I am happy to hear the video was helpful and I appreciate you taking the time for a comment. Yes, it is a pretty common problem that many of the ETFs people hold are similar or have huge overlaps.
Great! I guess it saved you some time and made the process easier. Hopefully, the video was helpful to you. Thanks for checking it out and leaving a comment!
Great video and so informative. I see people debate this question all the time and they seem to have strong opinions, but I don't think they know the facts. They should watch this!
Yes, I've seen some strong opinions about which is best, too, and that's on both sides of the argument. Some people may be surprised to know the facts.
@@MikesFinancialEdge I know some people that think VTI has less volatility because it is more diversified. I guess that is wrong. I thought the actual comparisons of holdings was really interesting too.
What are you currently holding in your 3-fund portfolio? VOO is an excellent choice as the core holding for most any portfolio. SCHD is great too with only a 8% overlap with the S&P 500. XLK is very aggressive with over 42% in just two stocks. SCHG does have a 54% overlap with VOO and it also has a 39% overlap with XLK. Depending on what you are holding now, you may not need all of these. Anyway, thank you for checking out the video and leaving a comment.
Most people would be far better off using low-cost ETFs rather than trying to pick stocks. Also, we should remember that companies with seemingly high dividends may not be able to sustain them long term, those dividends hurt growth, and if they need to lower those dividends, the stock price could take a big hit. Therefore, I would probably recommend dividend-paying ETFs for someone looking for dividends. Naturally, we always want to keep costs/expense ratios low, and the biggest thing is to avoid making silly errors due to our own behavior and emotions. You might be interested in these two videos for more on that. The 20 Most Important Investment Rules & Lessons Every Investor Needs to Know: ua-cam.com/video/WxEYYZSo4wI/v-deo.html How To Invest BETTER And Avoid STUPID Mistakes ua-cam.com/video/FqKCDqcOqWg/v-deo.html
I was also curious about your approximate age. If you are still quite a ways from retirement, focusing too much on dividends may not be the best strategy. Many of the best-performing stocks over the past decade or two have paid very little or no dividends at all. Before making recommendations, it’s important to consider the overall plan in relation to a person’s age. Those two videos I linked in the other message should be helpful, though. Let me know if you have more questions.
I agree with a lot of what you have said, and index funds - based on the S&P 500 - are my core holdings. However, I was wondering what your reasons are for not considering international stocks. I agree with a lot of what J.L. Collins and John Bogle say about them, but I was curious to hear your thoughts too.
There’s nothing wrong with having a relatively small portion of a portfolio devoted to international stocks using a low-cost ETF. Personally, I don’t have any, and over the past decade, they have severely underperformed. I'll link a BlackRock study below. Decades ago, it made more sense to gain exposure outside of the U.S. That’s where developing economies were, and it was wise to invest in emerging markets to seek better growth and balance out the U.S. economy. However, in today’s global economy, most large companies are truly global, with much of their revenue coming from outside the U.S. In fact, approximately 41% of the total revenue generated by companies within the S&P 500 comes from outside the U.S. Here's a Blackrock study of assets and their performance. www.blackrock.com/corporate/insights/blackrock-investment-institute/interactive-charts/return-map
Well, the differences and similarities are interesting, but both are an excellent choice for any core holding in a portfolio! No reason to have both, but either one is great. Happy to hear you like the video. Thanks for the comment!
Well, it has been winning slightly over the past 10 years. No one can predict the future, though. Thanks for checking out the video. I hope it was helpful.
Hi Mike, your videos are excellent and very accessible for someone new to this type of financial content such as myself. Have you covered in your videos why you prefer ETFs over regular index funds? Thanks!
