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The 3 Best Funds for Retirees

The best funds for retirees should include solid financial strategies for generating enough money to cover the later-year living expenses.

According to the Centers for Disease Control and Prevention, “in 2020, life expectancy at age 65 for the total (U.S.) population was 18.5 years.” Therefore, individuals need to plan ahead for those golden years.

Although many retirees may have different financial resources to rely on, they now face significant uncertainty due to sticky inflation and deteriorating macroeconomic conditions. Unlike younger investors, a retiree should often focus on generating current income while keeping an eye on capital preservation.

In this regard, exchange-traded funds (ETFs), which offer low-cost, diversified exposure to a particular market index, sector, or theme, can help create the returns for the financial security we all need during our retirement years.

With that said, here are three of the best funds for retirees that are worth considering for any retirement portfolio.

FUTY Fidelity MSCI Utilities Index ETF $49.58
SPYV SPDR Portfolio S&P 500 Value ETF $38.37
VDC Vanguard Consumer Staples ETF $188.08 

Fidelity MSCI Utilities Index ETF (FUTY)

Source: Shutterstock

52-week range: $40.91-$50.25
Dividend yield: 2.52%
Expense ratio: 0.08% per year

The Fidelity MSCI Utilities Index ETF (NYSEARCA:FUTY) offers access to U.S. utility companies. It was first launched in October 2013.

FUTY follows the market-cap-weighted MSCI US IMI Utilities 25/50 index as a benchmark. It currently holds a basket of 69 holdings, where 48.7% are large-cap, and 44.2% are mid-cap companies.

The top 10 stocks account for almost 54% of net assets of $2.2 billion. In terms of sub-sectors, we see electric utilities (59.4%), multi-utilities (27.3%), gas utilities (4.5%), water utilities (4%), and independent power and renewable utilities (3.9%).

NextEra Energy (NYSE:NEE), Duke Energy (NYSE:DUK), Southern (NYSE:SO), Dominion Energy (NYSE:D), and Sempra Energy (NYSE:SRE) lead the holdings in the portfolio.

FUTY has returned roughly 7% year to date and more than 12% over the past 12 months. The fund currently trades at 2.32x book and 2.54x sales values. Its trailing price-to-earnings (P/E) ratio stands at 24.44x.

The utilities sector is often considered a “safe haven” in times of higher volatility, which makes this among the best funds for retirees seeking stability.

In addition, FUTY offers a combination of cheap fees and relatively high yields for investors seeking capital-weighted exposure to U.S. utilities. Potential investors could regard a decline toward $48 as a better entry point into FUTY.

SPDR Portfolio S&P 500 Value ETF (SPYV)

52-week range: $35.62 – 42.99
Dividend yield: 2.24%
Expense ratio: 0.04% per year

The SPDR Portfolio S&P 500 Value ETF (NYSEARCA:SPYV) invests in S&P 500 companies that exhibit fundamental value characteristics based on their book value-to-price, earnings-to-price and sales-to-price ratios.

In addition to their relatively lower volatility, dividend yields of value stocks typically tend to be high. Seasoned investors keep a close eye on established blue-chip names usually that pay reliable dividends.

SPYV was first listed in September 2000 and tracks the returns of the market-cap-weighted S&P 500 Value Index. The top 10 holdings comprise around 18% of net assets of $12.6 billion, making this one of the best funds for retirees to keep their eyes on.

Sectoral allocations include healthcare (16.8%), financials (14.7%), industrials (12.3%), consumer staples (11.5%), and information technology (11.1%), among others.

Among the leading names are Berkshire Hathaway (NYSE:BRK.B), Johnson & Johnson (NYSE:JNJ), Exxon Mobil (NYSE:XOM), Procter & Gamble (NYSE:PG), and Chevron (NYSE:CVX).

The ETF has dropped around 9% since January and 5% over the past 12 months. The fund’s trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 14.36x and 2.60x, respectively.

With a portfolio of 446 stocks, SPYV offers broad exposure and a good balance across sectors. Conservative investors looking to diversify their investment portfolios with a low-fee value ETF could consider buying in at the current levels.

Vanguard Consumer Staples ETF (VDC)

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52-week range: $175.69-$210.13
Dividend yield: 2.26%
Expense ratio: 0.10% per year

The Vanguard Consumer Staples ETF (NYSEARCA:VDC) delivers pure-play all-cap exposure to U.S. consumer staples stocks. VDC started trading in January 2004. It tracks the MSCI US Investable Market Consumer Staples 25/50 index, and holds 100 stocks.

This passively managed ETF is heavily weighted in the soft drinks sector with an allocation of 21.8%. Next are household products (19.4%), packaged foods & meats (16.8%), and hypermarkets & supercenters (16.2%).

Nearly two-thirds of $8.1 billion in net assets are held in the top ten holdings. Leading stocks on the roster include Procter & Gamble (NYSE:PG); Coca-Cola (NYSE:KO); Pepsi (NASDAQ:PEP); Costco Wholesale (NASDAQ:COST); and Walmart (NYSE:WMT).

VDC is down around 5% year to date. Yet, it has outperformed the broader market and has returned close to 2% over the past 52 weeks. Trailing P/E and P/B ratios are 23.8x and 4.8x, respectively.

Given the defensive nature of the consumer staples sector, VCD offers upside potential in the months ahead. Investors seeking long-term steady returns could regard the subsequent decline as an opportunity to buy a fund like VCD.

On the date of publication, Tezcan Gecgil, Ph.D., did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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