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Since interest rates are rising, it is safer to put your money in funds as compared to individual stocks. Funds invest the money in stocks or bonds but it will reduce the risk since all your money is not invested in a particular stock or sector.
You might feel put off by the return on funds but it is a safer investment option if you are a retiree and cannot take a lot of risks. A balanced portfolio should include the best funds for retirees.
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They can be traded like common stocks and you can track the index just like stocks. You can invest in funds just as easily as you can invest in stocks. Let's take a look at the 7 best funds for retirees.
VWESX Vanguard Long Term Investment Graded Fund $8.67 VTINX Vanguard Target Retirement Income Fund $12.88 FAGIX Fidelity Capital & Income Fund $9.32 FLOT iShares Floating Rate Bond ETF $50.13 VWINX Vanguard Wellesley Income Fund $26.07 OOSAX Invesco Senior Floating Rate Fund $6.67 QQQ Invesco QQQ ETF $301.06Vanguard Long Term Investment Graded Fund (VWESX)
Vanguard has been a popular choice when it comes to funds. It has low expense ratios and a low minimum investment. This fund will take 0.22% of the assets for management every year and has a minimum investment of only $3,000.
Vanguard Long Term Investment Graded Fund (VWESX) has invested in 1,386 holdings and it holds large positions in U.S. and California government bonds. It is an ideal long-term bond fund that carries a yield of 3.76%. The fund provides exposure to medium and high-quality corporate bonds that have a maturity period ranging from 15 years to close to 25 years.
It invests in corporate bonds and holds a small amount in municipal bonds. If you are looking for long-term investment and can tolerate minor risk, then this fund can be a good option.
Vanguard Retirement Income Fund (VTINX)
If you are already enjoying your retirement years, you can opt for this fund to enjoy capital appreciation on your investment. It has an allocation in stocks and bonds and carries moderate risk. It has low fees and will help with your cash flow.
Vanguard Target Retirement Income Fund (MUTF:VTINX) focuses on five index funds and allocates 30% in stocks and 70% in bonds. The stock allocation includes both, domestic and international stock funds. They can be further divided into total, inflation-protected and international funds.
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The fund has an expense ratio of 0.12%, significantly lower than many other funds in this category and the total fund net assets stand at $22.2 billion. The shares in this fund are trading for $12.67 each. This is one fund retirees must consider.
Fidelity Capital & Income Fund (FAGIX)
If you are a retiree and can take a little higher market risk, you will be able to enjoy a high potential yield with Fidelity Capital & Income Fund (FAGIX).
Based on the historical performance, the fund has offered a yield of 4.95% in five years and 6.24% in 10 years, and your portfolio will consist of investment-grade bonds and high-yield bonds.
The risk could be slightly higher but the yields are consistently and significantly higher than other mutual funds which have their major allocation towards U.S. treasuries. Fidelity Capital & Income fund has an expense ratio of 0.69%.
iShares Floating Rate Bond ETF (FLOT)
iShares Floating Rate Bond ETF (FLOT) is an ETF that invests in the top investment-grade floating rate bonds with maturities ranging from one month to five years. The interest payment on the bonds will adjust to the changes in the interest rate but it is an attractive investment option for retirees.
Managed by Blackrock, the fund focuses on safety with short-term loans and has a 5-year annualized return of 1.39% and a yield of 0.87%. With an expense ratio as low as .15%, the bond is a great investment option for you to consider. iShares floating rate bond has already broken even this year and it holds $9.6 billion in assets under management.
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If you are looking for higher safety, this bond is a good choice. The shares in FLOT are trading at $50.14 each today.
Vanguard Wellesley Income Fund (VWINX)
Another fund by Vanguard which focuses on sustainable income and invests about 35% of the fund into solid dividend-paying companies, Vanguard Wellesley Income Fund (MUTF:VWINX) will ensure that you enjoy a higher yield than the S&P 500.
It is a four-decade-old fund that has become a part of several portfolios. In order to secure your money in turbulent market conditions, the balance 65% is invested in fixed-income securities which include corporate bonds. The fund has a long duration and an expense ratio of 0.23%. Vanguard Wellesley Income fund has a 12-month yield of 2.35%. The actively managed fund has low volatility and offers strong and steady income.
It is trading at $25.75 today. It has a strong history of outperforming its peers and has a conservative allocation strategy. This fund is one of the top choices for retirees and they have done an exceptionally good job in the past.
If you have a medium to high time horizon and are looking for a consistent, stable income, this is a good fund to park your money in.
Invesco Senior Floating Rate Fund (OOSAX)
This is another income fund that invests in floating-rate loans. It is an ideal choice if the interest rates are rising. So, in today's environment, the fund would perform well. It has a 12-month yield of 4.28% and the fund invests in stocks and low-rated loans.
Invesco Senior Floating Rate Fund (NASAAQ:OOSAX) aims to provide a high level of a steady income and invests in adjustable-rate loans in domestic as well as foreign companies, business entities, or partnerships. It can invest up to 20% of the total assets in senior loans and other securities in foreign companies.
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Invesco senior floating rate fund has total assets worth $3.71 billion across 608 holdings. It might not provide capital appreciation but will ensure steady income over time.
Invesco QQQ ETF (QQQ)
If there is one thing that is not going out of our lives anytime soon, it is technology. Whether you believe it or not, we cannot live without it.
Technology stocks have taken a downward trend this year but they are not out yet. Some of the top and the most profitable companies in the technology industry will bounce back and they will continue to grow.
Investing in Invesco QQQ ETF (NASDAQ:QQQ) will give you exposure to these companies. The fund invests in tech giants including Tesla (NASDAQ:TSLA) and Amazon (NASDAQ:AMZN). It is down currently and is trading for $301.39 per share but it can grow significantly over the years. In the last decade, it showed a 20% return to investors and is one of the top ETFs available today. However, it is ideal for those who have a long investment horizon and can take moderate risks.
Funds can be a smart option for retirees who want to invest in a managed portfolio and do not want to take a hands-on approach. Whenever you choose a fund, always look for one with a low expense ratio so that it boosts performance and can provide the steady income you are looking for.
On the date of publication, Vandita Jadeja 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 InvestorPlace.
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