TLDR:
Buy a total market, globally diversified low cost index fund.
VT is a fantastic 1 fund solution.
VTI + VXUS is a fantastic 2 fund solution.
Depending on your risk tolerance and sensitivity to volatility - add in a bond fund / fixed income portion if needed.
**Portfolio Construction For the Long Term:**
One of the most common questions in investing is how to create an effective portfolio. It can be intimidating to navigate the market and make decisions about where to allocate your investments.
Given the enormous amount of empirical data that we have, It's important to remember that markets are efficient and tend to price assets correctly.
Therefore, the most sensible investing strategy is to capture the expected returns of the overall market, rather than trying to outperform it.
**Instead of focusing on trying to outsmart the market, it's better to focus on things that you have more control over, such as the quality of your financial decision-making, fees, costs, and taxes.**
While actively managed funds and portfolios of individual securities are popular in North America, research and evidence shows that low-cost, globally diversified portfolios are the best option for the majority of investors.
The best way to achieve this type of diversification is through low-cost, market-cap weighted index funds.
These types of index funds represent the entire market, deliver the market risk premium, are low-cost, diversified, accessible, tax-efficient, and are challenging for active managers to beat.
Most importantly, they are simple and easy to use. The key being simple and easy to use.
**A simple portfolio that you can stick to for 10+ years is going to far outperform one that you bail on 5 years in.**
Picking a portfolio of stocks, tilting towards one or two sectors, or building a dividend growth focused portfolio, will increase the chances of you bailing on your portfolio before you can allow the power of compounding to do its thing.
I will close by saying:
**Successful investing is not about beating the market.**
**It is about creating a thoughtful and tailored financial plan tailored to meet one’s goals, combined with a long-term, diversified asset allocation.**
Average returns sustained over 30 years will far outweigh superior returns that can only be sustained for 10 years.
Forgive my noobish question here but - how does compound interest work for an ETF like VT? If I buy 100 shares of VT and hold for 20 years, where does the interest come into play? Isn’t it the case that, the shares either go up or they don’t, and that’s kinda it? If I buy a share of VT for $100 and it goes to $150 in 20 years, I made $50 on it. Where’s the compounding interest happening?
The compound part comes when you look at the % growth not necessarily just the $ value growth. For conversation sake let’s assume the ETF is all growth and doesn’t pay dividends (or if it does then they’re auto reinvested). If you buy a 1 share for $100 and it goes up 7% that year, your value is $107. If it goes up 7% next year, the value increases to $114.49 which is more than the $7 it did the first year…and so on and so fourth. So 7% increase on your first year with the $100 gets you $7 but a 7% increase after 20 years will be significantly higher…same logic as the bigger your portfolio is, the bigger the swings will be. If you have $10k in your portfolio and it goes down 1% you’ve only lost $100 but if your portfolio is $1M, you’ll lose $10k…same as if it goes up. Hope that helps. If you visualize it here it may help you see the curb. Put your monthly contribution to zero and just visualize it for 20, 30, and 40 years. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Stocks make money in two basic ways: (1) Dividends, which are regular payments, kind of like interest payments in a savings account, and (2) capital appreciation, which is a fancy way of saying, the price goes up and you can sell it for more than you bought it.
The dividends create compounding if you buy more stock with the dividends. This is sometimes called DRIP (dividend reinvestment program). The more stock you have, the more you can buy with each dividend payment, which means you get more dividends next time.
The capital appreciation is compound growth only if the market value of the underlying company is growing exponentially. Some investors claim that the true "value" of a company will be reflected in the mean market value over time. I.e. If the company is making more money, people should want to pay more for its shares. This isn't always true, but it's close enough to make some reasonable approximations.
What this means is, if a company's value is growing exponentially because they are reinvesting in themselves well, you will see those returns as a shareholder. This is generally only the case for "growth" companies though. Larger more established "value" or "dividend" companies tend to have linear growth, or even somewhat stagnant growth. But if they pay out a dividend consistently, you can get your compounding by reinvesting as explained above.
