Tips regarding ETFs for senior investors

Advanced investors looking to diversify their portfolio are advised to consider Exchange Traded Funds.

“ETFs are investment vehicles that pool stocks that investors can buy and sell on the stock exchange at market-determined prices throughout the day,” said Harman Johal, Texas and Illinois wealth management market leader at US Bank in Houston. I’m here.

Johal explains that ETFs are primarily passive investments that seek to replicate the performance of a particular index.

“ETFs have become popular with institutional and retail investors over the past decade and have grown to hold over $3.4 trillion in assets over the past 25 years,” Johal told FOX Business. increase. “Because ETFs are primarily passive, they have lower expense ratios compared to actively managed funds. is also a big advantage.”

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As such, passive ETFs track an index and don’t require frequent trading, which also saves taxes and helps minimize the capital gains that need to be distributed, he says.

Why Senior Investors Should Consider ETFs

Retirement was a commonly cited goal for 76% of ETF households, according to a study by the Investment Company Institute. According to additional BlackRock research, he said 30% of investors over the age of 70 own his ETFs.

“ETFs can provide a cost-effective option for investors approaching retirement and looking to change their portfolio from growth-oriented to one that can provide a balance between growth and income,” says Johar.

Trader Justin Flynn (left) works on the floor of the New York Stock Exchange on March 16, 2022. (AP Photo/Richard Drew / AP Newsroom)

Specifically, as senior investors move from growth to income strategies, they explain that cost efficiency is a key consideration as portfolio returns can be lower.

“By keeping our expenses low, we can give a higher percentage back to our investors,” continues Johal.

Why there are no ETFs on the 401(K)

In addition, Johal explains how ETFs tend to offer advantages over actively managed funds in terms of tax savings, lower costs, lower investment minimums, and transparency of holdings within ETFs. I’m here. There is still inherent market volatility risk in investing in ETFs.

“Other areas that investors need to be aware of when investing in ETFs are that some ETFs may have wide bid/ask spreads and some special asset class ETFs may It can be difficult to sell exactly when you want it,” he adds.

What is the strategy for senior investors and ETFs?

According to Johar, retirees can consider three different strategies to earn income from ETFs. Stock ETFs that pay dividends, Bond Fund ETFs, and Real Estate Investment Trust ETFs.


How can retirees incorporate both short-term income and long-term benefits?

Roxana Islam, Associate Director of Research at VettaFi, said retirees looking for a source of income can invest in Dividend ETFs and other Income ETFs to provide regular income sharing while reducing the risk of single stocks. says it can.

“Senior investors can also hold these ETFs for a longer period of time without having to manually buy and sell stocks in anticipation of dividend changes, and can expect relatively stable yields due to the benefits of diversification.” says Islam.

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