund does provide ample upside during bull markets. And considering the Nasdaq just re-entered a bull market this past week, this is a fund that’s actually now performing better than some of the more defensive options available to investors (see chart above). 

Of course, the pursuit of higher capital appreciation within one’s portfolio does come with added risk. Holding VUG is no different than holding other portfolios that are tech-heavy, with outsized exposure to Magnificent 7 stocks, for example. 

But over the long-term, having at least some added exposure to the best quality companies has proven to be a solid strategy. If I had to choose a growth ETF to consider for retirement, VUG would certainly be among my top picks. 

Schwab U.S. Dividend Equity ETF (SCHD)

Last, but not least on this list of ETFs to consider buying for retirement, is the Schwab U.S. Dividend Equity ETF (SCHD). 

As its name suggests, this ETF is focused on companies that pay dividends. Tracking the Dow Jones U.S. Dividend 100 Index, the companies held within SCHD tend to be large-cap in nature, with high quality balance sheets and robust dividend yields. That’s a key driver of this ETF’s impressive dividend yield of more than 4%. Thus, for those seeking a truly meaningful passive income stream in retirement (and who don’t want too much exposure to fixed income assets within their portfolio), this is a great option.

I’m in the camp of investors who think that interest rates are more likely to go down than up over time. Of course, inflationary pressures could break that thesis, and no one knows what the future holds. But given that this ETF now yields roughly what long bonds will provide, and the ETF’s holdings also provide capital appreciation upside, I do think there’s a lot to like about holding such a fund for the long-term. 

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