ETFs for your IRA / retirement portfolio

Vanguard Energy VIPERs (VDE) is an ETF that seeks to track the performance of the MSCI U.S. Investable Market Energy Index. With an expense ratio of .26% it’s quite reasonable.

The top holdings consist of well known names such as Chevron, ConocoPhillips, Exxon Mobil, and Halliburton.

I also came across a Motley Fool article from jan. 3 2006 which details the authors IRA: Vanguard Total Stock Market (VTI) which has a cost of .07% a year. Vanguard Emerging Markets (VWO) has an expense ratio of 0.30%, and tracks the performance of the Select Emerging Markets Index. The top holdings include Israel’s Teva Pharmaceutical (TEVA), Korea’s Kookmin Bank, and China Mobile. It has outperformed the S&P 500 by a wide margin in the past year.

Then there’s the iShares S&P MidCap 400 (IJH) ETF. The average company in the index has a market cap of just $3.4 billion. It has outperformed the S&P 500 over the past 5 years but the charts look very similar. This ETF seems to give you a shot at outperforming the broader market, but doesn’t truly diversify your portfolio.

Speaking of diversification, some would recommend Vanguard REIT Index VIPERs (VNQ), but a chart to chart comparison shows that while outperforming the S&P 500, VNQ still follows most of the broader markets ups and downs. Of course if terrible things were to happen to stocks, real estate investments (and VNQ) might hold more of their value than stocks.

Even Vanguard Materials VIPERs (VAW) seem to go up and down with the broader market when you compare the charts. I still feel that gold (for example streetTRACKS Gold Shares – GLD and iShares COMEX Gold Trust – IAU) is the most certain way to diversify. Other metals like silver would be a nice play as well but there is no ETF focusing on silver (when there is I would expect silver prices to increase even more quickly than they are doing now due to increased demand). That’s why I have CEF in my IRA.

CEF is a closed-end fund limits its amount of shares. Because closed-end funds limit their shares, they can trade at a premium or discount to their net asset value. I believe that currently CEF is trading at a premium to its net asset value.

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