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For retirees who are looking for greater capital appreciation and hold a higher risk tolerance, an ETF portfolio with a more aggressive investment strategy may be a better fitting option.

Investors looking to solely live off their investments over the next 20 or so more years will want to included investments that will appreciate while still hold their stability, according to Christine Benz, Director of Personal Finance at Morningstar.

ETFs are low cost, tax efficient and easy to use investments that allows individuals to take control of their investments.

An aggressive ETF model includes half of its assets in stocks and the remaining half in bonds and cash. Investors will also follow a total-return approach and allocate holdings into cash to cover living expenses.

Retirees who also accrue income from Social Security, pensions or a business may also consider taking on additional risk with heavier weighting in equities.

This type of portfolio includes separate ETF bond holdings, including iShares iBoxx $ Investment Grade Corporate Bond (NYSEARCA:LQD) at 12% and the mortgage-backed bonds ETF iShares Barclays MBS Bond (NYSEARCA:MBB) at 6%, to replicate securities in a total market bond index fund.

Additionally, the portfolio holds a quarter of its assets in government bonds that try to limit the negative effects of inflation, such as iShares Barclays TIPS Bond (NYSEARCA:TIP) at 17%, Vanguard Short-Term Bond ETF (NYSEARCA:BSV) at 9%, and a smaller allocation in SPDR DB International Government Inflation-Protected Bond (NYSEARCA:WIP) at 2%.

Morningstar advises taking on larger weighting in mega-caps, like the Vanguard Mega Cap 300 Index (NYSEARCA:MGC) at 27%, and smaller weightings in mid- and small-caps, such as the Vanguard Mid-Cap ETF (NYSEARCA:VO) at 9% and Vanguard Small-Cap ETF (NYSEARCA:VB) at 3%, or take on a broad market index exposure, like Vanguard Total Stock Market ETF (NYSEARCA:VTI). Additionally, it would be prudent to diversify with international holdings, including the European iShares MSCI EAFE Index (NYSEARCA:EFA) at 9% and the Vanguard Emerging Markets ETF (NYSEARCA:VWO) at 2%.

Lastly, Benz suggests holdings 4% in cash equivalent for two to five years’ worth of living expenses, or investors may consider holding cash in money markets, certificates of deposit and high-quality short-term bond ETFs.

Max Chen contributed to this article.

Disclosure: None

Source: Morningstar's Aggressive ETF Portfolio For Retirees