I'm glad to hear that you find the videos helpful and easy to follow. Thank you for watching and taking the time to leave a comment. I hope I can clarify your question a bit. In some of my videos, I've discussed why ETFs are often preferred over mutual funds. Exchange-Traded Funds (ETFs) and Index Funds share many similarities. ETFs are traded on stock exchanges like individual stocks, allowing you to buy and sell them throughout the trading day at market prices. Index Funds are any investment funds designed to mirror the performance of a benchmark, like the S&P 500, by replicating its composition. But, an Index Fund can be structured as either an ETF or a mutual fund. When structured as mutual funds, Index Funds are typically bought and sold only at the end of the trading day at the net asset value (NAV). ETFs generally tend to be more tax-efficient than mutual funds due to their structure, which may minimize capital gains distributions if held outside of a retirement account. Additionally, Index Funds structured as mutual funds often have slightly higher expense ratios. There are a few more subtle differences, but I hope this helped clarify things a bit. When making recommendations, it's often simpler to just go with low-cost ETFs.
@@MikesFinancialEdge thanks for the thorough response and breakdown. If I’m looking to set up my portfolio and plan on scheduling monthly contributions from my bank account and keeping my interaction with the portfolio to a minimum except from rebalancing it one a year, does an ETF or index fund generally lend itself to this better than the other?
Being consistent and investing monthly using dollar-cost-average is an excellent way to create wealth. Just stick with the plan through all the ups and downs. And an ETF or other index linked to the S&P 500 or Total Market fund is a great way to do it or at least for the core of most any portfolio. You might find this video about dollar-cost-averaging surprising and there are other recommendations in it too. ua-cam.com/video/QVUqNbvaGWI/v-deo.html
SPY has a higher MER, but it has a very liquid option chain. Do you have any historical data comparing holding VOO vs. holding SPY & selling covered calls? Thanks for your great video 🙏🤠
Yes, SPY has a little higher expense ratio, but it's still pretty low and is certainly acceptable. As you mentioned, it is highly liquid with an average daily volume over 51M compared to VOO at a little over 5M. SPY and VOO are nearly identical for a long-term investor, though. As far as historical data of selling covered calls with holding SPY, I don't really have any good data on that and it would depend on the individual, too. Over the long-term, I would guess it would end up putting somewhat of a drag on the performance. Anyway, I'm happy to here you enjoyed the video. Sorry I wasn't mroe help with the question.
And thank you for checking out the video! If you are interested in something like the S&P 500, but a lower price per share is helpful, you can use the ETF SPLG. It's identical to VOO, but it's price per share is only around $67.
Yes, SPLG is great for people just getting started because of its lower price per share, and it's the one I usually recommend. Its expense ratio is actually slightly lower than VOO, but the difference is pretty insignificant. One of the most common bond funds people mention is BND, Vanguard's total bond fund. However, I’m not really a fan of bonds. If someone wants something stable, HYSAs and CDs are still paying 4.5-5% these days. I understand that bonds are meant to provide stability and reduce volatility, but over the long term, they tend to drag down a portfolio’s performance. Plus, they’re not always safe. In 2022, when the stock market dropped about 18%, the total bond fund was down over 13%. The 10-year average for BND is only 1.62%, while SPLG’s 10-year average is 12.87%. Since its inception in 2007, BND has averaged 3.07%, whereas the S&P 500 has averaged around 10%, even considering the housing crisis of 2008-2009. However, having said all that, there is nothing wrong with having a bond fund if it helps one feel better about staying invested. Anyway, for the portion of a portfolio that someone may want to be less volatile than stocks, I personally prefer CDs, HYSAs, or money market accounts. Then, of course, there are other types of ETFs that can provide more diversification and stability, too.
Should an investor consider the NAV when choosing a fund? VOO NAV is around $510 a share. VTI is around $282 a share. Should an investor consider this or does it not matter?
VOO and VTI are, of course, slightly different investments, but we can compare something like VOO and SPLG, which are nearly identical. VOO’s share price is around $526, while SPLG is about $67 per share. Both are ETFs, which trade just like stocks and have a fluctuating price per share throughout the day. Mutual funds, on the other hand, don’t trade throughout the day and are priced at what’s called the NAV (Net Asset Value), calculated after the market closes. Therefore, NAV doesn’t apply to ETFs. That said, your question is a good one! Comparing SPLG and VOO’s price per share, the price is irrelevant in terms of performance. SPLG might just make it easier for some investors to purchase shares because of its lower price point. Both track the S&P 500, so if the S&P 500 rises 10%, both VOO and SPLG will also increase by 10%. Therefore, whether someone invests $5,000 in either fund, they will perform exactly the same.
