Building a retirement portfolio does not have to be complicated. Instead of trying to predict every market move, many investors simply spread their money across a handful of broad ETFs and let time do the heavy lifting. After all, why make investing harder than it needs to be?
Building a strong foundation
For many people, the Vanguard S&P 500 ETF (VOO) serves as the starting point because it tracks around 500 of the largest publicly traded U.S. companies. Along with broad exposure to well-known businesses, it comes with a very low 0.03% expense ratio.
Although its past performance has been strong, most investors expect future returns to be closer to long-term market averages rather than repeating the exceptional gains of recent years.
Growth opportunities do not stop with large companies, though. By investing in more than 1,300 smaller businesses, the Vanguard Small-Cap ETF (VB) adds exposure to companies that can deliver stronger gains during certain market cycles. Sure, small-cap stocks tend to be more volatile, but that extra risk can also come with greater upside over the long run.
The diversification advantage
Another option worth considering is the Vanguard Mid-Cap ETF (VO). With 288 medium-sized companies in its portfolio, the fund sits between large- and small-cap stocks, offering a mix of stability and room for future growth.
Looking beyond the U.S. can also strengthen a retirement portfolio. The Vanguard Total International Stock ETF (VXUS) holds nearly 8,740 companies from developed and emerging markets around the world.
As a result, investors gain broader global exposure while reducing their dependence on the U.S. market alone. Combining these ETFs allows investors to participate in the performance of thousands of companies worldwide instead of depending on the fortunes of just a handful of stocks.
