Top 5 "Buy And Hold" ETFs To Own For Life

when it comes to investing there are two primary schools of thought the first is broad market investing where you invest in etfs giving you diversified market exposure the second is stock pickers which is anybody out there that owns individual stocks of companies now truth be told one strategy is not necessarily better than the other in fact if you had to give it to either strategy the broad market investing has performed better for most people in the long run versus stock picking now while being a stock picker could have paid off in years like 2021 where certain individual stocks had just stellar performance in 2022 owning broad market etfs would have given you a lot more downside protection in most cases versus owning a lot of the popular growth stocks that were the top performers of 2021 so just how successful or unsuccessful is the strategy of stock picking well based on recent figures roughly six percent of investment professionals out there actually beat the market now i will say it's not a completely apples to apples comparison with retail investors for example retail investors are able to invest in small cap stocks whereas large mutual funds that have billions of dollars to deploy simply can't even play in that territory because they would have to own the entire company for it to even make sense so that's one of the advantages that retail investors have but you still have to assume that the outcome is going to be very similar where most stock pickers are not going to beat the market therefore you might be better off just owning the broad market so if you are of that school of thought or maybe i just convinced you here well this is the video for you because we're gonna be covering the top five etfs to own for life now look guys obviously i am largely a stock picker and that has worked well for me in certain years and other years it has led to some losses but one of the things i'm going to be doing in the future myself is hedging against my own stock picking ability by putting one dollar into etfs for every one dollar i personally put into individual stocks so that is just one of the ways that you could potentially utilize etfs even if you're currently totally on the side of being a stock picker now that being said before we get into the individual etf selections i just have to mention that i am not a financial advisor this video is not any sort of financial advice and you should always do your own research and due diligence above and beyond this video before investing so coming in at number one on the list is by far the most popular etf out there that is the vanguard s p 500 etf trading under the symbol voo now this fund represents 500 of the largest u.s companies specifically the ones that are publicly traded whereas it's possible to invest in their shares as a public investor so this etf gives you diversified exposure into the best businesses in america at a very low cost and that cost comes in at an annual expense ratio of just 0.03 percent now just to put that into perspective here on 100 000 invested that would be an annual cost of just 30 bucks now there are hundreds of billions of dollars invested into this etf and it's also a market weighted etf which is very important that essentially means that the larger a company is the bigger a piece it represents within that fund so when you buy shares of vo 6.52 of your money goes into apple 5.96 goes into microsoft 3.9 goes into google 2.88 goes into amazon and 1.75 percent of your money goes into tesla and then of course it's going to be a smaller piece into the next 495 different companies on that list now on top of that this fund does pay a dividend so that is something to be aware of as well which currently comes in at a yield of 1.53 so vo gives you a good blend of both growth and income that's why a lot of young people especially love this etf as a long-term investment and you can of course reinvest those dividends to earn compound interest now if the first etf we talked about is a bit too boring for you this one might be up your alley in fact if you like technology you're probably going to love this etf the invesco qqq etf is the second most traded etf in the united states this fund tracks the nasdaq 100 which is the largest non-financial companies listed on the nasdaq now the nasdaq is a major stock exchange that mostly encompasses technology however there are some financial companies listed on the nasdaq this fund nixes those so you end up with the top technology companies primarily in the united states simply put this is the real innovation fund out there not anything that was offered by kathy wood if you're looking to invest in innovation and u.s technology this is one of the best ways to accomplish this in a diversified manner this is a broad diversified investment into mostly large u.s technology giants the cost however does come in quite a bit higher than that vanguard etf that we just looked at to be precise 6.6 times the cost that expense ratio of 0.2 percent annually is going to cost you 200 bucks per year on a 100 000 investment it's certainly not the highest we're going to see on this list however i did want to point out that vanguard does have some of the lowest cost products on the market and when you leave the vanguard family you should pay very close attention to that expense ratio just to make sure it is not too high and again just like with voo this fund is market weighted meaning the larger the company is the more that it makes up in the fund so of the 100 companies that you own 13.17 of your money goes into apple stock 10.43 of your money goes into microsoft 7.23 of your money goes into google 6.39 of your money goes into amazon and 4.43 of your money goes into tesla now that's the thing that can be pretty crazy about these market weighted etfs is that even though there are a hundred different holdings just the top two make up almost 24 of the total amount of money invested now this etf does pay a dividend however since this is mostly technology companies they're focused more so on growth not income right now so it is a significantly lower dividend yield than we saw from voo and that yield comes in at 0.61 annually so this etf is largely focused on growth with a very little focus on income sure you could still earn and reinvest that dividend but that is just not going to be the primary way that you're trying to make money by holding on to this etf by and large you're looking to make money through the growth of the share price of the different companies owned within this etf however this is going to be more volatile than the s p 500 because it is technology companies and it's going to be a lot more volatile than many income investments out there simply put you're going to see more up and down price movements and so if you are a complete beginner you might be nervous to have those ups and downs early on however that being said over the long run we should see the most asset appreciation or growth of the nasdaq compared to other indexes out there because of how this is the most innovative uh companies in america so coming in at number three we have a real estate fund offered through fidelity the fidelity real estate investment etf trading under f pro is an actively managed fund that invests in real estate not equity in companies so everything we talked about up until this point is about funds that invest a pool of money into publicly traded u.s companies we're now talking about a fund that invests a pool of money into real estate and this is possible through a publicly traded investment known as a reit or real estate investment trust just think of this as real estate trading like stocks on the stock exchange so this particular etf over at fidelity has a team that actively picks what they believe are the best current reits and then they invest the sum of money of that fund into that portfolio of