I think that’s a nice mix of funds. Looks like you have been making good decisions. It would depend a little on the percentage devoted to each fund, or do you divide it up equally between them?
It would be great if someone knew the answer for sure. But, quite honestly, no one can predict the future! Some of the worst advice comes from even the so-called best analysts and their predictions. One study looked at the track record of stock market experts, reviewing over 6,600 forecasts made by 68 different "experts" over an 8-year period, and their accuracy rate was only 47%. You’d have been better off flipping a coin! Jim Cramer, a well-known figure, had an accuracy rate of 47%, and a former chief U.S. investment strategist at Goldman Sachs was only right 35% of the time. Forecasts are simply not reliable. It’s better to tune out the noise, have a plan, and stick to it. Ignore the hype, predictions, and speculation. Since no one can predict the future, it’s essential to control what you can-like your savings rate, your emotions, and the risks you take. The best plan is one you can stick with, even through market volatility. Now that I’ve shared all that, I'll share a few general ideas many people believe. I’m not a big fan of bonds for long-term investors, but many feel bonds will perform better in a falling interest rate environment than they have been doing. In addition, real estate (REITs) should benefit too. Over the past several years, small-cap ETFs have underperformed, but many expect them to do better along with some dividend-paying funds. When it comes to investing, anything over the next 1-2 years is short-term, and no one should assume they can predict that. There are just too many factors, such as the unrest in the Middle East, to consider. For long-term investors, low-cost index funds for the broad market should be at the core of any portfolio-something like the S&P 500. Let’s take a look at the historical returns for the S&P 500, including dividends, for periods ending in 2023: Over the past 5 years, it averaged 15.75%. Over the past 10 years, it averaged 12.07%. Over the past 20 years, it averaged 9.69%. Over the past 30 years, it averaged 10.16%. Over the past 40 years, it averaged 11.37%. (And, it's up around 20% this year already) These impressive returns are only possible for those who stayed fully invested through those periods. Anyway, I know I didn't answer your question as you probably hoped, but I don't feel anyone that is a long-term investor should try and keep changing their portfolios based on what they markets may do over the next year or two.
Sorry I missed your question until now. I appreciate you checking out the video and leaving a comment. Regarding predictions, remember that no one can predict the future! Some of the worst advice often comes from analysts and their forecasts. One study reviewed the accuracy of predictions by over 68 stock market experts, analyzing more than 6,600 forecasts made over an eight-year period. Their accuracy rate was just 47%-essentially no better than flipping a coin. Jim Cramer had a 47% accuracy rate, and a former chief U.S. investment strategist at Goldman Sachs was right only 35% of the time. Forecasts aren’t helpful. Instead, try to tune out the noise, make a plan, and stick with it. Ignore the hype, predictions, and speculation. For any long-term investor, the S&P 500 is an excellent choice. Take a look at these returns (with dividends) for periods ending in 2023: Past 5 years: 15.75% average return Past 10 years: 12.07% average return Past 20 years: 9.69% average return Past 30 years: 10.16% average return Past 40 years: 11.37% average return And it’s up about 23% this year But keep in mind, these returns reflect staying fully invested throughout. A total market fund is a great option too, with little difference in performance from the S&P 500. SPLG is also a solid choice for the S&P, priced at around $68 per share.
I am at the beginning of my "investment journey", planning to put 85K into dividend stocks so that I will be making up to 30% per year in dividend returns. Any advice?