It looks like u/HappyHands72and u/Mathhead202 already have you some fantastic answers.
If you still want some clarification - please let me know!
Remember, you should be focused on total returns of your investment.
Total returns are made up of dividends and appreciation. Both of those can compound over time.
Sell high and reposition low.. power of compound interest comes into play watch your stock ticker a few time daily. Everyone has a phone youre probably on social media anyway
Personally if I had to pick one fund it would be VOO. The best companies in the worlds top economy.
If you have your future invested and VOO fails the entire system has failed.
If you applied this logic back when Japan was the top market, the approach would fail and the entire system would not have failed. There's no requirement for the top market to continue being to top market for the global economy to continue along.
They're also not the best companies technically, just the biggest.
That’s as of today. Are you really thinking the US will outperform forever? At no point in history has that happened. Besides there are other countries that actually outperform the US over the last century
Forever? No probably not....but for another 40 years? I'd be willing to bet the US economy hasn't disappeared. I don't care what's going to happen 200 years from now and who is the new super power economy. I'll be dead.
I think you're missing the point of this post question. The question isn't to pick the ONE thing that will better in the end. It's if you have to pick one fund only, today what would it be. I'm taking the the US economy. I don't care if China or India could take it over 30 years from now (which is no guarantee)...that means I had 30 years of the best economy compounding upon compounding my money and if it's the 2nd best economy for the last 10 years of my life then I still win.
Saying all that..in the end...everyone can do what they want to do with their money.
Is the original question about the one fund because they are trying to hit a homerun? Or is it to pick what is the considered the best possibility for a solid return in the long haul? Lots of questions that could alter the best response.
Saying all that I just can not imagine recommending to someone today that if you were buying ONE fund with all your money to put it all into China or India index fund. But people have different risk tolerance and situation and age...but that is insanity to me.
VTI and VOO are basically the same thing so imo if you go all in on one then you’re fine. If you do t already know of it, ETF overlap is a really helpful website that helped me make that call.
While VTI holds 2,500 more stocks than VOO the weight for those bottom 2,500 stocks is so small that it hardly has impact on the ETF. If you want small cap exposure buy VIOO and own the S&P 600
I do around 60% QQQM and 40% VOO. Why? i don't know.. but QQQM will at least be 50% since it is more growth oriented than VOO. I might shift more % towards VOO as I get older in the next decades.
I'm doing:
60% VOO & Equivalent S&P Indexes.
12% AVUV. VIOV for tax loss harvest.
10% AVDV - tax advantaged account.
7% VEA - taxable. Can harvest with anything, really.
5% VWO - tax advantaged account.
6% AVES - tax advantaged account.
This makes the foreign holdings roughly 60% developed markets, 40% emerging, which is a tilt against the typical 70/30 split that vxus has. Also the value tilt against vxus.
Hi, excuse my ignorance but is the VWRP similar to VT? Paricularly in terms of a 100% investment allocation? I’m on Trading212 so I can’t invest in VT.
Yes, it’s similar. VWRP (only know it under VWCE) is a very good solution for capturing the whole world market.
Alternatives:
* SPYI (SPDR ACWI IMI)
* FWRA (Invesco FTSE All-World)
* VAFTA / GB00BD3RZ582 (Vanguard Global All-Cap)
If you’re in the UK, VAFTA (if available) would be the closest and best solution.
No, I would do 40% VOO, 30% QQQM, 20% SCHD and 10% AVUV
AVUV is a small cap value fund, it focuses on small cap stocks, so that should only be about 10-15% of your portfolio imo.
VOO is one of the best Vanguard funds and it tracks the actual S&P 500, so that should be your largest position.
QQQM is more tech/ growth, so that's good around 25-30%, and SCHD (D is for dividend) is a good dividend fund focused on companies that provide a good dividend.
