Have I convinced you to start investing yet? If so, this episode covers top brokerage choices as well as what investments to choose first.
An Index Fund is a type of Mutual Fund that is meant to track an index, typically higher management and taxation fees, along with only being traded at the end of the day. John Bogle, “father of investing”, and found of Vanguard, revolutionized the way we invest. Now, ETFs are viable approach for all investors, especially those that don’t want to hassle with picking individual companies themselves. ETFs are very similar to index funds, except they offer more liquidity because they trade much like securities intraday, and they are more divisible (smaller and more affordable).
If all you did was buy the Total US Stock Market for the past 20 years, you would have earned a 285% return, almost quadrupling your money. For the new investor that is overwhelmed and unsure of what to invest it, adopting a strategy like this to begin with is the best way to enter the market! This strategy has proven time and time again to not only beat most hedge fund and money managers, but also allow individual investors to meet their financial goals.
Building Block Funds:
VFIAX Vanguard Fund SP500 Fund Cost: 0.04% Expense Ratio Minimum: $3000 Investment Alternative ETF: VOO - 0.03% Expense Ratio This is a Vanguard Index Fund that follows the S&P500, which is the top 500 publicly traded companies in the United States. Buying this one index fund is basically the equivalent of buying a small piece of all 500 of the largest companies in the US, and you’ll get access to some of the bigwigs like Apple, Microsoft, Amazon, Google, Facebook, and so on.
VTSAX Vanguard Fund Total Stock Market Cost: 0.04% Expense Ratio Minimum: $3000 Investment Alternative ETF: VTI What makes this so unique is that it encompasses the entire us stock market in one single fund…like, this is everything. if there’s a small cap, medium cap, or large cap stock in any industry you can think of - this index fund has a tiny piece of it. For a small price, you can own a small piece in over 3,600 companies.
SWPPX Charles Schwab SP500 Fund Fund Cost: 0.02% Expense Ratio Minimum: NONE This index fund was started in 1997 and it ALSO follows the SP500.
SWTSX Charles Schwab Fund Cost: 0.02% Expense Ratio Minimum: NONE This encompasses the entire US stock market index, similar to VTSAX.
FXIAX Fidelity Fund Total Stock Market Fund Cost: 0% Minimum: NONE This is Fidelity’s version of the SP500 index fund with NO EXPENSE RATIO and NO MINIMUMS.
FZILX Fidelity International Stock Market Fund Cost: 0% Minimum: NONE This is, in my opinion, a GOOD index fund for everyone to at least get in on - because an international index fund will cover foreign and emerging markets that COULD perform very well over the next few decades. Now, it is true that - Historically, the SP500 has been a better investment than international stocks - but that might not always be the case and this is an excellent diversification tool for anyone’s portfolio.
BIG WINNER: FZROX Fidelity Total Stock Market Fund Cost: 0% Minimum: NONE Unlike Vanguard, which has a 0.04% expense ratio - this one has no expense ratio and is totally free to own!
Higher risk higher reward ETFs (these are just examples and many more exist!):
Large Cap ($10B+): VUG, QQQ
Mid Cap ($2B - $10B): VO, IWR, IJH
Small Cap (<$2B): VB, IWM
Examples of Cyclical ETFs (keep in mind that there are many others to choose from!) (also the expense ratios tend to be higher in these ETFs)
Consumer Discretionary: XLY
Home construction ETF: ITB
Emerging Market eCommerce: EMQQ
Broader Global Exposure to eCommerce: IBUY
Examples of Emerging Markets: Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea, and Turkey
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