3 top funds to rocket fuel your retirement

There is a huge body of evidence showing the power of so-called index funds — that is, mutual funds or exchange-traded funds that are tied to a stock market index such as the S&P 500.

The latest data point: Last year, two-thirds of investment managers who handpicked large stocks did worse than if they simply put their money into the fixed list of S&P 500 components.

The long-term data is even more compelling, with a whopping 82% of active funds underperforming index funds over the past 10 years.

66% of fund managers can't match S&P results

Still, for many investors, a plain vanilla approach to investing via index funds isn’t enough. Whether it’s the allure of being in the minority  achieving outperformance or whether it’s a specific financial situation in their household that demands a different approach, many Americans are looking for something different than simply a “set it and forget it” approach with index funds.

A good investment portfolio is always diversified, of course, something experts all recommend. In addition, they advise against risky bets that can bankrupt you if they go south.

That said, a few strategic moves in a portfolio can make a big difference — particularly when used in concert with index funds that form the foundation of your retirement strategy. Quality often trumps quantity in these situations, and allocating just a little bit of your nest egg toward smart picks can really pay off in the long run.

Here are three top funds recommended by investment experts to help you achieve your financial goals:

Long-Term Treasury Bonds for Protection

If you have a substantial amount of savings already, you should be very proud of your saving strategy.

And you also should consider looking for stable investments to protect that nest egg in a choppy market, said Chuck Self, a chief investment officer at ETF investment strategist of iSectors in Appleton, Wis.

That’s why he recommends the iShares 20+ Year Treasury Bond ETF (TLT), which yields about 2.4% right now.

“The iShares 20+ Year Treasury Bond ETF is a great option for investors looking to combat slowed growth (for the U.S. economy) and provide diversification for their portfolios,” Self said.

He added that “Treasuries are attractive to foreign investors, too,” given slowing global growth rates and the fact that U.S. government bonds are the world’s safe haven investment.

Some investors may be leery of long-term bonds, given talk about the U.S. Federal Reserve raising interest rates and the fact that when rates rise, the principal value of bonds can drop. However, Self pointed out that the Fed has been very subdued in its interest rate plan, including a move in March to dial down expectations for future rate increases. In fact, he doesn’t see any rate increases at all this calendar year.

Fed stands pat on rates; signals more gradual hikes

“With continued slow economic growth, low inflation expectations and the presidential elections coming up, the only opportunity to raise rates would be December, and we expect the economic growth and inflation expectations will be too low to raise rates then,” he said.

Get more information on the TLT bond fund on the official iShares website.

Emerging Markets for Aggressive Growth

It’s no secret that there is a lot of turmoil in global markets lately, particularly with China’s economy slowing last year to grow at the slowest pace in 25 years.

But long-term investors should see the recent downturn in emerging markets as an opportunity to buy into these regions at depressed prices, said Mariann Montagne, senior investment analyst at Gradient Investments in Arden Hills, Minn.

That’s why she recommends the First Trust Chindia ETF (FNI) for investors who can stomach the short-term volatility overseas in pursuit of long-term outperformance. This ETF is focused only on companies domiciled in China and India, two emerging markets with some of the biggest potential for future growth.

“We believe China’s economic growth will remain in the 6% to 7% range for the next few years, while India’s will continue its top position at slightly better than 7% growth,” Montagne said. “We believe earnings expectations have been set low for each country, and financial reforms are on the rise.”

Montagne adds that a diversified emerging markets fund like FNI also offers a bit more stability than picking individual companies in these far-flung regions, which can be very risky for individual investors.

Get more information on the Chindia fund on the official First Trust website.

Low Volatility for Less Stress

For many investors, the day-to-day volatility of the stock market can take a big emotional toll. Even if they know academically that a good strategy is to buy and hold for the long term, the roller coaster ride of their portfolio and the 24-hour crush of headlines can simply be too much.

That’s where the PowerShares S&P 500 Low Volatility ETF (SPLV) comes in. This exchange-traded fund avoids stocks that are trading for a premium above their current profit levels, and is weighted toward defensive consumer picks instead of more volatile sectors of the stock market.

“It has a low expense ratio and has zero technology and zero energy exposure, limiting risk,” said Ron Weiner, founder and president of RDM Financial Group in Westport, Conn. “This is a good all-weather fund. We feel that we are currently in a trading range where stocks are not cheap, and we don’t see a catalyst to spur significant growth.”

There isn’t as much explosive potential, of course, but it’s an appropriate investment for those who are willing to forfeit big swings up in order to prevent big swings down. And 2016 seems a particularly appropriate time for this fund, Weiner adds, given the “dull market” where today’s big winners don’t seem to have much staying power.

Get more information on the Low Volatility ETF on the official PowerShares website.

Jeff Reeves is the executive editor of InvestorPlace.com.