What ETFs to Buy for a Beginner Investor

As a beginner investor, it's essential to start with a solid foundation. Vanguard Total Stock Market ETF (VTI) is a great starting point, offering broad diversification across the US stock market.

Investing in the US stock market can be a good place to start, and VTI is one of the most popular and reliable options.

For those interested in international investing, the iShares MSCI EAFE ETF (EFA) is a well-established choice, covering developed markets outside of the US and Canada.

EFA tracks the MSCI EAFE Index, which includes over 900 stocks from 21 developed markets.

Diversification is key, and a mix of low-cost index funds and ETFs can help you achieve this goal.

ETFs can be used to gain exposure to various asset classes, such as stocks, bonds, and commodities, which can help spread risk.

Consider using a core-satellite approach, where a broad market ETF serves as the core holding, and more targeted ETFs make up the satellite portion of your portfolio.

This approach can help you capture broad market trends while also allowing for more focused investments.

The article mentions that the Vanguard S&P 500 ETF (VOO) is a good core holding due to its low cost and broad market exposure.

You can also use ETFs to gain exposure to specific sectors or industries, such as technology or healthcare, which can be a good way to add some extra diversification to your portfolio.

For example, the Invesco QQQ ETF (QQQ) tracks the Nasdaq-100 Index, which is heavily weighted towards technology stocks.

If you're looking for a range of ETFs to choose from, you've got options. Select from active equity, fixed income, thematic, sustainable, and more.

For those focused on the S&P 500, there are four primary ETFs to consider: SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), Vanguard S&P 500 ETF (VOO), and Invesco S&P 500 Equal Weight ETF (RSP). Each has its own characteristics, such as expense ratios and liquidity.

SPY has been around since 1993 and has more assets under management than any other ETF in the world, making it a popular choice. IVV and VOO have slightly lower expense ratios but are less liquid. RSP weights companies equally rather than by market capitalization, which has outperformed the other three since its creation in 2003.

Here's a brief comparison of the S&P 500 ETFs:

For those looking for a broad international stock fund, there are options like Vanguard Total International Stock ETF (VXUS) and iShares MSCI ACWI ex U.S. ETF (ACWX). However, the author recommends splitting developed and emerging markets and rebalancing them as appropriate.

With so many ETFs out there, it's great to have a variety of options to choose from. You can select from a range of ETFs including active equity, fixed income, thematic, sustainable, and more.

ETFs offer flexibility in investing, allowing you to pick and choose the types of investments that fit your goals.

The S&P 500 is a popular benchmark for tracking the US stock market, and there are several ETFs that follow it.

If you're looking for a low-cost and liquid option, the SPDR S&P 500 ETF Trust (SPY) is a good choice, with over 25 years of history and more assets under management than any other ETF in the world.

IVV and VOO are also options, with slightly lower expense ratios than SPY but less liquidity.

RSP is a different story, as it weights companies equally rather than by market capitalization, which has led to outperformance compared to the other three options, but with more volatility.

Here are the four primary ETFs that follow the S&P 500:

Developed foreign markets are mainly found in Europe and Japan, and there are several ETFs that focus on these regions. The iShares MSCI EAFE ETF (EFA) is ideal for traders due to its extreme liquidity, but it's a bit on the expensive side for a passive fund.

The MSCI EAFE index, which stands for Europe, Australasia, and Far East, excludes Canada even though it's an international developed market, because Canada is in North America. This can make a difference in your investment choices.

The Vanguard Developed Markets ETF (VEA) and the Schwab International Equity ETF (SCHF) both include Canada and South Korea, which is considered a developed market by FTSE but an emerging market by MSCI. This distinction can impact your portfolio.

If you're a buy-and-holder, the iShares Core MSCI EAFE ETF (IEFA) might be a better choice, as it has a lower expense ratio and less liquidity compared to the EFA ETF.

Crypto investing is now easier than ever, thanks to Fidelity's introduction of two crypto funds: one for bitcoin and one for ether. These funds can be added to brokerage, trust, and IRA accounts.

Fidelity's crypto funds offer a convenient way to gain exposure to crypto without directly buying and holding the assets.

Spot crypto ETPs, such as FBTC and FETH, are designed for investors with a high risk tolerance and offer an investment in a single cryptocurrency.

These ETPs are highly volatile and can become illiquid at any time, so it's essential to carefully consider the risks before investing.

View the prospectuses for more information on these investment options.

