Vanguard's Total World Stock ETF, Short-Term Corporate Bond ETF Are All Investors Need for Retirement: Kiplinger

January 22, 2018 — 12:05 PM EST

When it comes to retirement savings, diversification is the key to riding out the volatility in the markets, but that doesn't mean you need to own a multitude of different mutual funds, exchange-traded funds or individual stocks. In fact, the investment magazine Kiplinger has identified two ETFs that will give investors everything they need to save for retirement, with both investments coming from Vanguard, one of the kings of passive investing.

Take the Vanguard Total World Stock ETF for starters. According to Kiplinger, the ETF, which invests in U.S. and foreign stocks, gives investors broad exposure with investments in 7,900 stocks. That's a lot more than the 100 to 200 stocks typically found in funds, noted Kiplinger. Some of the biggest holdings in the ETF include Apple Inc. (AAPL), Microsoft Corporation (MSFT),, Inc. (AMZN), Facebook, Inc. (FB) and Johnson & Johnson (JNJ). On the international front, the ETF's largest holdings include Chinese internet and gaming company Tencent Holdings Limited (TCEHY) and Switzerland-based food company Nestle (NSRGF).

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Currently, the Vanguard Total World Stock ETF holds 52% in U.S. stocks, 47% in foreign public companies and the rest in cash, noted Kiplinger. It doesn't hurt that the ETF is cheap, charging just 0.11%. That breaks down to $11 in expenses each year on an investment of $10,000. The fund also trades less frequently than other funds, with stocks staying included in the ETF for ten years on average. "When you invest in Vanguard Total World Stock, you get the collective opinion of all investors worldwide about which stocks are likely to yield the highest returns with the least risk," wrote Kiplinger, noting that the ETF has trailed the S&P 500 index by 4.6 percentage points on average each year but has beaten the EAFE index by 3.1 percentage points.

Retirement-focused investors should have debt exposure as well as stocks. On the bond front, Kiplinger pointed to the Vanguard Short-Term Corporate Bond ETF, which it said yields 2.6% and charges annual expenses of just 0.07%. Of the debt held in the ETF, the average credit rating is single-A. Kiplinger did caution that investors should have around 25% of investments in short-term corporate bonds given rising interest rates could result in longer-term bonds losing money. Kiplinger noted that an asset allocation in which 75% is invested in stocks and 25% is in bonds constitutes a good mix for investors aiming to retire 15 or more years from now.