The 3 BEST ETFs You Need To Buy To Compound Your MONEY

if you've been looking for specific etfs to invest your money to build wealth and compound your wealth you are in the right place because in this video i'm going to be going over three different etf strategies that you can use right now to start building and compounding your wealth what's up everybody i'm jaspreet singh from the minoritymindset.com where money minds rethink rich i have two different strategies when it comes to investing my own money in the market i have a passive strategy and an active strategy my active strategy is where i'm looking for companies individual stocks and when these companies go down in price that's when i come in and buy so it's more active because i'm actively watching the price of these stocks i want to see a good price for me to come in and buy and i'm actively researching each one of these companies um listening to their earnings calls paying attention to the cash flows so i'm paying attention to what these companies are doing and when i see a good price that's when i come in and buy my passive strategy is when i buy etfs so an etf is an exchange traded fund and every week i have a strategy where money leaves my account and automatically gets invested into these etfs that have already pre-selected it doesn't matter if the market is up or down my passive strategy happens every single week and this happens passively and automatically for money automatically leaves my account and it gets invested into these etfs you can think of investing in an etf like investing in a group of stocks because if you go out and let's say you invest in the amazon company am zn and you think that amazon is going to rule the world you buy the stock but then something happens their executives run the company into the ground and now the amazon company goes bust well now so does your investment because now you invested your money into this company and you're hoping to see a lot of upside because you did your research you're hoping that this company would grow but you were wrong if this were to happen now you lose your investment versus if you invest in an etf now you invest in a group of stocks so this etf might have companies like amazon now i'm not saying this is what's going to happen to amazon just an example but this etf might have amazon and mcdonald's and coca-cola and a whole bunch of other companies now if amazon were to go bust you're okay because your etf doesn't just have amazon it has amazon and hundreds of other companies in there and you're getting exposure to all these companies so if one company were take off bust if one company were to go bankrupt you're okay because you have other companies to balance it out the advantage with this is obviously you have less risk because now you're not just investing in one company you're investing in a whole bunch of different companies and it requires less work on your end because now you don't have to individually research every single one of these companies you find the right etf you buy it and then you just keep letting the etf do its thing the downfall with etfs is you also limit some of your upside because now instead of just investing in one company you're investing in a whole bunch of companies and if now the opposite happens you invested in amazon and they did take over the world they started rule in the world but now your investment here will be worth way more and in this case you'd have amazon in your etf but it'd be balanced out by some of the losers so with etfs you get more kind of a normalized return because you have some winners and you have some losers which are balanced out but in this case you also have the risk of your company going bust and you have to put in all the research so for most people who don't want to put in all the work or who don't want to take on the extra risk and who don't want to keep up with companies they just want to invest their money in the market and let the market do its thing without investing all that time well etfs are a better and easier strategy for you and that's why i want to go over three different types of etfs with specific etfs that you want to consider investing your money in that way you can grow and compound your wealth so let's start by talking about the first kind of etfs that you want to consider investing your money in that way you can grow and compound your wealth but before i get into that i need you to do me a quick favor and smash the thumbs up button below and if you haven't already be sure to join our free discord server called the guac talk community we call it guac talk because as we all know extra guac is truly a symbol of extra wealth and in this community you can chat about all things minority mindset you can chat about the stock market the real estate market the cryptocurrency markets and all things building wealth this community is completely free and it's a place for you to network with and talk with other minority mindset thinkers so if you want to learn more and check out our free discord server i'll put the link to where you can do that in the description below so the first kind of etf that you want to consider investing your money in is an etf that gives the exposure to the s p 500 a couple examples of this would be v-o-o and s-p-y now a couple disclaimers before i get into this you are never guaranteed to make money when you invest you might even lose money so you should always always always do your own due diligence and never blindly listen to a random guy on youtube i'm going to be talking about a bunch of different etfs in this video some of them i have invested my money in myself and i will give you those disclosures like i've invested my own money in voo but the reason why i say you need to always do your own due diligence is because what's right for me isn't always going to be right for you so just make sure you do your own research the s p 500 is an index meaning group of stocks which are the biggest 500 companies on the stock market so if you go to the stock