If you're looking for a low-cost option, there's the Vanguard Total International Stock ETF (VXUS), which is incredibly broad and should be the default choice in most cases. It's cheap and offers global ex-U.S. exposure within a single ETF.

For those who want to hold all of their international equities in one fund, the Vanguard Total International Stock ETF (VXUS), iShares MSCI ACWI ex U.S. ETF (ACWX), and SPDR ACWI ex U.S. ETF (CWI) are all good options. However, these funds tend to over-allocate to large, slow-growing economies, and emphasize whichever markets are most expensive, due to their international market-cap weighting.

If you're looking for a more focused approach, consider splitting developed and emerging markets and rebalancing them as appropriate. This can help you avoid the pitfalls of multi-country ETFs.

The Vanguard International Dividend Appreciation ETF (VIGI) is a great option for those who want to focus on growth. It includes developed and emerging market stocks that have increased their dividend for at least seven consecutive years, giving them an inherent quality and growth factor.

Here are some key characteristics of the Vanguard International Dividend Appreciation ETF (VIGI):

The SPDR S&P Dividend ETF (SDY) is another option for those who want to focus on dividend growth. It tracks the S&P High Yield Dividend Aristocrats Index, which includes large-, mid-, and small-cap stocks weighted by yield and with 25 years of consecutive hikes.

Asset Classes are a key consideration when deciding which ETFs to buy.

Equities are a popular asset class, making up about 60% of the average investor's portfolio. They offer potential for long-term growth, but also come with higher risks.

Fixed income securities, on the other hand, provide regular income and lower volatility, making them a good choice for conservative investors. They typically offer a lower return than equities, but with less risk.

In the world of investing, value is a key consideration when choosing an asset class. You can choose from actively managed ETFs with competitive pricing.

Actively managed ETFs offer a human touch to your investment decisions, allowing you to tap into the expertise of experienced fund managers. This can be a valuable asset, especially for those new to investing.

Index ETFs, on the other hand, provide a more hands-off approach with lower fees. They track a specific market index, such as the S&P 500, to give you broad market exposure.

Index ETFs are often a more affordable option, making them a great choice for those on a budget.

Bonds are a type of investment that can add diversity to your portfolio and provide regular income. They're like loans you make to companies or governments, and in return, they pay you interest.

The goal of most bond ETFs is to provide a high level of current income, using a mix of global fixed income securities to add value in different markets.

If you're new to bonds, you might want to start with some of the "default" bond ETF choices, which are designed to be broad and balanced. These include the iShares Core U.S. Aggregate Bond ETF (AGG), Vanguard Total Bond Market ETF (BND), and Schwab U.S. Aggregate Bond ETF (SCHZ).

These ETFs follow the U.S. Aggregate Bond index, which is like the S&P 500 of bonds, and consist of a mix of U.S. government and corporate bonds, but are more weighted towards government. They have a broad spectrum of maturities, which average out to intermediate maturity.

If you want to nearly eliminate interest rate risk, you might consider short-term treasuries, which are available through ETFs like iShares Short Treasury Bond ETF (SHV) and Vanguard Short-Term Treasury ETF (VGSH).

If you're looking for more risk, there are hundreds of bond ETFs to choose from, offering long duration or lower credit quality options.

Small-caps can be a great way to diversify your portfolio, but it's essential to understand that there's mixed evidence on whether they outperform large-caps.

The iShares Russell 2000 ETF (IWM) is an extremely liquid option, making it suitable for both buy-and-hold and trading.

Some investors prefer to combine a small-cap ETF with a broader market ETF, like the Vanguard Total Stock Market ETF (VTI) or the Schwab U.S. Broad Market ETF (SCHB), for a more comprehensive portfolio.

These "all-cap" ETFs are relatively inexpensive and perform similarly to S&P 500 ETFs, but with a subset of assets invested in smaller companies.

If you're looking for a separate small-cap ETF, the Vanguard Small-Cap ETF (VB) and the Schwab U.S. Small-Cap ETF (SCHA) are two options to consider.

Both of these ETFs are slightly cheaper and less liquid than the iShares Russell 2000 ETF, making them more suitable for buy-and-hold investors.

The SPDR S&P 600 Small Cap Value ETF (SLYV) is another option to consider, especially if you're interested in small-cap value exposure.

It's worth noting that small-cap value ETFs have a better set of evidence on their side for long-term outperformance.

Precious metals can be a great addition to your portfolio, and there are several options to consider. The most liquid ETFs for trading gold and silver are the SPDR Gold Trust (GLD) and iShares Silver Trust (SLV).

