In the stock market, there are no bonus points for complexity.
In the stock market, there are no bonus points for complexity.
It's hard to argue with history. In the last two decades, the S&P 500 index has delivered an annualized total return of 11.2% (as of Oct. 13). This gain shows just how powerful the stock market can be when it comes to building wealth for ordinary investors.
You might initially think that you need a sizable amount of capital to reap the rewards, but this isn't the case at all. The single most important step is to simply get started.
It's also worth remembering some core tenets. The key is patience. Short-term swings are noise. Investors who think in decades give compounding the time it needs to work. Time in the market beats timing it.
That being said, if I were starting out with $1,000 ready to invest, I'd buy this one exchange-traded fund (ETF), and I wouldn't touch it for 20 years.
Own a slice of America
There might be no ETF more popular than the Vanguard S&P 500 ETF (VOO -1.10%). After all, it has a whopping $1.7 trillion in assets. This investment vehicle gives you exposure to the S&P 500 index, which contains 500 or so large and profitable U.S. companies. Investors also capture a dividend yield of 1%.
Bigger businesses have a higher weighting. The ETF's top 10 positions combine to make up a significant 38% of the portfolio. Digging deeper, Nvidia, Apple, and Microsoft represent 21% of the Vanguard S&P 500 ETF's asset base. Unsurprisingly, the information technology sector is the most prominent. Its performance has a meaningful impact.
Investors might be most drawn to the cost, though. The ETF's expense ratio sits at just 0.03%. On a $1,000 investment, this amounts to a tiny $0.30.
That kind of deal is tough to find elsewhere. There is no shortage of active funds run by expert money managers that charge exorbitant fees. Instead of outperformance, these have a poor track record of lagging the benchmark. In the world of investing, paying more rarely buys better results.
Averytin News Financial update.