market and you pick out the 500 biggest companies about market cap meaning the valuation of these companies this gives you the s p 500. now instead of you going out and individually investing in all 500 of these companies you can invest in something like vo or spy these are the ticker symbols for the etfs if you invest in either one of these you are now indirectly investing in all 500 of these companies because voo and spy both invest in the s p 500 they give you exposure to the s p 500 the biggest 500 companies on the stock market now when it comes time for you to actually invest your money into an etf there are three big questions you always want to ask the first question is who made the etf second is what do these etfs actually invest in and what percentage of each company and third is fees because you don't want to give all their money to fees and so you got to understand these three questions to help you understand where you should actually put your money so let's start talking here who made this etf leo is an etf made by vanguard and spy is an etf made by spyder spdr they're pronounced spider but these are two different companies both investment companies that create etfs which allow you to now buy etfs both vanguard and spyder are both very reputable companies and so when it comes time for you to actually research etfs you want to look at how credible is the company that created the etf because you're going to have a whole bunch of newer no name companies releasing etfs and index funds all the time but if they have no credibility they have no history you don't want to just dump your money into them because what if they go bust so you want to look at who made this etf vanguard and the spider and also along with that how many people are actually investing their money into these etfs how big are these etfs the easiest way to find that information is just to go on to the vanguard website or the spyder website and actually look at these etfs they'll have a fact sheet that will give you a bunch of information everything you need to know about the etf itself so if you go into the vanguard website here i'm on the voo page and you see it says the fund total net assets which is 829 billion dollars for voo and then if i come on to the spyder website under index statistics it says the weighted average market cap which is currently 668 million million which is 668 billion dollars if you search online the general rule of thumb is if you're investing in an etf you want to look for an etf that has at least 10 million dollars in market cap of actually assets that are being managed in order for it to be an actual worthwhile investment to protect your money but i like to look at something a little bit safer especially if it's an etf because i want my money to be safe so i'm looking at at least a hundred million dollars on the low end of assets under management and both of these in the hundreds of billions are way past that so we know that one they're made by a company that's credible and second that they have enough assets under management for it to be an okay investment the second question you want to ask yourself is what companies do these two etfs invest in so we know that both of these etfs give you exposure to the s p 500 meaning they both invest in the same 500 companies but they don't invest in the same 500 companies with the same ratios let me show you what i mean so i'm going back onto the vanguard website and right now i can see that the 10 largest holdings are number one microsoft number two apple number three alphabet which is google for amazon tesla and on and on and on but if i go to spy i'm gonna see here at the top holdings number one is apple number two is microsoft number three is amazon number four is tesla number five is alphabet so you can see it's very similar companies but what you see is that the percentages are different because in sp why apple is the number one holding versus in vanguard microsoft as the number one holding this question is going to have a lot bigger implications and the other etfs that i talk about because those other etfs are going to be investing in different companies and different types of companies but in this case both of these etfs are investing in the same companies just in a different ratio and a different percentage of each one so you can take a look at them see what their top holdings are and see which ones you'd like better now in general you don't need to spend a ton of time trying to get into the nitty-gritty of each individual company in these etfs because the whole point of investing your money into an etf is for it to be passive and so you just want to get a kind of general idea of which companies that they're investing in and if you like the companies then the etf might be a good investment for you and the third question you want to ask before you invest your money into any etf or index fund or mutual fund or really any investment is what are the fees so in general etfs have much lower fees than something like a mutual fund because these etfs are passively managed so a mutual fund which is something that a lot of people are familiar with is when you invest your money into this fund but it's managed by a person this money manager and because it's actively managed by a person their goal is now trying to beat the market and they're also going to charge you a lot higher fees and the problem with that is sure they're trying to beat the market but over the long term most money managers cannot beat the market year after year after year so you end up actually losing because you also have to pay much higher fees on top of all of that now there are some instances where a mutual fund can be beneficial if you can get access to the right mutual fund but in general that's the thing that you got to be aware of with etfs generally you have much lower fees because now they're passively managed meaning that they're managed by a computer so a computer is going to look at the index they're going to look at the rules the rules are