Where should you invest your retirement savings?

When it comes to portfolio construction there are various types of investments you can use to fulfill your retirement savings asset allocation strategy. Consider the following investment options that can help you put your eggs in different baskets.

  • All-in-one exchange-traded funds (ETFs):These allow you to diversify your assets across global markets, while automatically rebalancing your portfolio to maintain a desired value split among different classes.
  • Life-cycle funds: A type of asset-allocation mutual fund that automatically rebalances your assets throughout the course of your investment time horizon. Adjustments start from a profile of higher risk then shift to a lower risk as you approach the date of funds withdrawal.
  • A High Interest Savings Account (HISA): As its name suggests, a HISA pays higher interest than standard savings accounts and constitutes a practical approach to security with some growth.

  • Money market exchange-traded funds (ETFs): These offer investment opportunities in in high-quality and very liquid short-term debt instruments such as U.S Treasury bonds.

Keep in mind that maintaining a well-diversified portfolio of investments— including equities and fixed income, spread across different sectors and geographies— is a highly regarded approach to achieving growth while mitigating the effects of market ups and downs. Your retirement portfolio isn’t limited to one particular asset class. Everything from cash and mutual funds to GICs, stocks, bonds and ETFs can be used to achieve your retirement savings goals. Whichever investment vehicles you use make sure that as you approach the date of decumulation you may want to gradually shift to a more conservative strategy, particularly if your initial strategy was strongly growth oriented.


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Which ETFs are good choices for retirement savings today?

1. Vanguard 500 Index Fund ETFThis fund provides a good starting point. The Vanguard S&P500 Index fund ETF (NYSEMKT:VOO) tracks 500 of the largest companies (by market capitalization) traded on U.S. exchanges, and it has proved to be a strong investment over any 15-year period in U.S. history. While there’s no guarantee the index will rise in any short- or medium-term period, investors in this ETF can be fairly confident that major benchmarks will rise over the decade or two that they will be saving for retirement. Investing in a fund tracking the S&P 500 is a good starting point for any retirement savings plan.

2. Vanguard Small-Cap Value Index Fund ETF

If you are looking to diversify the holdings, the Vanguard Small-Cap Value ETF (NYSEMKT:VBR) might warrant being part of an overall portfolio. The fund holds positions in companies with market capitalizations less than $1 billion, and it focuses on value stocks — those companies with stock trading at low prices relative to their earning. Small-cap value stocks have the potential to outperform the market on a long-term basis, and given that retirement funding is a long-term goal, it might make sense to include this inexpensive fund.

3. Vanguard FTSE All-World ex-US ETF 

This international ETF includes companies operating outside the United States, and it can act as a sensible complement to any existing U.S.-based fund. The Vanguard FTSE All-World ex-US ETF (NYSEMKT:VEU) is dominated by companies based in developed economies like Japan, the United Kingdom, and France — only about a quarter of its holdings are in emerging markets. A properly sized position in this fund will achieve much, if not all, of the international diversification needed in a portfolio. Pair it in equal proportion with a low-cost U.S. ETF and you will definitely increase the potential for long-term success in your retirement savings plan.

4. Schwab Emerging Markets Equity ETF

The widely available and tax-efficient Schwab Emerging Markets Equity ETF (NYSEMKT:SCHE) offers investors a low-cost option for getting exposure to emerging markets. This is another fund that you probably wouldn’t want to invest your  entire retirement fund in, but having a portion of your portfolio in this ETF is worth considering. It provides access to emerging economies like China, Taiwan, India, Brazil, and South Africa — but without the concentrated risk of investing in any single country. This ETF is best used as part of a diversified portfolio that also has exposure to U.S. and international developed markets.

5. Fidelity MSCI Information Technology Index ETF

If you’re bullish on tech, you can express that view through the Fidelity MSCI Information Technology Index ETF (NYSEMKT:FTEC). The benefit of investment here is that, for an extremely low annual fee, the fund provides a basket of tech companies weighted toward top-tier names like Apple and Microsoft. While this fund probably shouldn’t be a core holding, it would be a safe bet to allocate 3% to 5% of your retirement portfolio to it for a decade or two. The fund is also a prudent choice for those who are interested in tech but don’t want their funds to become ensnared in the hype of day trading or the lure of headline-grabbing stocks. 


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Why pay someone to manage your investments?

A managed product such as a mutual fund helps investors reduce the risk of a market downsize as in times of crisis as the manager protect holdings by switching to real assets, gold and secure bonds.   In the long run assets grow exponentially with good returns while having market risks under control.    There are fees associated however management fees are tax deductible in some investment accounts.  The fees must be paid for advice on buying or selling a specific share or security and must be paid to a person whose principal business is advising and administration of securities.  Fees paid by an investor on a fee-based investment account would therefore generally be tax-deductible.