These ETFs are widely traded, but the GLD has a relatively high expense ratio for simply holding gold. If you're looking for a cheaper option, consider the iShares Gold Trust (IAU) or GraniteShares Gold Trust (BAR), which have lower expense ratios but are less liquid.

For added security, I recommend Sprott Physical Bullion Trusts, which are exchange-traded trusts that hold metal in 100% physical allocated form in Canada. Their expense ratios are a few points higher than GLD, but may be worth it for peace of mind.

Here are some options to consider:

The Aberdeen Standard Physical Swiss Gold Shares ETF has a low expense ratio and stores its gold in Switzerland, which can be an attractive option for some investors.

Emerging markets can be a bit tricky to navigate, but there are some great ETFs out there that can help you get started. The Vanguard Emerging Markets ETF (VWO) is a popular choice, but it's worth noting that it doesn't include South Korea, which is actually part of Vanguard's developed market ETFs.

The iShares emerging market ETFs, on the other hand, do include South Korea, making them a good option if you're interested in investing in this country. EEM is extremely liquid, but more expensive, making it ideal for traders who need fast and frequent buys and sells. IEMG, on the other hand, is cheaper and only moderately liquid, making it better for buy-and-holders who are looking for a long-term investment.

If you're looking for a more specific investment, there are some factor ETFs that can help narrow your selection. These ETFs tend to have higher expense ratios and aren't as liquid, but they can be good alternatives if you're looking for something specific. Here are a few examples:

These ETFs can be a good option if you're looking for a more specific investment strategy, but keep in mind that they may not be as liquid as some of the other options out there.

The Vanguard International Dividend Appreciation ETF is a great option for those looking to invest in international dividend-paying stocks. It has $7.2 billion in assets under management.

VIGI tracks the S&P Global Ex-U.S. Dividend Growers Index, which selects companies that have improved their dividends for at least seven consecutive years. The index then removes the highest-yielding stocks to improve portfolio quality and eliminate potential dividend cutters.

The ETF has a dividend yield of 2.0% and expenses of 0.15%. Its portfolio is made up of 355 holdings, with a tilt towards large-cap stocks.

VIGI's top country allocations include Japan (25.6%), Switzerland (17.0%), Canada (12.6%), and the U.K. (8.6%). The ETF also holds international blue chips such as Novartis, Novo Nordisk, and Nestle.

Here's a breakdown of VIGI's portfolio:

This ETF effectively captures high-quality firms with consistent dividend growth, making it a great option for long-term investors.

In the current market, investors are looking for ETFs that can provide a hedge against inflation.

The S&P 500 Index has historically been a reliable choice for investors seeking long-term growth, with an average annual return of 10% over the past 50 years.

Investing in emerging markets can be a high-risk, high-reward strategy, but it's essential to choose an ETF with a strong track record, such as the Vanguard FTSE Emerging Markets ETF, which has outperformed the MSCI Emerging Markets Index in the past decade.

For U.S. Sectors, you have a few options to consider. The Invesco QQQ ETF (QQQ) is a popular choice, representing the Nasdaq 100 with an emphasis on growth.

It's rather inexpensive and extremely liquid, making it a good option for traders. The Invesco QQQ ETF consists mostly of technology and consumer discretionary stocks.

The SPDR S&P 500 Select Sector ETFs offer a way to trade 11 individual sectors, and they're relatively inexpensive. These ETFs have been around since the 1990's and are very liquid.

They're a good choice if you want to overweight some defensive sectors like utilities and consumer staples. Invesco also has their equal-weighted versions of the typical sector ETFs.

Some of these equal-weighted ETFs have outperformed their non-equal weighted counterparts, but not all of them.

As we look beyond 2020, the market is expected to continue its upward trend, with a projected growth rate of 4.5% by 2025. This growth will be driven by increasing demand for digital technologies and e-commerce.

The shift towards online shopping will continue, with mobile commerce expected to account for 73% of all e-commerce sales by 2025. This means that businesses will need to have a strong online presence to stay competitive.

The rise of the gig economy will also continue, with 43% of all workers expected to be freelancers or independent contractors by 2025. This will require businesses to adapt their hiring and management strategies.

Investments in emerging technologies such as AI and blockchain will also increase, with a projected growth rate of 30% by 2025. This will lead to new business opportunities and innovations.

The focus will be on sustainability and environmental responsibility, with 75% of consumers expected to prioritize eco-friendly products by 2025. Businesses will need to incorporate sustainable practices into their operations to meet this demand.