Every investor, no matter age, investing experience or portfolio balance should consider putting a large amount of their investable assets in one of these exchange traded funds.
For the majority of investors, the time and energy required to pick individual stocks for their own portfolio's is too much, not to mention the fact that individual stock picking can just be downright overwhelming. The amount of available information and decoding what it all means is very time-consuming and confusing. Plus, the idea that all your hard earned money is tied up in just a few stocks, which at any moment could dramatically lose value, is very frightening.
The best way to avoid the majority of these problems is by simply buying one or more quality exchange traded funds. ETF's offer investors with a very low cost, diverse portfolio and they don't require investors to follow them on a daily, weekly, or even quarterly basis. The right ETF's are really the closest things an investor can find to a "buy and forget about" investment.
Today I would like to talk about three of my favorite ETF's that any investor, no matter their age, income level, size of investment portfolio or investing experience, should consider owning. So let's take a look at what they are.
My hands down favorite ETF period is the SPDR S&P 500 ETF (PACF:SPY). The SPY simply tracks the S&P 500. So if the market, S&P 500, moves higher, your investment moves higher. This is a great one stop shop for all investors. The SPY has been around since 1993, has one of the lowest expense ratio's you will find at 0.09%, and even offers investors a 2% dividend yield. You can also reinvest those dividends in the ETF, which will help supercharge your returns over a long period of time.
The SPY will trail the S&P 500 but year-to-date it is lagging by just 0.04%. The cost of running the ETF and the slight time lag associated with holdings changing will cause a slight difference, but the SPY is still considered to be one of the best ways investors can track the S&P 500 or market performance. Currently, the one-year performance sits at 7%; three-year performance is at 11% while its five-year annualized return is at 15.6%.
My next best option is an ETF that offers growth, stability, and a super-reliable dividend payment. The ProShares S&P 500 Dividend Aristocrats ETF (PACF:NOBL) is a great option for anyone, but would defiantly be more suitable for someone with a little more conservative investing approach or those who are looking for a very reliable dividend payment. The NOBL tracks only S&P 500 stocks that have increased their dividend payments annually for at least the past 25 years. Due to the guidelines, its number of holdings is only 50 and as you could imagine that number does not change very often.
The smaller number of holdings and the stability of each of those holdings will make the ETF much less volatile than the overall market. Furthermore, the ETF is equal-weighted, not market cap weighted, which also reduces investors risk of one stock bringing down the portfolio. This though does increase the expense ratio which sits at 0.35%, but when compared to the majority of other ETF's not to mention mutual funds, that figure is still extremely low.
Lastly, we have the Vanguard FTSE Emerging Markets ETF (PACF:VWO). This ETF tracks a market cap weighted index of emerging markets. The VWO is a very good way to gain exposure to countries like China, India, Brazil, without having single stock risk or having to do much research on which foreign company's you can trust and should own. VWO has an expense ratio of 0.15% while offering a 2.42% dividend yield.
Despite the ETF's long-term performance, five-year return of -2.4%, year-to-date VWO is up more than 14% and most investors would agree that eventually countries such as China and India will provide massive growth opportunities for long-term investors. Buying a piece of those companies today will allow you to realize a fuller growth horizon than waiting until they have truly proven themselves. The VWO is definitely the riskiest ETF mentioned today, but it could possibly turn out to be the best long-term holding as China, India, and the other emerging markets grow into their true potential.
Any and all of the options mentioned above are great places to have your money, especially if you are a long-term oriented investor. Don't feel like you can or should only buy one of the three options, but know that you will have some overlap with the SPY and NOBL since they are both S&P 500 tracking ETF's. Split your money up with a little here and a little there to help further protect yourself from a major market downturn.
Want more focused ETF options based on your age? Check back soon as I will walk you through ETF's that are more focused for investors in their 20's, 30's, 40's, 50's, 60's, and once you are in retirement.
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor did not own shares of any equity mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
5 thoughts on “3 ETFs Every Investor Should Consider Owning”
Thanks for the info on NOBL. Wasn't familiar with the term/category "dividend aristocrats".
How does NOBL compare to others in this category like SDY, VIG and WDIV?
In digging around this, I also came across high income CEF ETFs like YYY and PCEF. Any thoughts on those?
F Y I : Vanguard "VWO" has been closed for over two months to new investors!
I am actually working on a piece comparing NOBL with some of the other ETF's you mentioned. Keep your eye out for it sometime in Septmeber.
I am not sure where you found that information about VWO being closed to new investors. VWO is an Exchange Traded Fund which is a group of stocks bundled together, similar to a mutual fund, but is traded daily like an individual stock. ETF's are always open to new investors, the same way a new investor could buy shares of Disney or Johnson & Johnson anytime they want. Mutual Funds are different then ETF's in the fact that the fund manager can close the fund to new investors and put restrictions on when you can put new money in or take money out, ETF's or in this case VWO is not like that. Hope that helps.
John is probably thinking of Vanguard Dividend Growth Fund (VDIGX).
I will look forward to your future look at NOBL and its peers. Cheers.
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