here that is investing in the biggest 500 companies on the stock market so if a company becomes smaller than one of these top 500 companies the computer is going to kick that company out and add in a new company so it's very passive which is why your fees are less but you still want to pay attention to what the fees are the way you do that is by looking at the expense ratio and here on the vanguard website you'll see that the voo expense ratio is 0.03 percent and on the spdr spider website you'll see that the gross expense ratio is 0.0945 percent so the expense ratio or fees for vo and spy are both extremely low but the spy fees or expense ratio is about three times higher than voo but relatively they're both very very very little i mean an expense ratio of 0.03 means that if you invest a thousand dollars your fees are going to be 30 cents for every thousand dollars that you invest and an expense ratio of 0.09 means that your fees are going to be 90 cents for every 1 000 that you invest so both very very little now the reason why i talk about investing in the s p 500 etf is because this is a way for you to get general exposure to the stock market you're just investing in the biggest 500 companies in the stock market and now if the stock market goes up your fund will typically go up the stock market goes down your fund will also typically go down but this is a way for you to grow and compound your money because now you're just investing your money in the market and letting the market do its thing so if the economy continues to grow and the market continues to grow but now your money's growing and compounding because your exposure to the general market you're getting exposure to the american economy and the american stock market and this is one of the most accessible ways to do that because you're just investing in the biggest 500 companies on the market the second type of etf that you may want to consider investing your money in is a growth etf especially if you have more time on your side because this is a way for you to get exposure into faster growing companies now faster growing typically also means higher risk but you also have higher potential for more growth the reason why you want to have some exposure to growth especially in this economy is because well our economy is not projected to grow as fast over the next decade and couple decades as it has in the previous decades in the previous generation just because our economy is so much larger now back in the day in our parents and our grandparents generation we saw our economy grow by five six seven eight even nine percent a year but nowadays we're just trying to see our economy grow by two percent a year so our economy because it's so large and our country because it's so large can't grow as fast as it did before i mean when you're a smaller company it's not uncommon to see your company grow by 20 or 40 or even 100 in a year because you're small and you have the opportunity to gain a lot more market share and they can grow a lot faster but if you're investing in just the biggest companies well you're going to be limited by how fast the economy can grow unless you're really investing in innovation but if you're already so large you don't really have the real need to be innovating and creating new products and trying to grow as big as possible as fast as possible versus with the growth companies and the growth stocks these are the companies that are fighting that are competing and that are trying to get more market share so these are the smaller companies that are trying to go faster but that also means more risk because now that means that these companies also have a bigger chance of failing and not succeeding so instead of now you're trying to find the right companies to invest in on the growth stage you can invest in an etf that will give you exposure to this type of growth but again you're going to want to pay attention to these three questions because what you're going to see is that the etfs that i'm going to go over here are very different than the etfs that we just talked about that gave the exposure to the s p 500. now some of these etfs are very different from the others so let's go over them vb is the vanguard small cap etf so this is an etf that gives the exposure to small cap smarter capitalization smaller companies and you're trying to get more growth here because you're investing in smaller companies that are trying to go bigger ark is going to be the only actively managed etf so this is an etf that gives the exposure to innovation and is actively managed not passively managed by a computer the other etips that i just talked about is managed by someone named kathy wood and her team she's kind of like a celebrity trader slash investor now and this is an etf that gives the exposure to more innovation and innovation type of companies vug is another vanguard etf this is an etf that gives exposure to growth this is the vanguard growth etf and this is investing in companies that are trying to grow bigger faster and then you have qqq this is the invesco etf that gives the exposure to the nasdaq and this is giving exposure to the 100 companies 100 biggest companies that are not financial and so what that means technically is for most of these companies they are tech companies because the biggest 100 companies on the stock market that are not financial tend to be tech they don't have to be tech but most of them tend to be tech because besides financial the next biggest industry of companies are typically in the tech space and so qqq gives exposure to the biggest 100 companies that are not financial now before we get into the questions got to give you my disclaimer that i do own some shares of the ark fund so when we talk about who made these etfs this is vanguard this is vanguard this is arc by kathy wood and this is invesco all these are very credible investment companies and to see how much assets they have let's look at each of their websites so starting with vb the small cap etf on the vanguard