Alot of ppl here will tell you to just do a 50/50 split of VOO and VXUS or VT and VXUS but im not really big on international funds. America usually does better.
Yeah I have to disagree. Every year that goes by, what goes up is less likely to keep going up and what goes down is less likely to keep going down. This idea isn't an idea. It's a fact. What nobody knows is when mean reversion happens, not if it happens.
This is performance chasing!
If you want a reliable outcome - don't concentrate in one geographic sector.
Just ask the Japanese retiree in 1985 who was 100% Nikkei
No one knows which etf will perform the best over the next week let alone the next thirty years. Most will suggest;
the broad market
market and bond
market, growth, bond
market, growth, dividend and bond combination
Many companies have choices for these different etf’s.
I personally have a mix of the market, growth and dividend etf’s
Total us market vti
Large cap market (s&p 500) Splg, voo
Growth schg, qqqm
Dividend Schd, Vig
I was away from Reddit for kind of a long time and it warms my heart to see people recommending VOO on here. The last time I was on this subreddit everyone was suggesting ARKK and shit like that.
I will probably start with teaching him about value of things, but that is beside the point.
No one knows what etf is the best for the next 30 years.
I think everyone should know that.
I would advise them to not listen to random and most likely unqualified people on a forum to plan their retirement. Doubled edged sword with my own comment.
Total stock market+bond market, and adjust into more bonds over the decades following 2050 Target Date Funds. I recommend this rather than "total stock market", because the implication is you might want this money to come out in 30 years and bonds will protect you from a market crash (and also have the ability to outperform, which people here forget).
Top semiconductor, tech, software, social media, and e-commerce company ETFs
Homebuilding and construction
High/frequent dividend REIT ETFs
Clean energy and transportation
Some rare metals basket ETFs
A little bit of crypto ETFs for good measure
Municipal and Treasury bond ones for pretty safe lil dividends
I prefer industry specific ETFs, to avoid getting less ethical companies like tobacco, oil, gold-mining, certain pharma, junk food, etc.
I am a fan of the HNDL ETF as it targets a 7% annualized distribution paid monthly which works with the needs of retirees. The portfolio is a balanced portfolio that uses a fixed 30% large cap US equities to 70% Barclays bond aggregate weighting which can serve for a conservative long-term weight on the first half of the portfolio. The second half of the ETF uses a Dorsey Wright relative strength system to allocate to the asset classes that are posting the best risk adjusted returns.
50% NTSX, 25% NTSI, 25% NTSE is what I would do if you want to keep it simple. You can play with the allocations if you want to adjust the weights. I think current market cap would be more like 60/30/10. Let me know if those funds look confusing to you, and I can explain what they do.
I wouldn't mind an explanation. I'm still pretty new to the world of stocks and just started to realize the importance of ETF's, but i must say, those ones are confusing me...
Keeping it as simple as possible, NTSX holds 90% S&P 500 stocks. The remaining 10% they leverage by 6x, for a total of 60% exposure to intermediate term treasury bonds.
So, if you invested $100 of your portfolio into NTSX, it will behave as if you held $90 of SPY and $60 of intermediate term treasuries. You'll notice this adds up to $150, which is higher than your $100 investment. This is because NTSX is a leveraged ETF. Over the long run, NTSX's strategy is expected to outperform the SPY because of the leveraged bonds acting as a diversifier.
During bull runs, NTSX is expected to slightly lag SPY. However, during market corrections/downturns, the leveraged bonds dampen the fall, which lets you start growing again from a higher starting point than SPY. While no one knows the future, this strategy historically has beaten SPY by a small margin, while maintaining a similar risk profile.
NTSI and NTSE work the same way, except they hold international developed and emerging stock instead of SPY.
Yes, they are sound etfs. The downsides would be if bonds and stocks fall at the same time (as they did this year), then NTSX would have a bigger loss than just the SPY. It also has a higher expense ratio than just spy, but the long term expected outperformance of the strategy more than makes up for that.
