Stock investing can turn into a time-consuming and hard hobby, requiring many hours of reading and studying companies, evaluating their numbers, and working on which ones to put your money in and when to buy and then when to sell.
Thus, many investors turn to professionally managed funds, or to the usually much less costly yet arguably better index funds, which come in the form of mutual funds and ETFs. ETFs have been increasing in popularity because of how easy they are to get in and out of these funds.
So… can you get by with your investing life sticking mostly to ETFs? You can — and they can even aid you in retiring a millionaire. Here’s how.
What are these ETFs?
There are many ETFs. They are technically funds, but they also sell like stocks on the exchanges like the NYSE or Nasdaq. As funds, each share will give money across numerous assets — perhaps hundreds or thousands of stocks — giving easy diversification.
Unlike mutual funds, which may require you to pay a minimum of several hundred or even thousands of dollars on their shares, you can purchase as little as one single share of an ETF.
Many ETFs are actually index funds, tracking a particular index (like the S&P 500) by owning all or most of what the index has, in close proportions. It is hard to beat index funds as an investment, since good, low-cost index funds are the easiest way to invest in stocks and still get solid returns over the long haul.
The long-term average yearly ROI of the market is near to 9%, and a large index fund that tracks the total market can deliver returns around the same as the market.
Which ETFs should you consider?
Here are some good lower-cost index-fund ETFs:
Schwab U.S. Mid-Cap ETF (SCHM), Vanguard Small-Cap ETF (VB), iShares Core S&P Small-Cap ETF (IJR).
Remember that there are a wide selection of index funds out there, and the ones above are a small selection. These will have your money focused mainly on smaller companies, which can grow faster. You can distribute your money among these funds, or you can do well with only one of them.
Author: Blake Ambrose