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Investing Specialists

A Conservative Retirement Portfolio: The ETF Version

This asset mix is targeted toward risk-shy investors with time horizons of roughly 15 years.

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A conservative retiree portfolio featuring exchange-traded funds might seem like a contradiction in terms. But as I noted when I discussed a moderate ETF portfolio, ETFs have some attributes that can make them a good fit for retirees. Provided you stick with low-cost ETFs that track broad market segments, you'll keep your overall portfolio costs low--a laudable benefit given that your portfolio's absolute return level is apt to downshift as you move more assets into cash and bonds. And for retirees who have a decent share of their portfolios in taxable accounts, ETFs have some features that could reduce the drag of taxes on an ongoing basis. (Note that ETFs that kick off bond and dividend income won't be any more tax-efficient than similar traditional mutual funds, however.)

But the biggest benefit of a portfolio anchored in broad-market ETFs or index funds is the ability to be hands-off. With a few small tweaks every once in a while, such a portfolio could virtually run itself for a while if need be. Given that most retirees have better things to do with their time than toil over their portfolios, that's a valuable attribute indeed.

Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.