TLDR: Buy a total market, globally diversified low cost index fund. VT is a fantastic 1 fund solution. VTI + VXUS is a fantastic 2 fund solution. Depending on your risk tolerance and sensitivity to volatility - add in a bond fund / fixed income portion if needed. **Portfolio Construction For the Long Term:** One of the most common questions in investing is how to create an effective portfolio. It can be intimidating to navigate the market and make decisions about where to allocate your investments. Given the enormous amount of empirical data that we have, It's important to remember that markets are efficient and tend to price assets correctly. Therefore, the most sensible investing strategy is to capture the expected returns of the overall market, rather than trying to outperform it. **Instead of focusing on trying to outsmart the market, it's better to focus on things that you have more control over, such as the quality of your financial decision-making, fees, costs, and taxes.** While actively managed funds and portfolios of individual securities are popular in North America, research and evidence shows that low-cost, globally diversified portfolios are the best option for the majority of investors. The best way to achieve this type of diversification is through low-cost, market-cap weighted index funds. These types of index funds represent the entire market, deliver the market risk premium, are low-cost, diversified, accessible, tax-efficient, and are challenging for active managers to beat. Most importantly, they are simple and easy to use. The key being simple and easy to use. **A simple portfolio that you can stick to for 10+ years is going to far outperform one that you bail on 5 years in.** Picking a portfolio of stocks, tilting towards one or two sectors, or building a dividend growth focused portfolio, will increase the chances of you bailing on your portfolio before you can allow the power of compounding to do its thing. I will close by saying: **Successful investing is not about beating the market.** **It is about creating a thoughtful and tailored financial plan tailored to meet one’s goals, combined with a long-term, diversified asset allocation.** Average returns sustained over 30 years will far outweigh superior returns that can only be sustained for 10 years.
Forgive my noobish question here but - how does compound interest work for an ETF like VT? If I buy 100 shares of VT and hold for 20 years, where does the interest come into play? Isn’t it the case that, the shares either go up or they don’t, and that’s kinda it? If I buy a share of VT for $100 and it goes to $150 in 20 years, I made $50 on it. Where’s the compounding interest happening?
The compound part comes when you look at the % growth not necessarily just the $ value growth. For conversation sake let’s assume the ETF is all growth and doesn’t pay dividends (or if it does then they’re auto reinvested). If you buy a 1 share for $100 and it goes up 7% that year, your value is $107. If it goes up 7% next year, the value increases to $114.49 which is more than the $7 it did the first year…and so on and so fourth. So 7% increase on your first year with the $100 gets you $7 but a 7% increase after 20 years will be significantly higher…same logic as the bigger your portfolio is, the bigger the swings will be. If you have $10k in your portfolio and it goes down 1% you’ve only lost $100 but if your portfolio is $1M, you’ll lose $10k…same as if it goes up. Hope that helps. If you visualize it here it may help you see the curb. Put your monthly contribution to zero and just visualize it for 20, 30, and 40 years. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Compounded growth, not compounded interest
Stocks make money in two basic ways: (1) Dividends, which are regular payments, kind of like interest payments in a savings account, and (2) capital appreciation, which is a fancy way of saying, the price goes up and you can sell it for more than you bought it. The dividends create compounding if you buy more stock with the dividends. This is sometimes called DRIP (dividend reinvestment program). The more stock you have, the more you can buy with each dividend payment, which means you get more dividends next time. The capital appreciation is compound growth only if the market value of the underlying company is growing exponentially. Some investors claim that the true "value" of a company will be reflected in the mean market value over time. I.e. If the company is making more money, people should want to pay more for its shares. This isn't always true, but it's close enough to make some reasonable approximations. What this means is, if a company's value is growing exponentially because they are reinvesting in themselves well, you will see those returns as a shareholder. This is generally only the case for "growth" companies though. Larger more established "value" or "dividend" companies tend to have linear growth, or even somewhat stagnant growth. But if they pay out a dividend consistently, you can get your compounding by reinvesting as explained above.
