ETFs can be a powerful investment for retirement accounts. The best ETFs offer broad, thematic or asset-specific exposure at low cost, helping investors maximize long-term returns and minimize risk. These features make them an ideal buy-and-hold investment.
Of the ETFs I own, there are two main elements of my retirement strategy: Schwab US Dividend Equity ETF(NYSEMKT: SCHD) and JPMorgan Nasdaq Equity Premium Income ETF(NASDAQ: JEPQ). I plan to purchase more of both this November. That’s why I’m excited to add more of these top funds.
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The Schwab US Dividend Equity ETF has a simple investment strategy. ETFs aim to follow closely Dow Jones US Dividend 100 Indexwhich measures the performance of the 100 largest dividend-paying stocks. The index selects companies based on their ability to pay higher dividend yields that are sustainable and consistently growing. This combination of yield and growth allows the fund to provide income and growth potential, making it ideal for a retirement account.
The fund’s 100 holdings currently have a dividend yield of about 3.8%, more than triple S&P 500level (1.2 percent). Meanwhile, these companies have grown their dividends at an average annual rate of more than 8% over the past five years.
Its largest holdings are dividend stocks. For example, the current top is AbbVie(NYSE: ABBV) 4.4% of its assets. The healthcare company has increased its dividend every year since its founding in 2013, growing by an impressive 310 percent during that period. The company’s dividend yield is currently above average at 2.9%. A financially sound company invests heavily in research and development to develop innovative drugs to address health issues and increase revenue to help drive dividend growth.
The Schwab US Dividend Equity ETF has been successful for a long time. Since its establishment in 2011 the fund gave an average annual return of 11.6%. ETFs provide investors with income and high total returns at a very low cost (0.06% ETF expense ratio).
The JPMorgan Nasdaq Equity Premium Income ETF has a dual mandate. It aims to provide investors with monthly income and higher risk Nasdaq-100 an index with lower volatility.
The Foundation uses a two-pronged strategy to achieve its goals:
Stock portfolio: The ETF uses applied data science and fundamental research to build a portfolio of companies based on the Nasdaq-100 index. This portfolio provides access to many high-growth technology stocks.
An overlay of disciplined options: The Nasdaq-100 ETF writes out-of-the-money (above the current market price) call options. This strategy generates income from option premiums (the option writer receives the value of the option (called the premium) as a credit).
ETF options writing strategy can be very profitable. Over the past 12 months, the fund has returned more than 11% to investors. This far exceeds the returns generated by all other asset classes. The fund’s monthly payouts provide investors with tangible returns and help reduce the impact of volatility.
Meanwhile, the fund’s equity portfolio provides growth potential, increasing the fund’s total return. Since its establishment in 2022 the fund gave an average annual return of 16.2%. This is a high return for a less volatile, income-oriented investment. The JPMorgan Nasdaq Equity Premium Income ETF offers this attractive combination for a reasonable expense ratio of 0.35%.
The Schwab US Dividend Equity ETF and the JPMorgan Nasdaq Equity Premium ETF are excellent choices for my retirement account. They have different advantages, so they complement each other perfectly. SCHD emphasizes dividend yield and growth, while JEPQ provides strong monthly income flow and exposure to growth-oriented technology stocks. Both combine income and growth with a lower risk profile, matching my strategy of attractive returns with lower volatility. That’s why I’m looking forward to replenishing my positions again this November.
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Matt DiLallo has positions in the JPMorgan Nasdaq Equity Premium Income ETF and the Schwab US Dividend Equity ETF. The Motley Fool has a position and recommends AbbVie. The Motley Fool has a disclosure policy.
Top 2 ETFs I Can’t Wait to Buy More of in My Retirement Account Originally published by The Motley Fool this November
