Help for a newbie ETF/index fund investor?

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Seahawks754
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Joined: Thu Apr 15, 2021 3:49 pm

Help for a newbie ETF/index fund investor?

Post by Seahawks754 »

Hi Everyone,

I'm wondering if I could get a little advice for a newbie investor. I currently have about $25,000 in cash that I am looking to invest safely. After doing some research, it seems that $SPY would be a wise investment given its strong performance and high liquidity, but are there any others I should also invest in? Is it important for me to diversify my ETF/ index fund investments, or would simply parking money in $SPY be wise?

Also, any tips on which broker would be the best for me to use? Are there any distinct advantages a broker like Vanguard offers over brokers like TD Ameritrade or E*TRADE?
livesoft
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Joined: Thu Mar 01, 2007 7:00 pm

Re: Help for a newbie ETF/index fund investor?

Post by livesoft »

If $SPY is the S&P500 SPDR with ticker symbol SPY, then I would not call it "safe." Stocks, and ETFs of stocks and equities are not safe.

I suggest a pause and start at https://www.bogleheads.org/wiki/Getting_started
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retired@50
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Re: Help for a newbie ETF/index fund investor?

Post by retired@50 »

Seahawks754 wrote: Thu Apr 15, 2021 3:53 pm Hi Everyone,

I'm wondering if I could get a little advice for a newbie investor. I currently have about $25,000 in cash that I am looking to invest safely. After doing some research, it seems that $SPY would be a wise investment given its strong performance and high liquidity, but are there any others I should also invest in? Is it important for me to diversify my ETF/ index fund investments, or would simply parking money in $SPY be wise?

Also, any tips on which broker would be the best for me to use? Are there any distinct advantages a broker like Vanguard offers over brokers like TD Ameritrade or E*TRADE?
Welcome to the forum. :happy

I presume you're referring to the ETF known as SPY, but I'm not certain if the dollar sign ( $ ) notation you're using is somehow significant.

If you do mean SPY, the expense ratio is .09%, but you can get the same exposure to the S&P 500 stocks by using Vanguard's ETF known as VOO which has an expense ratio of .03%. The lower the expense ratio the better, at least when you're comparing identical investments.

VOO would likely be available at any broker you choose to use. I use Vanguard and have been happy with them for over 20 years.

You use the words "looking to invest safely". This is a bit of a concern, since you should know that investing in stock index funds like SPY or VOO does carry some risk.

Maybe take a look here: https://www.bogleheads.org/wiki/Getting_started

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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ruralavalon
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Location: Illinois

Re: Help for a newbie ETF/index fund investor?

Post by ruralavalon »

Welcome to the forum :) .

What sort of account will you be using (IRA, individual taxable account)? Is there a plan offered at your job like a 401k, 403b, 457b, SEP IRA, SIMPLE IRA, TSP? If so is an employer match offered, and what is the match?

If a plan is offered at work, then it's usually better to start there.


Seahawks754 wrote: Thu Apr 15, 2021 3:53 pm Hi Everyone,

I'm wondering if I could get a little advice for a newbie investor. I currently have about $25,000 in cash that I am looking to invest safely. After doing some research, it seems that $SPY would be a wise investment given its strong performance and high liquidity, but are there any others I should also invest in? Is it important for me to diversify my ETF/ index fund investments, or would simply parking money in $SPY be wise?
Yes diversification is important, very important.

SPDR S&P 500 ETF Trust (SPY) ER 0.095% covers over 80% of the U.S. stock market. You can be more diversified with a target date fund, or with a combination of a total stock market index fund, a international stock index fund, and a bond market index fund.

Seahawks754 wrote: Thu Apr 15, 2021 3:53 pmAlso, any tips on which broker would be the best for me to use? Are there any distinct advantages a broker like Vanguard offers over brokers like TD Ameritrade or E*TRADE?
I suggest using a low cost fund company like Vanguard, Fidelity, or Schwab. The choice between the three is largely a matter of personal preference, my personal preference is Vanguard.

You can use their very diversified, low expense, index mutual funds without paying any commissions or fees. You may have to pay commissions or extra fees for their mutual funds at an independent brokerage.

In selecting funds touse strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net returns). You could use a single very diversified allocation fund like a target date fund, or a combination of three index funds like:
1) Vanguard Total Stock Market Index Fund (VTSAX) ER 0.04%;
2) Vanguard Total International Stock Index Fund (VTIAX) ER 0.11%; and
3) Vanguard Total Bond Market Index Fund (VBTLX) ER 0.05%.
Wiki article "Three-fund portfolio", link.

There are ETF share classes for the each of those funds.

To start your investing education please see the wiki article "Bogleheads® investment philosophy", link, and Dr. Bernstein's short, free, pdf book "If You Can", link.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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