Want $1 Million in Retirement? 5 Simple Index Funds to Buy and Hold for Decades. – Yahoo Finance

In investing, there’s no need to invest in individual stocks to achieve strong returns over time. Don’t get me wrong. I own about 40 different individual stocks and completely believe it’s possible to beat the market over time. But even if you simply match the market’s performance through the magic of index fund investing, you might be surprised at the results.

With that in mind, here are five simple index funds that could help set you on the path to a million-dollar retirement portfolio, and with minimal ongoing effort on your part. We’ll also look at how you can use these to grow your portfolio to a seven-figure sum before you retire.

To be fair, there are hundreds of solid index funds that could make excellent retirement investments for you. But if I were to start a portfolio from scratch today and could only choose five index funds, here’s what they would be:

1. Vanguard S&P 500 ETF (NYSEMKT: VOO): There’s a solid case to be made that if you were only going to buy one index fund, it should be this. The Vanguard S&P 500 ETF will track the performance of the benchmark S&P 500 index over time, which has historically averaged annual returns of about 10%. And with a rock-bottom 0.03% expense ratio, you’ll get to keep most of the index’s gains.

2. Vanguard Real Estate ETF (NYSEMKT: VNQ): Real estate investment trusts, or REITs, are often thought of as boring investments. However, many people don’t realize that not only have REITs slightly outpaced the S&P 500 over the long run, but they’ve done so with significantly less volatility.

3. iShares iBoxx Investment Grade Corporate Bond ETF (NYSEMKT: LQD): While you’re young, you should have most of your money in stocks, but it’s still a good idea to put some of your money into fixed-income investments and to gradually shift your allocation toward them as you get older. This index fund invests in corporate bonds and currently has a 4.4% yield with relatively low downside risk.

4. Vanguard Russell 2000 ETF (NASDAQ: VTWO): In full disclosure, this is the index fund I’ve been buying recently. It invests in a broad basket of small-cap stocks, and while small caps have underperformed their large-cap counterparts, they tend to produce similar or even better returns over long periods of time.

5. Vanguard International High Dividend ETF (NASDAQ: VYMI): It can be a smart idea to diversify some of your portfolio into stocks based outside of the United States. Since dividend stocks tend to be relatively mature with stable cash flows, I like to use this ETF to get international exposure (and a 4.3% dividend yield).