Would you like to retire as a millionaire? It's not such a lofty goal these days, since a million dollars doesn't buy what it used to -- especially after our recent few years featuring higher-than-average inflation. If you retire with $1 million and use a withdrawal strategy of taking out 4% in your first year of retirement, that's only $40,000. Many people might want to aim to retire with even more than $1 million.
If you're not a great stock-picker and don't want to invest the effort in trying to become one, you might reasonably simply opt for low-fee, broad-market index funds, which can be all you need to build wealth powerfully over many years. Index funds in exchange-traded fund (ETF) form are particularly attractive, as they're so easy to invest in. The SPDR S&P 500 ETF is a fine example of that.
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If you want to aim for somewhat better returns or a more diversified portfolio, you might look to some more specialized ETFs. Here are five standouts from Charles Schwab to consider.
Fund | Expense Ratio | 5-Year Avg. Annual Return | 10-Year Avg. Annual Return |
|---|---|---|---|
Schwab US Large-Cap ETF (SCHX -0.66%) | 0.03% | 14.5% | 12.5% |
Schwab US Large-Cap Growth ETF (SCHG -1.10%) | 0.04% | 19.3% | 15.7% |
Schwab US Dividend Equity ETF (SCHD -0.34%) | 0.06% | 12.2% | 11.3% |
Schwab US REIT ETF (SCHH -0.30%) | 0.07% | 1.2% | 4.7% |
Schwab Fundamental International Large Company ETF (FNDF 0.26%) | 0.25% | 7.7% | 4.7% |
Data source: Morningstar.com.
1. Schwab US Large-Cap ETF
The Schwab US Large-Cap ETF gives you even more than the S&P 500's group of 500 of the biggest companies in America. It tracks the Dow Jones U.S. Large-Cap Total Stock Market Index, plunking its investors in the 750 largest U.S. companies. The index and ETF are focused on large-capitalization companies, but they also include smaller ones, with a recent median market cap for constituents of $20 billion and a smallest constituent market cap of $228 million.
2. Schwab US Large-Cap Growth ETF
The Schwab US Large-Cap Growth ETF tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, which recently sported 248 stocks deemed by the folks at S&P Global to be "growth stocks" based on several factors. As you can see in the table above, they have succeeded in finding companies growing at a relatively brisk rate over the past five and 10 years.
3. Schwab US Dividend Equity ETF
The Schwab US Dividend Equity ETF sports an even smaller portfolio, encompassing the 100 stocks in the Dow Jones U.S. Dividend 100 Index. S&P Global explains that the index "is designed to measure the performance of high-dividend-yielding stocks in the U.S. with a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios." It's well worth considering including strong dividend payers in your portfolio, because payers tend to grow well while delivering dependable income.
4. Schwab US REIT ETF
The Schwab US REIT ETF is focused on real estate investment trusts (REITs), which are companies that own lots of properties and earn income by renting them out. As you can see in the table above, the ETF has not been the most impressive performer in recent years. But it's a solid, low-fee one to include in your portfolio if you'd like exposure to the real estate market -- either for diversification's sake or because you're bullish on real estate.
5. Schwab Fundamental International Large Company ETF
Finally, consider the Schwab Fundamental International Large Company ETF, which offers international diversification. It's focused on large-cap companies based abroad -- such as Shell (based in the United Kingdom), Toyota Motor (Japan), Samsung Electronics (South Korea), and TotalEnergies (France). The ETF tracks the Russell RAFI Developed ex-US Large Company Index, which recently encompassed 922 companies.
These are some of the kinds of investments that can get you to a million dollars and beyond -- as long as you remain diligent and stick to a good plan. To inspire you, the table below shows how much can be amassed over various periods, at an 8% average annual growth rate:
Growing at 8% for | $7,500 invested annually | $15,000 invested annually |
|---|---|---|
5 years | $47,519 | $95,039 |
10 years | $117,341 | $234,682 |
15 years | $219,932 | $439,864 |
20 years | $370,672 | $741,344 |
25 years | $592,158 | $1,184,316 |
30 years | $917,594 | $1,835,188 |
35 years | $1,395,766 | $2,791,532 |
40 years | $2,098,358 | $4,196,716 |
Source: Calculations by author.
So get your plan together and start saving and investing for your future -- whether in the ETFs above, some other ETFs or funds, or stocks you choose yourself.
Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Charles Schwab. The Motley Fool recommends the following options: short March 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.