website it says that they have 141 billion dollars in assets under management on the arc ark one it says they have 21 000 million assets under management which is 21 billion assets under management the vug vanguard growth etf has 183 billion assets under management and qq i'm going to show you this on the finance.yahoo website because it's easier to find here than on the actual invesco website but if you look under the net assets number it says that they have 192 billion dollars in assets under management so for all four of these we know that they're made by all credible companies and they all have billions of dollars in assets under management which is significantly higher than that bare minimum of at least 100 million dollars in assets under management so we're looking good over here which brings me here what do they actually invest in so starting up here with vb remember vb is an etf that gives the exposure to small cap companies by definition a small cap company is a company that's worth less than two billion dollars so now coming back to the vanguard website you'll see that the 10 largest holdings are things like the biotechnic corp or pool corp or diamondback energy unlike the companies and the s p 500 etfs which are worth hundreds of billions if not trillions of dollars those were companies that everyone has heard of there's a good chance that you haven't heard of any of these companies because they're small cap and these companies are trying to grow you can compare that to something like arc ark which is investing in innovation here this has a very different philosophy where kathy wood and her team are trying to invest in innovative companies actively and they're trying to capture the upside that these innovative companies might have in the future but it also comes with more risk and more volatility take a look arc's number one holding is tesla then their other top holdings are coinbase and roku and zoom and shopify compared to the other passive etfs you'll see a lot more changes in the top holdings for arc because it's actively managed and so you'll see them change which is a top holding they'll buy and sell stocks a lot more often than these because all the other passively managed etfs are just letting a computer do its thing vug is investing in growth companies but more specifically large cap growth companies so this is investing in companies that have a market cap of over 10 billion dollars that's the definition of a large cap company it's worth more than 10 billion dollars compared to here this is only investing in small cap companies the ug's top holdings are companies like microsoft apple alphabet amazon tesla and meta which used to be facebook and then you have qqq investing in the nasdaq which are the non-financial companies and their top holdings are apple microsoft amazon alphabet facebook and tesla this is from yahoo finance so vb is investing in the small cap companies to smaller companies this is investing in the large cap growth companies this is investing in the nasdaq the non-financial companies and this is investing in innovation now that we know what these etfs are investing in you got to understand the fees going back to the websites vb's expense ratio is zero point zero five percent so essentially nothing mark's expense ratio is zero point seven five percent which is a lot higher than the others vug's expense ratio is zero point zero four percent and qq's expense ratio is zero point two percent so again for these passively managed etfs the fees are pretty negligible because you're not paying for a person to actively manage and buy and sell the stocks versus here you can see arcs expense ratio is significantly higher than all the others the reason being that this is an actively managed fund and because of that you're paying a higher expense ratio and your goal here is to beat the returns on the market but again you're going to see a lot more volatility here some years you're going to see great returns other years you're going to see much lower returns you might lose money and so each one of these has its own fair share of risk and you got to understand what your goal is before you go and invest your money into any of these etfs so now we talked about etfs that gave you exposure to the general economy in the general stock market the s p 500 etf this is an etf the growth etfs are etfs they gave you exposure to growth and more innovation and more upside because now you're investing in companies that are smaller trying to acquire more market share and then i have one more type of etf that you want to consider buying that way you can grow and compound your wealth the third kind of etf that i want you to consider investing your money in to grow and compound your wealth are emerging market etfs these are etfs that invest in companies overseas and outside of the united states that way now you can get exposure not just to different companies but different countries around the world that way now if the united states economy slows down or the united states dollar has issues or something happens to the united states you're not out of luck completely because now you're investing in countries outside of the united states they have their own economies their own governments their own systems and now you're getting exposure to something completely outside of the united states now again this also has its own fair share of risks because a lot of these countries especially the emerging markets might not have as much stability as the united states but the whole idea here is you're investing in a growing country so if this country can grow a whole lot bigger their economy can grow a whole lot bigger and invested in a strong company but now this company can see a whole lot more upside because the whole country and the whole economy there is starting to grow and yeah the risk is that some of these emerging markets like china rely on the united states to spend a lot of money in that country but if these countries continue to grow now you're also getting exposure