Thanks for checking out the video! So, you have a lump sum of $85K to invest right now? How are you determining that you can make 30% per year in dividends? That's not realistic. Maybe I misunderstood what you meant. Deciding to invest a lump sum all at once can seem scary, but there is good research and data on the best decision when choosing between lump-sum investing and dollar-cost averaging into the market. I think it would be helpful to check out the video I have on that topic, and I will leave a link below. Also, how you might want to invest depends on your age and risk tolerance. If you have time, I'll suggest a couple of videos you might check out that could help with your decisions. Afterwards, I would be happy to answer any questions you may have. Lump-sum vs DCA: ua-cam.com/video/V0m8r2Ft7kY/v-deo.html Rick Tolerance: ua-cam.com/video/EMHi0yhc3ZA/v-deo.html Optimal Order For Investments: ua-cam.com/video/tW5o5K7BDUs/v-deo.html Details of the S&P 500: ua-cam.com/video/LL-lkcM1_4U/v-deo.html
Did you watch the whole video? The difference between mid and small-cap companies is not as significant as people think, and VTI is actually slightly more volatile. I tend to prefer the S&P 500, but the Total Market Fund is great too. What are your thoughts after watching the video?
@@MikesFinancialEdge I did, it was very informative. It’s just hard to think that I am not as diversified as I could be. I own all VOO at the moment and have enjoyed the last year with the gains. I’m just wondering if it’s the right choice for another 30 years of investing.
For a long-term investor, VOO is a great choice for a core holding and most really don't need more than that. There are many ETFs to choose from, but the benchmark against which professionally managed mutual funds are measured is the S&P 500. Interestingly, Warren Buffett also believes that individual investors should use it for their investments. In fact, over a 15-year period, over 90% of professionally managed mutual funds do worse than their S&P 500 benchmarks. It’s not hard to do better than professionals, and you don’t have to know anything about picking stocks. So don’t pay them a bunch of fees to do worse. In fact, look at these rates of return with the dividends it pays for the periods ending in 2023. In the past five years it has averaged 15.75%. The past ten years it averaged 12.07% The past 20 years, it averaged 9.69% The past 30 years, it averaged 10.16% And the past 40 years it averaged 11.37% Plus, it's up around 14% in 2024 already. But those are only the returns if someone stayed completely invested throughout those periods of time. However, if you are wanting to feel a bit more diversified, there is certainly nothing wrong with that.
Nothing wrong with that at all. After all, no one can predict the future! But, I'll just offer some information to go along with this idea. Decades ago, it made more sense to get exposure outside of the U.S. That’s where the developing economies existed, and it made sense to get exposer to the emerging markets, intending to seek better growth and balance out the U.S. economy. However, in today’s global economy, most of the large companies are truly global and much of their revenue comes from outside the U.S. In fact, approximately 41% of the entire revenue generated by the companies within the S&P 500 comes from outside the U.S. Also, this asset map from Blackrock is interesting. It gives the performance of different asset classes over the past decade. www.blackrock.com/corporate/insights/blackrock-investment-institute/interactive-charts/return-map
HaHa - I hope it is helpful to people wondering about which is better. The S&P 500 or Total Stock Market. Thank you for the vote of confidence and leaving a comment!😉
It seems certain stocks are undervalued, flying under the radar despite their potential. You can't help but wonder when the market will recognize their true worth. How can I invest $600K wisely to ensure our future security?
