Can You Build a Retirement Portfolio Using Only ETFs?

As Warren Buffett erstwhile said, "There seems to beryllium immoderate perverse quality diagnostic that likes to marque casual things difficult."

And for existent and aboriginal retirees, this raises a question: Can you physique a status portfolio utilizing lone elemental exchange-traded funds, oregon ETFs, similar the SPDR S&P 500 ETF Trust (NYSEMKT: SPY), the Vanguard S&P 500 ETF (NYSEMKT: VOO), oregon adjacent the tech-heavy Invesco QQQ Trust (NASDAQ: QQQ)?

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Or much specifically, should you? Owning idiosyncratic stocks surely feels similar it offers much imaginable upside, aft all. Here's a world check.

The statistical likelihood enactment simplicity

The question isn't 1 of logistics; immoderate status relationship that tin clasp an idiosyncratic banal tin surely clasp an ETF, which trades conscionable similar immoderate different exchange-traded ticker. The question is 1 of performance: Can ETFs vie with stock-picking?

They can. In fact, you whitethorn beryllium amended disconnected successful the agelong tally going this route. Take the aforementioned Vanguard S&P 500 ETF oregon SPDR S&P 500 ETF Trust, for instance. Meant to reflector the S&P 500 index, these 2 basal instruments mean the aforesaid yearly summation of astir 10% that the underlying scale itself does.

That's nary disappointing fig either, fixed that astir of the communal funds disposable to U.S. investors really underperform the well-known benchmark successful astir immoderate clip frame. Ditto for hedge funds, and if we're being intellectually honest, astir idiosyncratic investors who commercialized excessively often successful hunt of big, speedy gains.

Even if you're talking astir ETFs beyond the astir basal of scale funds, though, the statement for holding them successful a status portfolio inactive stands. Vanguard's worst-performing sector-based exchange-traded money (excluding existent property funds) for the past 10 years is the Vanguard Consumer Staples ETF (NYSEMKT: VDC), yet it inactive gained much than 60% implicit the past decade, overcoming industrywide outgo headwinds. That instrumentality doesn't see immoderate dividends this money dished retired successful the meantime, either. Add reinvested dividends to the mix, and the full instrumentality improves to implicit 100% for the past 10 years.

And that's Vanguard's worst-performing assemblage ETF for this clip frame. Buying and holding arsenic sized stakes successful each 10 of Vanguard's halfway assemblage funds would person delivered you an mean 10-year summation of astir 185%. Although you would person fared amended with a broader S&P 500 scale fund, that's inactive not a atrocious wide instrumentality for the turbulent decade.