to different countries and different economies which is something important for you to consider because you have a lot of countries and a lot of economies outside the united states that are growing significantly faster than the united states economy just because the united states economy is so large it just can't grow as fast as they used to and so these emerging market etfs gave you exposure to that now before i go into the specific emerging market etfs one thing that i do want to mention is that no matter which etfs that you're investing in the key for any etf strategy to work is you have to keep consistently investing your money in tfs and you want to do this automatically this way every week or every month money is automatically leaving your account and going into these etfs and this is something that you want to keep doing whether the market is up or down the key for this to work is you have to be consistent you don't want to just put your money in once and just forget about it you want to keep putting your money in and letting your shares in this etf grow because now you're just getting exposure to the different markets the different stocks and different companies and just going to keep acquiring shares and let the companies do their thing now thankfully there's a handful of apps out there that make this type of passive investing and automatic investing easy and simple and automatic and so you can do your research and find an app that you like i use an app called m1 finance they're also a sponsor of minority mindset the reason why i like m1 finance is because they make this type of passive investing super simple and automatic and they do it for free the way it works with m1 finance is you go in and you create a pie with your stocks and etfs that you want to invest in so you can kind of designate it however you want you can allocate you know this is going to be an etf these are two stocks that i want to invest in this is another etf and i said this is a stock and this is an etf sorry my handwriting's getting messy here but you built this pie with a whole bunch of different stocks and etfs that you want to invest in and then you can build a calendar where every week every two weeks every month you have some money that leaves your account and it's automatically invested into this pie and you can allocate whatever percentages you want you can say 25 is into this etf 13 is into this stock and yada yada i mean you can pick your own percentages whatever you like you could do 25 25 25 25 you pick your own percentages you pick your etfs you pick your stocks and then you set it and forget it every week every two weeks every month your money is to automatically leave your account and be invested into your funds and then you just let it do its thing so this is what i do so every single week i have money leaving my account going into a few different etfs and this happens every single week whether the market is up or down it is automated it is passive and i don't got to worry about it and the best part is m1 finance doesn't cost me anything to do this so if you want to learn more about m1 finance and see how you can passively start investing your money i'll put the link to where you can learn more and get started with m1 finance in the description below minority mindset is a paid partner with m1 finance so if you use them we will get compensated but there's no additional cost to you so if you want to learn more and start using m1 finance i'll put the link to where you can do that in the description below and i forgot to mention this just a second ago but the last key to really make this passive investing strategy work is you have to give it time the key for this to work is you have to invest your money consistently passively and let your money grow and compound which means you're just going to let your money sit there and continue growing and building on top of it because your investments need time to appreciate so a few different emerging market etfs that you may want to consider looking at are vwo this is a vanguard emerging market etf eem this is an ishares emerging market etf and sche this is a schwab emerging market etf now again disclaimer i have my own money invested in vwo and sche so now let's dissect and analyze these three etfs the first thing is who made it we have vanguard we have i shares and we have schwab all of them are again very reputable and very credible companies that made these etfs so let's go a little bit deeper and see the assets under management starting with vwo it says that the fund total net assets are 110 billion dollars moving on to sche the schwab etf it says that the total net assets are nine billion dollars and then the i shares eem emerging market fund says that the net assets are 28 billion dollars so again each one of them passed this test it's a credible company and they have a large number of assets under management each one in the multiple billions the second question which is even more important here is what do they invest in now not only are looking at the companies but also what kind of company and which countries are these etfs investing in see it's one thing to be investing into a small cap company in the united states you know that the united states economy is stable so when you're investing in a small cap company in the united states it has its own fair share of risk you're just hoping that this company which is small will be able to grow in the stable economy but now when you look at these emerging markets now these economies and governments aren't always as stable as the united states depending on which country that you're investing in and so a small cap company and an emerging market might have a much harder time growing or it'll have the possibility to grow significantly larger depending on which country it's in so this is where you have to be a little bit more picky and know really what your risk tolerance is because a small cap company and an emerging market is riskier than an investment in a small cap company in