The Best 1-Stop-Shop ETFs to Buy and Hold Forever for Retirement

Keeping your holdings simple is the key to creating a successful investment portfolio.

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Happy New Year! Did you spend a lot of time in 2021 researching stocks, following the financial news, and tinkering with your portfolio, only to underperform or barely beat the market? Don’t worry; there is an easier way to match the market with minimal effort.

Active stock picking can be time consuming, stressful, and prone to dismal results. For the average investor, there is ample evidence that passive investing using a variety of exchange-traded funds (ETFs) following major stock market indexes is the way to go.

As the former founder of Vanguard Jack Bogle would say: “Don’t look for the needle in the haystack — just buy the haystack itself!” Thankfully, Canadian investors have access to a variety of asset-allocation ETFs to form the core of their investment portfolios. Let’s take a look at my top picks.

Vanguard leads the way

Vanguard All-Equity Growth Portfolio (TSX:VGRO) is my top pick for an investor seeking sustainable long-term growth with a 80/20 stock/bond allocation. The fund is highly diversified, holding over 13,000 equities across multiple industries and in large, mid, and small caps, and federal, provincial, municipal, and corporate bonds.

VGRO is best used as a core holding in your portfolio or as the entire portfolio all together. Holding this fund will currently cost you a management expense ratio (MER) of 0.24% per year, or $24 per $10,000 invested. The fund is split approximately 40% in U.S., 20% in developed, and 7.5% in emerging markets, with a 30% Canadian home bias to mitigate currency risk and reduce volatility.

The less-risky version

If 80% equities is too risky for your investment objectives and time horizon, don’t worry. There is a less-volatile alternative in Vanguard Balanced ETF Portfolio (TSX:VBAL) for a 60/40 stocks/bond allocation. The 60/40 portfolio has traditionally been the optimal blend for the best risk-adjusted return.

Asides from the higher bond allocation, VBAL shares the same equity holdings and fees as VGRO. Investors who are seeking less volatility and protection of capital may want to make VBAL their core holding, with the aim of increasing their bond allocation as retirement draws closer.

The Foolish takeaway

If you’re still dead set on doing research and picking your own stocks, my suggestion is to use no more than 10% of your capital to do so, while holding the remaining 90% in one of these ETFs. This allows you to at least match the market in case your picks do poorly, as your losses are limited to a small portion of your overall portfolio.

In my opinion, Vanguard did an excellent job of creating model portfolios suitable for Canadian investors of all objectives, time horizons, and risk tolerances. For a low fee, these portfolios take the hard work out of picking stocks, rebalancing, and managing your investments. Buying and holding one of these funds with consistent contributions can help compound wealth with zero effort or worry on your end.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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