*This blog post is my personal opinion only and may contain affiliate/referral links.
A novice entry to the world of Stock Market can be very overwhelming. There are a lot of details about the company and the stock that can’t simply be learned and digested overnight. I think it is important to have a good grasp of the basics if you want to take an active role on your investing.
This post is about the actual path that i took when i first invested on the Stock Market. Just like many new employed people in the workforce, i first got into investing by participating on my employer’s retirement plan. It was a very passive way of investing that gave me my first lesson on the Stock Market. I remember choosing the default mutual fund selection of a “Balance” fund because i don’t know what to choose. I later learned that this selection gave me a balance exposure to stocks, bonds and cash.
That was the time when i also discovered the beauty and practicality of index fund investing. And up to this day, i am still invested on one. Whether you are investing through your employer or thinking of investing on your own, I think index fund is the entry-level stocks that will give a newbie investor a diversified exposure to different stock sectors and perhaps most importantly, index funds are not as volatile and as risky as individual stocks.
Vanguard’s all inclusive index ETF fund covers the US Total Market Index, that means you own stocks that track 3700 plus companies. Ranging from large to small companies, you have exposure to well established companies and also to solid small cap stocks. Differing styles of investing from growth to value are also spread out to all the stock holdings.
Another appeal of owning a share of VTI is it has one of the lowest expense ratios (0.03%) for an ETF on the same field. In general, Vanguard is known for offering low ER (expense ratio) for ETFs and mutual funds.
SPY has a more narrow group of stock tracking than VTI, as the former is honed on the S&P 500 as its index. With holdings in the low 500, SPY has a significant large cap exposure and is almost always on the top lists of heavily traded ETFs.
Many consider the S&P 500 the true representative of the stock market because it gves greater weight to companies with the most value trading in the market. This is very apparent with the technology sector having the biggest weighting on the SPY holding.
The last ETF on my list is Invesco’s QQQ. It basically tracks the NASDAQ 100 index and very heavy on the technology sector, above 60% as of this writing. Having said that, Apple, Amazon, Google, and Facebook are among its biggest holding.
QQQ prided itself of beating the S&P 500 in the last 10 years, but can be very vulnerable during bear market. This is a very ideal index fund choice for those who have affinity and believes on the long term potential of growth stock companies.
The three ETFs mentioned on this post are not investment advice, but i believe a good introduction for someone just starting on the stock market. It is by no means boring but very educational for a curious investor mind. I called it boring in the title because it connotes that you can leave them on their own and won’t need to check every minute. There will always be risk involved but not as much when you own an individual stock, which is volatile by a long stretch.
Thank you for reading.