Legendary investor Warren Buffett said a low-cost index fund is the most sensible equity investment for the great majority of investors.
Many investors enthusiastically embrace exchange-traded funds (ETFs) as an excellent choice for building a diversified and resilient retirement portfolio, and with good reason.
Buffett advocates cost-effective investing, highlighting ETFs for their low expense ratios and investors' ability to keep more money invested. ETFs offer flexibility similar to stocks, allowing for portfolio adjustments in tune with retirement goals and market dynamics.
With that in mind, here are my two ASX ETF picks for retirement.
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Vanguard Australian Shares Index ETF (ASX: VAS)
Let's kick off with the Vanguard Australian Shares Index ETF. This ETF is a prime example of Buffett's invaluable advice in action. It offers extensive exposure to the Australian equity market, comprising the top 300 companies listed on the ASX.
This ETF is designed to track the return of the S&P/ASX 300 Index (ASX: XKO), which includes Australia's major players such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and CSL Ltd (ASX: CSL).
Another important consideration is its fees. The VAS ETF is popular due to its low management fee of just 0.07% per annum, making it an even more attractive investment option.
This ETF is ideal for those seeking regular income, paying quarterly dividends. Over the past 12 months to April 2024, it provided total dividends of $3.741, yielding 3.9% at the current share price, with around 80% franking credits.
Over the last 10 years, VAS has generated a total return of 7.7% per year, comprising 3.2% capital growth and 4.5% income return.
The VAS ETF unit price was trading at $96.73 after closing on Tuesday.
Betashares Nasdaq 100 ETF (ASX: NDQ)
Now, for those eager to broaden their investment horizons, Betashares Nasdaq 100 ETF stands out as an exceptional choice.
With Australia accounting for just 2% of the global financial market, it's crucial to diversify beyond domestic equities when planning for retirement.
NDQ offers an affordable entry point into the United States market, focusing on tech-heavy and growth-oriented stocks within the NASDAQ-100 Index. Big names include Nvidia, Amazon, Apple and Alphabet. This not only serves as a hedge against domestic market volatility but also adds substantial value by capturing growth opportunities in the global market.
The ETF's management fee is 0.48% per annum, which is higher than VAS but reflects its specialised exposure to high-growth tech stocks.
Since its inception in May 2015, the ETF has generated an average annual return of 19.48%, which is phenomenal.
The NDQ ETF unit price closed at $45.60 on Tuesday.
