You’re probably aware of how important it is to save well for retirement. But setting money aside for your later years is just part of the equation. You also need to invest your money in a manner that leads to steady growth over time.
Now you’ll often hear that it’s important to maintain a diverse portfolio of assets when you’re trying to build a retirement nest egg. And that’s definitely good advice.
But some people get overwhelmed by the idea of having to keep track of several dozen stocks. If you feel similarly, you may want to focus your investment strategy on ETFs, or exchange-traded funds, instead.
The nice thing about ETFs is that they allow you to own a bunch of different assets with a single investment. That gives you the diversification you need without all of the legwork.
Meanwhile, the Vanguard S&P 500 ETF (VOO) and the Invesco QQQ Trust (QQQ) are two very different ETFs. But when combined, they could be a winning formula for building retirement wealth.
How the Vanguard S&P 500 ETF (VOO) works
The Vanguard S&P 500 ETF (VOO) is often hailed as a great asset for everyday investors. The reason is that it’s set up to track the performance of the S&P 500 index, which consists of the 500 largest publicly traded companies by market cap.
The nice thing about VOO is that it gives you exposure to the broad market, and that it consists of hundreds of established businesses. It also has an extremely low expense ratio, which means you’ll get to keep more of your returns.
Historically, the S&P 500 has produced strong returns for investors. So for many people, investing solely in VOO is a solid choice. But if you combine VOO with QQQ, you may get to enjoy even more upside.
How the Invesco QQQ Trust (QQQ) works
QQQ tracks the Nasdaq-100 index, which consists of 100 of the largest non-financial companies. QQQ tends to focus on growth-oriented sectors like tech and has historically delivered strong returns. And like VOO, its expense ratio is low.
However, QQQ carries a greater amount of risk than VOO because it’s so heavily concentrated in growth stocks. This means that while QQQ may deliver stronger returns when the market is up, it might also lose more value when the market is down.
Why VOO + QQQ could be the winning formula for you
Individually, VOO and QQQ are strong investments. When combined, they could give you the best of all worlds.
VOO give you the stability that comes with investing in the broad stock market. QQQ gives you a nice growth push, allowing you to potentially generate much stronger returns than what VOO is capable of.
Plus, the nice thing about this combination is that it’s easy to maintain. If you were to invest in 15 established S&P 500 companies and another 15 tech or growth stocks, you’d probably have to rebalance your portfolio a lot more frequently.
Of course, one thing you should realize is that both VOO and QQQ carry risk, since the value of both can swing wildly. If you’re in retirement, this combination may be too volatile for you without other stable assets to offset it. But if you’re in the process of building retirement wealth, you may find that VOO + QQQ = an optimal formula for you.
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