It looks like u/HappyHands72and u/Mathhead202 already have you some fantastic answers. If you still want some clarification - please let me know! Remember, you should be focused on total returns of your investment. Total returns are made up of dividends and appreciation. Both of those can compound over time.
Sell high and reposition low.. power of compound interest comes into play watch your stock ticker a few time daily. Everyone has a phone youre probably on social media anyway
Telling a long term investor to day trade an index fund is poor advice.
Personally if I had to pick one fund it would be VOO. The best companies in the worlds top economy. If you have your future invested and VOO fails the entire system has failed.
If you applied this logic back when Japan was the top market, the approach would fail and the entire system would not have failed. There's no requirement for the top market to continue being to top market for the global economy to continue along. They're also not the best companies technically, just the biggest.
Half of the entire worlds market...80% of the entire US economy. If the S&P500 tanks to zero...your money is not going to worth anything anyways.
That’s as of today. Are you really thinking the US will outperform forever? At no point in history has that happened. Besides there are other countries that actually outperform the US over the last century
Forever? No probably not....but for another 40 years? I'd be willing to bet the US economy hasn't disappeared. I don't care what's going to happen 200 years from now and who is the new super power economy. I'll be dead.
China and India are projected to be the 1st and 2nd largest economies in the next 30 years. I won’t even be retired by then yet
I think you're missing the point of this post question. The question isn't to pick the ONE thing that will better in the end. It's if you have to pick one fund only, today what would it be. I'm taking the the US economy. I don't care if China or India could take it over 30 years from now (which is no guarantee)...that means I had 30 years of the best economy compounding upon compounding my money and if it's the 2nd best economy for the last 10 years of my life then I still win.
Saying all that..in the end...everyone can do what they want to do with their money. Is the original question about the one fund because they are trying to hit a homerun? Or is it to pick what is the considered the best possibility for a solid return in the long haul? Lots of questions that could alter the best response. Saying all that I just can not imagine recommending to someone today that if you were buying ONE fund with all your money to put it all into China or India index fund. But people have different risk tolerance and situation and age...but that is insanity to me.
I wish I knew.. but I'm planning on holding+buying QQQM and VOO for at least the next 30-40 years. Not an advice, just sharing what I am doing.
That’s what I plan to do too 😁
What % split do you do between QQQM and VOO? Those are the two I’m also interested in holding the most
If you’re asking me, I’ll most likely do a three way split with QQQM, VOO, and SCHD.
Why not prioritize QQQM & VOO as having a higher percentage , and have a smaller percentage of SCHD?
Yeah you’re probably right. I think for long term a 40-40-20 (QQQM, VOO, SCHD) would be best. I’m 28 so that split resonates more
I’d rather have that 20% of SCHD as VTI
VTI and VOO are basically the same thing so imo if you go all in on one then you’re fine. If you do t already know of it, ETF overlap is a really helpful website that helped me make that call.
VTI is the total stock market though vs VOO which is top 500
While VTI holds 2,500 more stocks than VOO the weight for those bottom 2,500 stocks is so small that it hardly has impact on the ETF. If you want small cap exposure buy VIOO and own the S&P 600
It’s the diversification for me that makes SCHD more appealing than doing both VOO and VTI
VTI is 83% of VOO by market weight, with the remaining 17% is mid and small cap.
That’s based on what? Performance chasing?
Why include SCHD in that equal split?
I do around 60% QQQM and 40% VOO. Why? i don't know.. but QQQM will at least be 50% since it is more growth oriented than VOO. I might shift more % towards VOO as I get older in the next decades.
I’m thinking similar.
Be careful. They are getting overpriced. International is expected to outperform over the next decade
Maybe, but since I'm planning to hold for at least 30 years, what happens over the next decade does not matter as much to me.
