How new, average and experienced investors should incorporate ETFs in a portfolio
ETFs are a basket of securities that you can buy or sell through a brokerage firm on a stock exchange
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Exchange-traded funds, or ETFs, can offer you valuable benefits, and when purchased with some research, offer distinct advantages like low upfront fees, ease of purchase and the ability to snag some stock in indexes you may be interested in like tech, pharma, housing or even sustainability companies.
ETFs are a basket of securities that you can buy or sell through a brokerage firm on a stock exchange.
"Investors of all levels of experience—whether they’re just starting out or have been investing for decades—are well served by building low-cost, broadly diversified portfolios of mutual funds and ETFs that align with their unique circumstances," said Vanguard spokesperson Michael W. Nolan. "It’s important for investors to focus on the things they can control, such as keeping investment costs low, setting an asset allocation that is appropriate for their investment goals and tolerance for risk, and sticking with their plan through the ups and downs of the market."
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For reference, Nolan stated that investors can develop low-cost, diversified, long-term portfolios with four core Vanguard ETFs: Total Stock Market ETF, Total International Stock ETF, Total Bond Market ETF and Total International Bond ETF. Another simple alternative for global, market-capitalization-weighted equity exposure, says Nolan, is Total World Stock ETF.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| VTI | VANGUARD TOTAL STOCK MARKET ETF - USD | 295.05 | +2.02 | +0.69% |
| VXUS | VANGUARD STAR FUND TOTAL INTERNATIONAL STOCK I | 60.70 | +0.03 | +0.05% |
| BND | VANGUARD TOTAL BOND MARKET ETF - USD | 72.56 | -0.04 | -0.06% |
| BNDX | VANGUARD TOTAL INTERNATIONAL BOND INDEX FUND ETF - USD DIS | 49.92 | +0.04 | +0.08% |
| VT | VANGUARD TOTAL WORLD STOCK ETF | 120.09 | +0.57 | +0.48% |
Furthermore, FOX Business asked a financial expert about how to choose the right ETFs for new, average and skilled investors.
"Overall ETFs arguably have leveled the playing field by giving all investors access to a wide variety of asset classes and market segments," says D.J. Tierney, senior portfolio strategist at Schwab.
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For newer investors, ETFs with broad, low-cost diversified exposure to U.S. and international equities may be a good first step, a Schwab strategist suggests. (iStock)
Novice investors
For newer investors, Tierney said ETFs with broad, low-cost diversified exposure to U.S. and international equities may be a good first step.
"The Schwab U.S. Broad Market ETF offers broad U.S. equity market exposure," he said.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SCHB | SCHWAB STRATEGIC TR US BROAD MKT ETF | 23.11 | +0.17 | +0.72% |
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Average investors
For typical investors, Tierney said they can put several ETFs together to create a diversified portfolio with equity, U.S. and international, fixed income and real assets all in a portfolio.
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Experienced investors
Skilled investors may be interested in diversifying equity exposure amid factor exposures, Tierney said.
"Fundamental indexing is an example of moving beyond traditional indexing and instead weighting companies by their economic footprint," added Tierney.