I’m a big believer in building a comprehensive portfolio of individual stocks, and that’s not going to change. I truly believe that investors can beat the market over time this way and I own about 40 individual stocks myself.
However, I’ve started to incorporate index funds into my investing strategy a bit more than before, especially when it comes to saving for retirement. I decided to start adding shares of three particular ETFs to my portfolio as we approach 2024, and here’s what they are.
1. Vanguard S&P 500 ETF
I’ve changed my investing strategy a bit lately, moving from a near-exclusive focus on individual stocks to incorporating some index funds into my portfolio, particularly in my retirement accounts. And the index fund I added the most is the ultra-low-cost fund Vanguard S&P 500 ETF (NYSEMKT: VOL).
In short, this ETF invests your money in the 500 companies that make up the well-known benchmark. Granted, past performance is no guarantee of future returns, but with an average annualized return of 9.9% since 1965, there’s a very good chance that the stocks I buy will be worth a lot more when I’m ready to take my retirement in about 20 years. years. And with an expense ratio as low as 0.03%, you keep most of your investment gains.
Note that Vanguard isn’t the only version of the S&P 500 index fund that’s a solid, inexpensive product, but it does offer the lowest fees of anyone on my radar.
2. Schwab US Dividend Stock ETF
Of the three ETFs discussed here, the Schwab US Dividend Stock ETF (NYSEMKT:SCHD) is the only one I don’t already own. And as the name suggests, this ETF invests in a portfolio of stocks that pay dividends – specifically, it tracks the Dow Jones US Dividend 100 Index. Top holdings include AbbVie (NYSE:ABBV), Amgen (NASDAQ:AMGN), Broadcom (NASDAQ:AVGO)And Home deposit (NYSE:HD).
In a nutshell, value stocks (like most dividend stocks are) have significantly underperformed growth stocks during the recent stock market rally. But with economic conditions improving and interest rates widely expected to fall in 2024, they could catch up. And regardless, one of my goals is to generate a steady stream of reliable dividend income in my retirement accounts, and this ETF could help me achieve that. As of this writing, the Schwab US Dividend Equity ETF has a dividend yield of 3.7%.
3. Vanguard Real Estate ETF
Last but not least is the Vanguard Real Estate ETF (NYSEMKT:VNQ). I’m buying this one even though I already own a dozen individual real estate investment trusts, or REITs, and for several reasons.
First, the real estate sector is well-positioned to have a strong 2024. REITs have been hit by rising interest rates as capital costs have risen and many investors have instead taken advantage of higher investment returns without risk like Treasury bills. With rates expected to fall in 2024, REITs could be one of the biggest beneficiaries.
Second, the Vanguard Real Estate ETF is a weighted index fund, meaning that larger companies make up a higher proportion of the fund’s assets. With leading holdings including some of the most disadvantaged REITs, such as American tour (NYSE:AMT), Crown Castle (NYSE:CCI), Prologue (NYSE:PLD)and others that I don’t already own, this seems like a great way to gain exposure to some of the biggest names in the industry without purchasing them individually.
There’s nothing wrong with putting money on autopilot
Of course, I’m not giving up on finding attractive individual stocks to own. Individual stocks still make up about three-quarters of my portfolio, and I see several interesting opportunities as we approach 2024.
However, even if you’re an avid stock picker, there’s nothing wrong with incorporating low-cost ETFs into your portfolio. ETFs can help form the backbone of a strong stock portfolio, can put you in a great position to earn strong long-term returns regardless of what an individual company does, and can help you get exposure to industries and sectors that you may not understand well enough. choose individual actions.
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Matthieu Frankel, CFP® holds positions in the Vanguard S&P 500 ETF and the Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool holds positions in and recommends American Tower, Crown Castle, Home Depot, Prologis, Vanguard S&P 500 ETF, and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool recommends Amgen and Broadcom and recommends the following options: long January 2026 $180 calls on American Tower and short January 2026 $185 calls on American Tower. The Motley Fool has a disclosure policy.
3 Best ETFs I Plan to Buy Hand Over Fist in 2024, Despite All the Cheap Stocks on My Radar was originally published by The Motley Fool