3 Top ETFs I Can't Wait to Buy More of in My Retirement Account This October

Key Points

• The Schwab U.S. Dividend Equity ETF holds 100 top dividend stocks.

• The JPMorgan Equity Premium Income ETF provides income and equity exposure to the stock market with less volatility.

• The iShares Core U.S. Aggregate Bond ETF is a great way to gain broad exposure to high-quality bonds.

• 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›

I primarily invest in individual stocks. However, I've started to add more exchange-traded funds (ETFs) to my portfolio. They enable me to easily invest broadly across a specific asset class or theme.

I make a monthly transfer to my retirement account. This month, I plan to allocate some of it to three ETFs: the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD), the JPMorgan Equity Premium Income ETF (NYSEMKT: JEPI), and the iShares Core U.S. Aggregate Bond ETF (NYSEMKT: AGG). Here's why I'm eager to increase my positions in these top ETFs this October.

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100 top dividend stocks in one fund

Investing in dividend stocks is a great way to build up a strong nest egg for retirement. Over the past half-century, dividend-paying stocks have outperformed non-payers by more than two-to-one. Dividend stocks have also been less volatile than non-payers and the broader market.

The best returns come from companies that grow their dividends. They just happen to be the focus of the Schwab U.S. Dividend Equity ETF. The fund invests in 100 top dividend stocks selected based on their strong dividend growth track records. The ETF tracks an index that screens stocks for several dividend quality characteristics, aiming to hold companies with strong financial profiles. Those characteristics position the companies to continue increasing their dividends.

As a result, the ETF pays an attractive and growing dividend (currently around 4%), providing me with extra income to reinvest each month. The fund also grows in value as the underlying companies increase their earnings and dividends. This focus on dividend growth stocks has enabled the Schwab U.S. Dividend Equity ETF to deliver an 11.5% average annual total return since its inception in 2011.

A premium income stream

The JPMorgan Equity Premium Income ETF aims to deliver a monthly income stream to its investors. The fund also strives to provide equity market exposure with less volatility.

The fund uses a two-part strategy to achieve its objectives. First, it builds a defensive equity portfolio by investing in stocks ranked by JPMorgan's risk-adjusted system. Second, it implements a disciplined options overlay strategy by writing out-of-the-money (above the current market price) call options on the S&P 500 Index to generate options premium income. As an options writer (short seller), the fund receives the premium (the value of the option) upfront.

The equity portfolio provides market exposure aimed at growing the investment value over the long term, while writing options generates monthly income. The fund has paid an income yield of over 8% in the past year. This mix has generated a strong total return (an average annual return of 11.7% since 2020), offering investors bond-like income with equity-like returns and lower volatility than the overall stock market.

A top bond fund

Most financial advisors recommend that investors build a diversified portfolio of stocks and bonds. While bonds are lower-returning investments, they also help investors reduce their risk profile. For example, a portfolio that's 100% stocks has historically produced an average annual return of 10.5% over the past century. However, that portfolio would have been down 43% during the worst year. On the other hand, a 60% stock/40% bond portfolio would have returned 8.8% annually, while muting the worst year's return to only a 26.6% decline.

I currently have a low allocation to bonds. However, I'm slowly increasing my allocation to bonds as I age by steadily investing a portion of my cash in top bond ETFs, such as the iShares Core U.S. Aggregate Bond ETF.

The iShares Core U.S. Aggregate Bond ETF provides broad exposure to the entire U.S. investment-grade bond market. This ETF currently holds nearly 12,900 bonds with an average yield of around 4%. They include a mix of U.S. treasuries, mortgage-backed securities (MBS), and investment-grade corporate bonds. That broad exposure to high-quality bonds makes it a great core bond holding for any retirement account. These bonds can provide me with a steady income and help lower risk by diversifying my portfolio.

Great ETFs to buy with retirement in mind

These three ETFs help diversify my portfolio, reduce risk, and provide income I can reinvest until retirement and draw on later. That future of a more secure retirement is why I'm excited to add more to each one this month.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Matt DiLallo has positions in JPMorgan Chase, JPMorgan Equity Premium Income ETF, Schwab U.S. Dividend Equity ETF, and iShares Trust-iShares Core U.s. Aggregate Bond ETF. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.