What ETF or Index Fund to Invest in the US?

2017-04-12T11:37:40+08:00By |Shares, Unit Trust, USA|

There are an increasing number of Exchange Traded Funds (ETFs) and index funds in the United States. What are the best ETFs you should consider investing in?

Why ETFs?

You may not have the time, interest, or inclination to perform detailed research in individual shares, believing you can outperform the market average.

You want to avoid the high fees charged by hedge funds and fund managers.

Or as Warren Buffett puts it:

What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. My advice to
the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors—whether pension funds, institutions or individuals— who employ high-fee managers.
(Berkshire Hathaway shareholders letter 2013)

 

Which ETFs to consider Investing in?

A ETF that is representative on an entire index is a good idea as it gives you a healthy level of diversification, and over a long term gives you around 8% returns (for US index ETFs).

 

SPDR S&P 500 ETF ($SPY)

[stockdio-historical-chart width=”100%” symbol=”SPY” displayPrices=”Candlestick” performance=”false” days=”365″ allowPeriodChange=”true” height=”350px”]

 

Vanguard S&P 500 ETF ($VOO)

[stockdio-historical-chart width=”100%” symbol=”VOO” displayPrices=”Candlestick” performance=”false” days=”365″ allowPeriodChange=”true” height=”350px”]

 Vanguard Total Stock Market Index ($VTI)

[stockdio-historical-chart width=”100%” symbol=”VTI” displayPrices=”Candlestick” performance=”false” days=”365″ allowPeriodChange=”true” height=”350px”]

 

Vanguard Small-Cap Value Index ($VBR)

[stockdio-historical-chart width=”100%” symbol=”VBR” displayPrices=”Candlestick” performance=”false” days=”365″ allowPeriodChange=”true” height=”350px”]

Alternative Considerations

Bond ETFs

  • Buffett recommends a 10% in bond ETFs.
  • Examples:
    • iShares Core US Aggregate Bond ($AGG)
      [stockdio-historical-chart width=”100%” symbol=”AGG” displayPrices=”Candlestick” performance=”false” days=”365″ allowPeriodChange=”true” height=”350px”]
    • Vanguard Total Bond Market ETF ($BND)
      [stockdio-historical-chart width=”100%” symbol=”BND” displayPrices=”Candlestick” performance=”false” days=”365″ allowPeriodChange=”true” height=”350px”]
  • Suggest that if you are not based in the United States, you can allocate a % of your portfolio in secure/low-risk investments in Malaysia instead (EPF, FD, endowments)

 

Berkshire Hathaway Inc class B shares ($BRK.B)

[stockdio-historical-chart width=”100%” symbol=”BRK.B” displayPrices=”Candlestick” performance=”false” days=”365″ allowPeriodChange=”true” height=”350px”]

  • Warren Buffett’s $BRK shares are pretty much as diversified as an ETF.
  • Share price is usually close to fair value with share buybacks done as necessary.
  • Estimated will continue growth at high single digit/low double digit long term.
  • Viewed positively during times of market corrections and recessions times as Buffett is a great at asset allocation.
  • Shares Review: Berkshire Hathaway Inc ($BRKB) (members).

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