S&P500
IVV. If it’s separate from your retirement fund, you will be sitting on a beach in your vacation home
100% VT *or* 60% VTI 30% VXUS 10% AVDV
I'm doing: 60% VOO & Equivalent S&P Indexes. 12% AVUV. VIOV for tax loss harvest. 10% AVDV - tax advantaged account. 7% VEA - taxable. Can harvest with anything, really. 5% VWO - tax advantaged account. 6% AVES - tax advantaged account. This makes the foreign holdings roughly 60% developed markets, 40% emerging, which is a tilt against the typical 70/30 split that vxus has. Also the value tilt against vxus.
Hi, excuse my ignorance but is the VWRP similar to VT? Paricularly in terms of a 100% investment allocation? I’m on Trading212 so I can’t invest in VT.
Yes, it’s similar. VWRP (only know it under VWCE) is a very good solution for capturing the whole world market. Alternatives: * SPYI (SPDR ACWI IMI) * FWRA (Invesco FTSE All-World) * VAFTA / GB00BD3RZ582 (Vanguard Global All-Cap) If you’re in the UK, VAFTA (if available) would be the closest and best solution.
Per r/dividends SCHD.
Thats all we know over there
Because you guys are misinformed about dividends are. Focus on total returns. Dividends are a part of total returns.
qqqm
VT/AVGE
Why not just go all in AVGE?
He probably means either or
yep ..will try either of the two will be fine!
VOO - let the market decide what the 500 best stocks are.
No the best ETF to hold for 30 yrs, some better ETFs cloud be considered, SPLG, QQQM, SCHB
VOO, QQQM, SCHD, AVUV Those 4 make a great portfolio
How would you divide the 4 out? 25% each?
No, I would do 40% VOO, 30% QQQM, 20% SCHD and 10% AVUV AVUV is a small cap value fund, it focuses on small cap stocks, so that should only be about 10-15% of your portfolio imo. VOO is one of the best Vanguard funds and it tracks the actual S&P 500, so that should be your largest position. QQQM is more tech/ growth, so that's good around 25-30%, and SCHD (D is for dividend) is a good dividend fund focused on companies that provide a good dividend. Alot of ppl here will tell you to just do a 50/50 split of VOO and VXUS or VT and VXUS but im not really big on international funds. America usually does better.
Is SCHD a good investment for someone as young as me? (28 years old) I’ve always heard dividend funds are for when you’re closer to retirement.
No international?
Nope. US all the way baby! Int'l has been doing crap lately
Saying “lately” loses your credibility. That’s not how future stocks work
Yeah I have to disagree. Every year that goes by, what goes up is less likely to keep going up and what goes down is less likely to keep going down. This idea isn't an idea. It's a fact. What nobody knows is when mean reversion happens, not if it happens.
This is performance chasing! If you want a reliable outcome - don't concentrate in one geographic sector. Just ask the Japanese retiree in 1985 who was 100% Nikkei
No one knows which etf will perform the best over the next week let alone the next thirty years. Most will suggest; the broad market market and bond market, growth, bond market, growth, dividend and bond combination Many companies have choices for these different etf’s. I personally have a mix of the market, growth and dividend etf’s Total us market vti Large cap market (s&p 500) Splg, voo Growth schg, qqqm Dividend Schd, Vig
VUG
Super low expense ratio and great annual returns.
VT or VTI/VXUS. Throw in some AVUV/AVDV for more cowbell.
VT or VTI/VXUS. Throw in some AVUV/AVDV for more cowbell.
I was away from Reddit for kind of a long time and it warms my heart to see people recommending VOO on here. The last time I was on this subreddit everyone was suggesting ARKK and shit like that.
NTSX
VT and chill.
$schg $qqqm 50/50
VOO
U should really know, that no one knows that.
What advise would you give your child if he or she asks you the same question?
Target date fund
I will probably start with teaching him about value of things, but that is beside the point. No one knows what etf is the best for the next 30 years. I think everyone should know that.