reits as of right now those top five holdings include crown castle 10.7 percent sba communications 7.6 prologus 7.2 well tower 5.4 percent and equinix 4.2 now each of these different reits are involved in a different type of real estate crown castle is a communications infrastructure company that owns over 40 000 cell phone towers that they then rent out to different tenants sba communications is another global wireless infrastructure reaped after that prologus is a warehouse based reit well tower is a healthcare related reit and then equinix is a data center related reit so right off the bat you can see this is a diversified pool of real estate and as of right now it is actually mostly industrial type applications not so much residential or commercial now that being said this is an actively managed fund so it is going to come with an additional cost the other funds are passively managed because it's basically a computer algorithm tracking the s p 500 and then the nasdaq 100 and then making changes to that fund as needed this instead is an actual team that is actively researching different um reits and then allocating money in the best way they personally see fit and that is going to come in at a higher cost with an annual expense ratio of 0.59 so on 100 000 invested that is 590 annually as the cost now reits tend to be more focused on income and less focused on growth and since they have the cash flow of the rentals they tend to pay out a higher dividend yield than most stock investments so as of right now that current dividend yield on this is 2.48 so f pro would be best used as a long-term compound interest investment where those dividends are reinvested every single quarter allowing you to earn more future dividends and growing your money exponentially that being said don't think that being invested in real estate through the stock market is going to shield you from the ups and downs because reits tend to have very similar correlation to the overall stock market so when stocks are up reits are usually up when stocks are down wreaths are usually down so before we get into number four on the list i want to quickly cover where to actually buy etfs now since pretty much every etf out there pays some form of dividend it's important to invest with a brokerage that allows you to take full advantage of that by being able to reinvest that dividend reinvesting dividends of course allows you to earn compound interest so this is especially recommended for young people so for me i personally use and recommend m1 finance because they cover all of the bases when it comes to etf investing number one they have automated dividend reinvestment number two they automatically rebalance your portfolio as you add more money or earn dividends so as the different allocations or stocks or funds within your portfolio change the new money going in is going to put you back to your target as close as possible and third and finally with fractional shares you can remain fully invested which is really cool in addition they offer dozens of pre-built portfolios that own low fee etfs from top providers like vanguard invesco etc and those are completely free of any management fees m1 finance is totally commission free and if you guys want to check them out my affiliate link is ryanoscribner.com m1-finance or you can check them out in my description down below i also have a completely free 30-minute step-by-step video training that's going to walk you through how to get started with m1 finance that's going to be down in the description below as well so coming in at number four on the list here is another fidelity etf this is fbcv the fidelity blue chip value etf now this is another actively managed fidelity fund meaning there is a team of professionals doing the research and then deciding what the actual assets are so these fund managers are purchasing stocks on investors behalf that they believe are undervalued based on cash flow growth potential and many other factors so this means that your money is invested in medium to large-sized companies that are well established and often time tested currently the top five holdings of this fund include number one berkshire hathaway at four point three eight percent number two comcast at three point five eight percent number three united health at two point seven three percent number four google at 2.65 percent and number five the healthcare company bms at 2.64 so as you can see there you have a lot of defensive uh you also have utilities there represented with comcast telecom you have healthcare you have google which is really sort of this basically utility at this point in a weird way providing different necessary online services so this is not going to be a growth fund this is a value fund where you're looking to invest in companies when they are near their underlying value and a good buy based on their cash flows not so much investing in what's going to be the most growing company or innovative company now again since this is actively managed it's going to have a higher cost identical to the last one at 0.59 or 590 dollars per year as the cost on a hundred thousand dollars invested now this etf does come in with the highest dividend yield on our list at 3.62 percent making this a fantastic compound interest investment now on that topic of income and dividends coming in at number five on the list is another income focused etf that is schd the schwab us dividend equity etf now what you like about this fund in particular is that similar to vanguard charles schwab is known for having extremely low costs on their funds this particular fund comes in with an annual expense ratio of just 0.06 so it is the second lowest cost option on our entire list to put that into perspective that is just a cost of 60 bucks per year on 100 000 invested now this fund tracks and replicates as closely as possible the performance of the dow jones u.s dividend 100 index this index includes high yielding dividend-paying stocks with a long track record of consistently paying them on a side note if you're wondering what companies have grown and paid dividends the longest these are called dividend aristocrats and i have a full article over on my website explaining every single one of these 60 plus stocks on this dividend aristocrat list these companies have both paid and grown dividends every single year for 25 plus years be sure to check that out down in the description below so back to the schwab u.s dividend equity etf currently the top five holdings within this fund are texas instruments at 4.36 percent pepsico also at 4.36 percent amgen at 4.31 percent merck and co at four point two nine percent and home depot at four point two three now the dividend is a little bit less than the fidelity fund we just covered however it is still coming in at a very respectable figure here of 3.41 so anyways guys that is going to wrap up this video on the top five etfs that you could potentially own for life the idea here is being invested and not having to worry about actively managing your money now you would want to change allocations and etfs over time as you get older and closer to retirement but you can pretty much create an etf portfolio and then set it and forget it especially using a great automated brokerage such as m1 finance once again if you want to check it out guys my affiliate link and free training link are both down below as well as that full article on the dividend aristocrats which is a really great piece if you're looking to learn more about dividend investing and potentially be on that stock picker side uh thank you guys so much for tuning in i hope you enjoyed it if you did please drop a like and subscribe and as always i hope to see you guys in the next video

Channel: Ryan Scribner

Views: 44,166

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Id: IQMl9-MxcoE

Length: 19min 41sec (1181 seconds)

Published: Mon Aug 01 2022