These 2 Vanguard ETFs Are a Retiree's Best Friend

Not all investors are the same. What is appropriate for investors in their 20s is unlikely to fit the goals and risk tolerance for investors in their 60s, 70s, or 80s. Similarly, not all retirees are the same. Some are focused squarely on income generation, while others might need a more aggressive mix of income and growth.

Here, I'll explore two Vanguard exchange-traded funds (ETFs) that provide a helpful mix of both income and growth.

Image source: Getty Images.

Vanguard Real Estate ETF

Let's start with the Vanguard Real Estate ETF (NYSEMKT: VNQ). This fund retirees a cheap and easy way to invest in real estate investment trusts (REITs). REITs are companies that own, finance, or operate real estate properties that generate income. By law, REITs must invest at least 75% of their assets into real estate and distribute 90% or more of their annual-taxable income to shareholders.

There are many varieties of REITs. For example, Public Storage owns and operates self-storage facilities. Meanwhile, VICI Properties operates leisure, gaming, and hospitality properties, including iconic locations on the Las Vegas strip like Caesars Palace and The Venetian.

This Vanguard fund counts both of those REITs among its holdings, along with many others. The fund could be particularly appealing to retirees who don't have direct exposure to real estate -- in other words, for those who do not own a house, apartment, condo, etc. By investing in this fund, retirees gain some exposure to the real estate market and can benefit from rising prices while not taking on the risk and costs of directly owning a real estate property.

The fund has a current dividend yield of 3.6% and a low expense ratio of 0.12%. Over the past 10 years, the fund has achieved a compound annual growth rate (CAGR) of 7.2%, meaning that $10,000 invested in 2014 would be worth $20,350 today.

Vanguard Utilities ETF

Next up is the Vanguard Utilities ETF (NYSEMKT: VPU). What's compelling about this fund is its focus on a commonly underappreciated sector. Simply put, the utility industry is critical to the American economy. However, given its nature as a highly regulated, slow-growth industry, it's often overlooked by investors.

Yet, that's changing, especially when it comes to electricity producers. That's because the world is desperate for more power. In particular, advancements in artificial intelligence (AI) and electrical vehicles (EVs) have led to greater demands on the power grid. In response, some utility providers are boosting supply by opening new facilities or reopening shuttered power plants.

In any event, what retirees should know is this this Vanguard fund is a great way to capitalize on such trends. The ETF boasts holdings in large regional utilities, including Duke Energy, Southern Company, and Dominion Energy, among many others.

The fund's low expense ratio of 0.10% means that investors only pay $10 per year for every $10,000 invested in the fund. Moreover, its dividend yield of 2.8% provides a solid amount of annual payments for income-seeking retirees.

Finally, the fund's 10-year performance is excellent. It has generated a 10-year CAGR of 10.1%, meaning a $10,000 investment made in 2014 would have grown to $26,100 today.

In summary, these two ETFs offer retirees a blend of income and growth -- something that's worth considering for many in this stage of life.

Should you invest $1,000 in Vanguard World Fund - Vanguard Utilities ETF right now?

Before you buy stock in Vanguard World Fund - Vanguard Utilities ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund - Vanguard Utilities ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $744,197!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Real Estate ETF. The Motley Fool recommends Dominion Energy, Duke Energy, and Vici Properties. The Motley Fool has a disclosure policy.