To build long-term wealth for the big-ticket items and retirement, you need to invest. Keeping your money in a CD paying 2% won’t cut it. So, if you’re an investor seeking a set-it-and-forget-it exchange-traded fund (ETF) portfolio, then low-fee, diversified index funds are your solution.
And with over 5,000 ETFs from which to choose, this list will help you prune your investment list.
This isn’t a two- or three-ETF portfolio but a smartly constructed group of funds that cover a range of investment styles, so that when small-caps are shining, you’re there to enjoy the run and when value stocks grow, you don’t miss out. The reason for broader diversification is that just as miniskirts go in and out of style, so do investment categories. For instance, if you only invest in an S&P 500 ETF, which is weighted toward large-cap stocks, for your U.S. allocation, then you’ll miss out when mid-caps win.
These long-term funds give a nod to the historical out-performance of both value and small cap stocks.
Fees and asset allocation have been shown to influence returns, so choosing lower-fee ETFs is a no-brainer. The percentages you assign to each of these funds depends upon your risk tolerance levels. Greater amounts of riskier stock assets typically lead to higher returns and greater ups and downs for your investment values. Tamer, more conservative investors lean toward greater percentages of fixed assets.
Set-it-and-Forget-it ETFs: Total Market U.S. Core Index ETF
Expense Ratio: 0.03%, or $3 annually per $10,000 invested.
First, choose a core holding that is the backbone of your U.S. equity investment. Many companies offer this standard, so choosing one with the lowest fees makes sense. I suggest the iShares Core S&P Total U.S. Stock Market ETF (NYSEARCA:ITOT).
This fund tracks the S&P Total Market Index (TMI) and