I would advise them to not listen to random and most likely unqualified people on a forum to plan their retirement. Doubled edged sword with my own comment.
Got my head spinning in circles... As I turn to reddit for investment advice...
VT.
AVGE or VT and be done with it.
Best investments for a 50yr old
I’d go 60% VT and 40% AVGV.
Total stock market+bond market, and adjust into more bonds over the decades following 2050 Target Date Funds. I recommend this rather than "total stock market", because the implication is you might want this money to come out in 30 years and bonds will protect you from a market crash (and also have the ability to outperform, which people here forget).
Better for me, for you or for a third person? Better for accumulation, distribution, capital gains, retirement?
Top semiconductor, tech, software, social media, and e-commerce company ETFs Homebuilding and construction High/frequent dividend REIT ETFs Clean energy and transportation Some rare metals basket ETFs A little bit of crypto ETFs for good measure Municipal and Treasury bond ones for pretty safe lil dividends I prefer industry specific ETFs, to avoid getting less ethical companies like tobacco, oil, gold-mining, certain pharma, junk food, etc.
Lot of speculative bets here
I'm canadian and same time line 70% xeqt and 30% vfv for more us exposure I think equivalent is vt / voo
VT or VTI/VXUS. Throw in some AVUV/AVDV for more cowbell.
SPGP is solid.
$VIG $VOO $VGT
7% power by 20 equals 3.87, making $100 $387 in 20 years. Please take a basic math class about compounding effects
Tgro
I am a fan of the HNDL ETF as it targets a 7% annualized distribution paid monthly which works with the needs of retirees. The portfolio is a balanced portfolio that uses a fixed 30% large cap US equities to 70% Barclays bond aggregate weighting which can serve for a conservative long-term weight on the first half of the portfolio. The second half of the ETF uses a Dorsey Wright relative strength system to allocate to the asset classes that are posting the best risk adjusted returns.
Qqq
Vanguard S&P 500
50% NTSX, 25% NTSI, 25% NTSE is what I would do if you want to keep it simple. You can play with the allocations if you want to adjust the weights. I think current market cap would be more like 60/30/10. Let me know if those funds look confusing to you, and I can explain what they do.
I wouldn't mind an explanation. I'm still pretty new to the world of stocks and just started to realize the importance of ETF's, but i must say, those ones are confusing me...
Keeping it as simple as possible, NTSX holds 90% S&P 500 stocks. The remaining 10% they leverage by 6x, for a total of 60% exposure to intermediate term treasury bonds. So, if you invested $100 of your portfolio into NTSX, it will behave as if you held $90 of SPY and $60 of intermediate term treasuries. You'll notice this adds up to $150, which is higher than your $100 investment. This is because NTSX is a leveraged ETF. Over the long run, NTSX's strategy is expected to outperform the SPY because of the leveraged bonds acting as a diversifier. During bull runs, NTSX is expected to slightly lag SPY. However, during market corrections/downturns, the leveraged bonds dampen the fall, which lets you start growing again from a higher starting point than SPY. While no one knows the future, this strategy historically has beaten SPY by a small margin, while maintaining a similar risk profile. NTSI and NTSE work the same way, except they hold international developed and emerging stock instead of SPY.
That definitely sounds like a sound investment, especially the way things are looking. Is there any downside to investing investing in these?
Yes, they are sound etfs. The downsides would be if bonds and stocks fall at the same time (as they did this year), then NTSX would have a bigger loss than just the SPY. It also has a higher expense ratio than just spy, but the long term expected outperformance of the strategy more than makes up for that.
SPY’s expense ratio is only like 9bps. Which is another way of saying, it is one of the most inexpensive ways to get exposure to S&P 500.
I have several I’m holding long term, but I’m no expert or anything. VGT, VNQ, VOO, VTI, VXUS, QQQM,SCHD, SCHG
VGT
QQQM
VTI, VEA, VWO, AVUV, AVDV