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These 4 Vanguard ETFs Are All You Need for a Well-Rounded Stock Portfolio
There are many misconceptions about investing, and a common one is that it’s difficult. Are there many moving parts that are confusing, even for those who study this for a living? Absolutely. Does it have to be complicated or require “advanced knowledge”? Not at all.
One way to simplify investing is to use exchange-traded funds (ETFs). Seasoned investors preach the importance of a well-rounded and diversified portfolio, and using ETFs is arguably the easiest way to accomplish this goal. There’s no need to invest in dozens (or hundreds) of individual stocks if you don’t want to do so. A few ETFs can do the trick.
Following are four Vanguard ETFs that can give you a well-rounded portfolio you can lean on for the long haul.
1. Vanguard S&P 500 ETF
If you ask me, no single investment serves as a better one-stop shop than an S&P 500 ETF. The Vanguard S&P 500 ETF (NYSEMKT: VOO) is my largest holding and likely will be for the remainder of my investing journey.
The S&P 500 index tracks 500 of the largest U.S. companies on the market, so investing in this ETF exposes you to some of the world’s most accomplished and promising companies. It contains businesses from all the major sectors, many of which are industry leaders. Here’s how the ETF is broken down by sector (as of Sept. 30):
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Communication services: 8.9%
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Consumer discretionary: 10.1%
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Consumer staples: 5.9%
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Energy: 3.3%
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Financials: 12.9%
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Health care: 11.6%
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Industrials: 8.5%
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Information technology: 31.7%
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Materials: 2.2%
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Other: 0.1%
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Real estate: 2.3%
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Utilities: 2.5%
There’s volatility with any stock or ETF on the market. However, this ETF generally has more long-term stability because it contains all large-cap companies better built to weather whatever storms come their way. Since it was created, it has averaged impressive annual returns.
If you’re looking for a single ETF that can be the bulk of your portfolio, this is it.
2. Vanguard Mid-Cap ETF
The Vanguard Mid-Cap ETF (NYSEMKT: VO) contains just over 310 mid-sized companies. Typically, mid-cap companies have a market capitalization between $2 billion and $10 billion. Because of the size of the companies in this ETF, it can be the sweet spot between stability and growth.
On the one hand, mid-cap companies are small enough to be agile and take on new growth opportunities. On the other hand, companies that managed to hit this market size typically have sustainable business models.
This ETF also contains companies from all major sectors, but it’s more diversified than the S&P 500. The top five represented sectors are industrials (21.1%), consumer discretionary (12.3%), financials (12.6%), technology (13.8%), and healthcare (9.2%).
I would feel comfortable with up to 10% of my stock portfolio being in mid-cap companies.
3. Vanguard Small-Cap ETF
Small-cap stocks are generally those with a market cap between $300 million and $2 billion. The Vanguard Small-Cap ETF (NYSEMKT: VB) contains over 1,300 of these companies, with a median market cap of $7.8 billion. This ETF doesn’t follow the Russell 2000 index like many other small-cap ETFs, but is still broad and diversified.
Small-cap stocks come with more risk than larger companies because they’re generally more volatile and still finding their lane in their respective industries, but they can also have more upside because of their growth potential.
To be clear, not all small-cap companies are young or early-stage companies; many are established businesses operating in niche markets.
Similar to mid-cap stocks, having around 10% of your stock portfolio is a good goal. That’s just enough to benefit from growth without relying too much on it.
4. Vanguard Total International Stock ETF
Part of having a well-rounded portfolio is investing in companies abroad. The Vanguard Total International Stock ETF (NASDAQ: VXUS) is a great way to do this because it contains companies from both developed and emerging markets.
Developed markets have more stable economies, a higher level of infrastructure, and mature financial markets (think the U.S., U.K., Japan, and Australia). Emerging markets have younger economies, increasing industrialization, and developing infrastructure (think: Brazil, China, Mexico, and Thailand).
Investing in companies from both markets is beneficial because they come with different risks and benefits. Developed markets are less risky because they have more economic (and often political) stability. However, they may not have room for rapid growth. Emerging markets carry more risk because of increased volatility and potential political instability, but they offer the possibility of higher growth.
I don’t recommend having a large portion of your portfolio in international stocks (mostly because U.S. companies have historically shown more long-term growth potential), but anything up to 20% of your portfolio is acceptable.
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Stefon Walters has positions in Vanguard Index Funds-Vanguard Mid-Cap ETF, Vanguard Index Funds-Vanguard Small-Cap ETF, Vanguard S&P 500 ETF, and Vanguard Total International Stock ETF. The Motley Fool has positions in and recommends Vanguard Index Funds-Vanguard Mid-Cap ETF, Vanguard Index Funds-Vanguard Small-Cap ETF, Vanguard S&P 500 ETF, and Vanguard Total International Stock ETF. The Motley Fool has a disclosure policy.
These 4 Vanguard ETFs Are All You Need for a Well-Rounded Stock Portfolio was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
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Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
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Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
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Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
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Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
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Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
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Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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CoinShares said the United States and Bitcoin led crypto investment product dynamics last week amid growing optimism over a potential Republican election win in the US.
Bitcoin’s private keys won’t be breached any time soon, but the industry still needs to transition to “post-quantum cryptography.”
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