Hurdle Fences With Low ETF Expenses

Inflation and stock market depreciation are obvious detriments to a portfolio designed to last throughout retirement, but fees are an equally damaging hurdle. In this article we'll look at a group of low cost ETFs for investors hoping to cash in on the volatility in the market. (For more on the fee structure common to many mutual funds and ETFs, read Stop Paying High Mutual Fund Fees.)

Low Cost Equity Exposure
The SPDRS S&P 500 Index (AMEX:SPY) fund gives investors exposure to a breadth of large U.S.-based firms from online giant Google (Nasdaq:GOOG) to commodity concerns like U.S. Steel (NYSE:X) and widely held conglomerate General Electric (NYSE:GE). An investor could consider the SPY fund as the foundation of his or her portfolio.

The SPY fund has an extremely low expense ratio of 0.10%.

Going Overseas
International ETFs, like the Vanguard FTSE All-World ex-US ETF (NYSE:VEU), with a heavy concentration in Western Europe and other regions outside of the U.S., provide an additional level of diversification to a portfolio. True, more than 100 companies on the S&P 500 like Intel (Nasdaq:INTC) and Newmont Mining Corporation (NYSE:NEM) generate 50% or more of their revenue overseas; however, an additional international component like the VEU fund should be considered.

The VEU fund has a low expense ratio of 0.24%.

Inflation Hurdle
When the value of the dollar is headed south and inflation fears arise the SPDR Gold Trust ETF (NYSE:GLD) offers protection. Inflation fears have slowed along with oil prices falling below $50 per barrel, but it's arguably just a reprieve as rising costs tied to healthcare and taxes are looming in the future. Since inflation fears are on hold for the interim, holders of gold-focused ETFs may be sellers. Investors may want to pay attention to the price of gold and dollar cost average their way in if gold prices decline below $700 per oz. (To learn more about inflation, and how it affects you, read our Inflation Tutorial.)

The GLD fund has an estimated expense ratio of 0.40%.

Fixed-Income Dividend Yield
Finally the SPDR Barclays Capital TIPS (NYSE:IPE) is a fixed income ETF designed to help investors outpace inflation. The IPE fund is composed of a variety of medium- and long-term U.S. Treasuries. Along with the GLD fund, IPE offers another measure of protection for a portfolio.

This fund has a low expense ratio of 0.19%.

Final Thoughts
There are many barriers and fences in the form of inflation, economic slowdowns and high fees that will sap the earnings potential of your portfolio. The low cost ETFs mentioned above, weight adjusted based on the age and goals of the investor, will give long-term investors a way to mitigate expenses as they build a portfolio for retirement.

To learn how to pick the best ETF, read Five Ways To Find A Winning ETF.