the united states just because of the stability of the economy this is where you have to know your risk tolerance and you got to know why you're investing your money are you looking to invest your money into emerging markets just to get some diversification in your portfolio are you looking at investing in emerging markets that we can see a whole bunch of potential upside by investing in these growth companies in emerging markets which could try to take over and become a leading company worldwide starting an emerging market so let me start by analyzing vwo the vanguard emerging market fund if you scroll down onto the vanguard page you'll see the portfolio composition and you'll see that 99.5 of this etf is investing in emerging markets 0.4 is in europe and 0.1 percent is other and you can look at some of the largest holdings the number one holding is the taiwan semiconductor manufacturing company number two is 10 cent number three is alibaba and on and on and on but you also want to take a look at the countries that is invested in so if you come back up and click on the portfolio and management tab and then scroll down you'll see the market allocation of the top countries that it invests in so the top five countries that this etf invests in are china followed by taiwan followed by india brazil and south africa now i want to remind you that with these type of emerging market etfs your risks are different than we're just investing your money in a u.s company and so now you can see bigger swings in these etfs and in these companies than you would typically see in a u.s company vwo has investments in over 5 000 companies and they can compare that to eem which has investments to about 800 or so companies and these are companies which are large or mid cap companies in emerging markets so if we come down to the holding section in this etf you're gonna see that its top holdings are actually similar to the vanguard fund the number one and this is the taiwan semiconductor company then you have 10 cent then you have samsung the name alibaba and then if you scroll down a little bit further you'll see the exposure breakdowns and then if you click the geography tab you'll see the top countries that this etf invests in so the top countries for this etf are number one china then taiwan then south korea and india and brazil so you can start to see why this question is so important here because yeah they do have some similar companies that they invest in and some similar countries but they do have different countries many different companies that they also invest in and this brings us here to the schwab etf so similarly the schwab etf is investing in large and mid-cap companies in emerging markets is investing in about 20 or so countries overseas and we can take a look at some of its top holdings under the portfolio tab you can see the top holdings which are for here the taiwan semiconductor company you have tencent again alibaba again and then you have companies like maitland i think that's how you say it and reliance and then scrolling down to the countries you'll see that the top countries that this etf invests in are china taiwan india brazil and south africa and now that you know where these etfs are making their investments you got to understand the fees that way you know that you're not overpaying in fees to invest in some countries or companies so starting with the vanguard vwo etf the expense ratio is 0.1 percent and the i shares eem etf the expense ratio is 0.7 and then you have the schwab sche etf which has an expense ratio of 0.11 so comparatively this and this etf have significantly lower expense ratios than this etf so you just gotta do your research and see if this expense ratio is worth it for you if you want to invest in emerging markets so there's three different ways of investing growing and compounding your money the first is by investing your money into the s p 500 which gives you general exposure to the economy and the stock market then we have the growth stocks these are the companies that are fighting to grow bigger and these are a little bit riskier but you have a lot more upside which are growth stocks if these growth etfs can grow bigger and the companies within those etfs can acquire more market share and then we have the emerging markets not only here is it a hedge against the united states but it's also a way for you to see more potential upside again more potential risk here because you have countries around the world that are trying to grow a lot bigger they have a lot more potential upside which means the companies which are innovating and growing within those countries also have the potential for more upside but the key again for any of this to work is you have to keep consistently investing your money you have to automatically invest your money and you want to make sure that you let your money invest and grow and compound over time because this is a long-term play these are not trading strategies this is a way for you to build wealth and continually keep investing your money and slowly let your money grow and compound over time i'm a licensed attorney i've heard of horror stories of people dying with a lot of money a lot of assets with no will no trust and no direction on what to do with their money after they die and now you create this huge family fight this financial mess and then the government comes in and they have to decide what to do with their money you don't want the government telling your family what to do with your money

Channel: Minority Mindset

Views: 156,305

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, rethink rich, financial education, financial literacy, finances, stock market, stocks 101, how to invest, money management, investing 101, building wealth, how to manage money, financial advice, investing, buying stocks, housing market, inflation, wealth, passive income, personal finance, real estate, real estate 101, real estate investing

Id: 8xqyQnjv-0k

Length: 31min 11sec (1871 seconds)

Published: Wed Jan 12 2022