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Simplifying the Investment Game
Contrary to popular belief, investing doesn’t require magical stock-picking skills. A straightforward strategy that often leads to success is buying and holding a selection of high-quality exchange-traded funds (ETFs). These funds bundle stocks or other assets around a specific theme and trade under a single ticker symbol.
ETFs are particularly advantageous for investors seeking an effortless way to diversify their portfolios. No matter your investment goal—whether for dividend income, high growth, or a blend of both—there’s an ETF tailored for you. Here, we spotlight three top-tier ETFs that you can invest in for less than $1,000.
1. Invest for Growing Dividend Income
For those aiming to enhance their dividend income, the Schwab U.S. Dividend Equity ETF offers a compelling option. This fund holds 103 blue-chip, dividend-paying stocks, featuring renowned names like Lockheed Martin, AbbVie, Home Depot, and Coca-Cola. Offering a distribution yield of 3.4%, these companies not only provide substantial dividends but also consistently increase their payouts. Over the past decade, the fund has raised its quarterly distribution by more than 220%, providing investors with a robust and growing passive income stream. This income can either be reinvested or used to cover living expenses.
In terms of performance, the Schwab U.S. Dividend Equity ETF has delivered solid returns, keeping pace with the S&P 500 over the past decade. Despite lagging during the recent tech boom, its distribution yield significantly surpasses the S&P 500’s 1.3% yield. If you’re seeking an ETF that combines growing dividends with potential stock price appreciation, this fund warrants consideration.
2. Take a More Growth-Focused Approach
For investors prioritizing share price growth, the Vanguard Growth ETF might be the ideal choice. With a portfolio of 188 stocks, this fund emphasizes large growth companies, including the “Magnificent Seven” and blue-chip leaders like Visa and Eli Lilly. These companies are known for their above-average growth potential, contributing to a remarkable 310% return over the past decade, compared to the S&P 500’s 240%.
However, growth stocks, such as those in the Vanguard Growth ETF, often come with increased volatility and can experience significant fluctuations. During market downturns, this ETF may see larger drops than the S&P 500. Investors opting for this fund should be prepared for a potentially bumpy ride, though its impressive long-term results might justify the associated volatility.
3. Keep It Simple: Own America’s Best Companies
For those who prefer a balanced approach, the Vanguard S&P 500 ETF offers a straightforward path to wealth creation. The S&P 500 is a renowned index, historically achieving an average annualized return of 10% across generations. Despite challenges like wars, recessions, and global pandemics, the index consistently reaches new heights. It comprises 500 of America’s leading publicly traded companies, with successful performers gaining more weight in the index, thus fostering its growth.
The effectiveness of the S&P 500 is evident, as approximately 90% of professional fund managers fail to outperform it over time. The Vanguard S&P 500 ETF is one of only two ETFs held by Warren Buffett’s Berkshire Hathaway, making it a smart choice for long-term investors. This ETF is an excellent foundation for a robust portfolio that offers peace of mind.
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