Four Easy-to-Purchase ETFs Worth Investing in with a Budget of $1,000, Intended for Long-Term Holding
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Going for a simple, straightforward investment strategy doesn't mean you're settling. Many successful investors opt for a market-tracking index fund, like the S&P 500, and regularly contribute to it. There's nothing wrong with this approach, as it can build significant wealth over the long haul.
But if you're looking for a bit more excitement, why not explore a mix of exchange-traded funds (ETFs)? This strategy provides the stability and diversity of index funds with the potential for higher returns. Let's dive into four ETFs that could make up an effective, long-term investment strategy.
Mix and match: Four intriguing ETFs to consider
On this adventure, we'll be using the following four ETFs:
- The SPDR S&P 500 ETF Trust (SPY) is a no-frills S&P 500 index fund, providing a solid foundation with its 500 component stocks. The membership is diverse, and annual fees are minimal.
- We'll spice things up with the Invesco QQQ Trust (QQQ), which mirrors the returns of the NASDAQ 100 market index. With a heavy emphasis on tech stocks, this ETF can add some volatility to your portfolio.
- Next, we'll welcome the Vanguard Small-Cap ETF (VB), featuring 1,379 stocks and a diversified portfolio. It's a great pick if you think small-caps might be undervalued.
- Lastly, we'll lean on the iShares 20+ Year Treasury Bond ETF (TLT), offering a hedge against stock market downturns while providing monthly cash distributions for some added income.
How these ETFs fare in turbulent times
These funds have weathered harsh economic conditions in the past, providing some valuable historical insights. Before the subprime mortgage meltdown in 2007, consider buying these four ETFs. The S&P 500 took about three years to recover, while the other three ETFs saw moderate but positive returns over the same period. Whatever the period, the S&P 500 generally underperformed the other ETFs market downturns.
Splitting your ETF portfolio into distinct categories gives you more control to fine-tune your investments over time. Whether you prefer a more hands-on approach or a more passive one, this strategy can help you navigate market swings.
Adjusting your ETF approach for market fluctuations
Over the past decade, my selected ETFs have outperformed a simple S&P 500 index fund by a slim margin. The Nasdaq ETF’s concentration in technology stocks may have taken a hit during the recent inflation crisis, while the bond ETF may be on the verge of a strong recovery.
Chances are, your investing strategy will vary from mine. But no matter which path you choose, remember that there's no one-size-fits-all answer when it comes to building a winning portfolio.
[1] Enrichment data: The Vanguard Mega Cap Growth ETF (MGK) offers exposure to large-cap growth stocks and has a lower expense ratio compared to its competitors.
[4] Enrichment data: SPY's 10-year annualized total return is lower than some of the other ETFs mentioned in the article.
Incorporating the discussed ETFs into your investment portfolio can help diversify your holdings and potentially yield higher returns. For instance, investing in the S&P 500 ETF Trust (SPY) provides a solid foundation, while the Invesco QQQ Trust (QQQ) offers exposure to tech stocks that may add volatility.
During turbulent times, it's crucial to consider the performance of different ETFs. For instance, before the 2007 subprime mortgage meltdown, the SPY took longer to recover compared to other ETFs mentioned in the text.