If someone has a lump sum of $600K they are considering investing, the recommendations would depend somewhat on their age and how long they plan to leave it invested. It’s also important to understand the differences between lump-sum investing and dollar-cost averaging into the market. I suggest checking out the videos linked below; I think you'll find them helpful. As for trying to pick individual stocks you believe are undervalued, it’s usually best to stick with low-cost ETFs rather than attempting to be a stock picker. Remember, over a 15-year period or longer, more than 90% of professionally managed mutual funds underperform their specific S&P 500 benchmarks, and those managers are actively making investment decisions. It’s not difficult to outperform the professionals, and you don’t need to know anything about picking stocks. Anyway, start by checking out the videos when you have time, and I’d be happy to chat more if you have any questions afterward. Lump-sum vs. DCA: ua-cam.com/video/V0m8r2Ft7kY/v-deo.html The S&P 500 Explained in Detail: ua-cam.com/video/LL-lkcM1_4U/v-deo.html The 20 Most Important Investment Rules: ua-cam.com/video/WxEYYZSo4wI/v-deo.html
Either method would be great. They would both be utilizing dollar-cost-averaging and, over the long-term, there would be very little difference between these to options. The most important thing would to be consistent and stick to a schedule regardless of what the market might be doing. To see some surprising examples of the benefits of dollar-cost-averaging, check out this video. I think you will find it helpful. ua-cam.com/video/QVUqNbvaGWI/v-deo.html
For a long-term investor, an ETF for the S&P 500 or a total market fund is a great choice. My son, who is in his mid-30s, only has an ETF for the S&P 500. For the S&P 500, VOO, IVV, or SPLG are all excellent options. SPLG can be appealing at times due to its lower price per share. While there are many ETFs to choose from, the benchmark against which professionally managed mutual funds are measured is the S&P 500. Interestingly, Warren Buffett also believes that individual investors should rely on it for their investments. In fact, over a 15-year period, more than 90% of professionally managed mutual funds underperform their S&P 500 benchmarks. It's not difficult to outperform professionals, and you don't need to know anything about picking stocks. So, don't pay high fees for underperformance. In fact, take a look at these rates of return, including dividends, for the periods ending in 2023: Over the past five years, it has averaged 15.75%. Over the past ten years, it has averaged 12.07%. Over the past 20 years, it has averaged 9.69%. Over the past 30 years, it has averaged 10.16%. Over the past 40 years, it has averaged 11.37%. Plus, it's already up around 15% this year. However, these returns only apply if someone stayed fully invested throughout those periods. The total market fund is also a great option, with very little difference in performance compared to the S&P 500. SPLG works well for the S&P 500 because it's priced around $60 per share. To learn everything you need to know about the S&P 500-its history, performance, the best places to open an account, and the best ETFs-check out this video. ua-cam.com/video/LL-lkcM1_4U/v-deo.html
Sorry I didn't see your comment until now. I usually try and respond right away because I do appreciate the people that watch the videos and take time to leave a comment. I can share that my son is now 35 and owns only one ETF. That's one for the S&P 500. When someone is in their 20's, 30's and 40's, the S&P 500 is a great choice. For this, the SPLG works great. Check this video out: ua-cam.com/video/LL-lkcM1_4U/v-deo.html
Sorry I missed your question until now. I appreciate you checking out the video and leaving a comment. There are many ETFs to choose from, but the benchmark against which professionally managed mutual funds are measured is the S&P 500. Interestingly, Warren Buffett also believes that individual investors should use it for their investments. In fact, over a 15-year period, over 90% of professionally managed mutual funds do worse than their specific S&P benchmarks. It’s not hard to do better than professionals, and you don’t have to know anything about picking stocks. So don’t pay them a bunch of fees to do worse. In fact, look at these rates of return with the dividends it pays for the periods ending in 2023. In the past five years it has averaged 15.75%. The past ten years it averaged 12.07% The past 20 years, it averaged 9.69% The past 30 years, it averaged 10.16% And the past 40 years it averaged 11.37% (And, it's up around 23% this year) But those are only the returns if someone stayed completely invested throughout those periods of time. The total market fund is great too, there is actually very little difference in their performance. The SPLG works great for the S&P because it's only about $68 per share. To understand everything one should know about the S&P 500, it's history, performance, best places for an account, best ETFs and more, check out this video. ua-cam.com/video/LL-lkcM1_4U/v-deo.html
Hey Everyone - I hope you leave some comments. I would love to hear your thoughts.
Thanks for the video! Very helpful since I went crazy and bought a bunch of different ETFs, only to realize most of them are almost the same.
I am happy to hear the video was helpful and I appreciate you taking the time for a comment. Yes, it is a pretty common problem that many of the ETFs people hold are similar or have huge overlaps.
I made the same mistake a few years ago.
It's a very common mistake people make.
Great timing on this video, was already in the process of researching these two ETFs!
Great! I guess it saved you some time and made the process easier. Hopefully, the video was helpful to you. Thanks for checking it out and leaving a comment!
Forgot to ask if you know which you'll go with now.
@@MikesFinancialEdge I already have FXAIX in a ROTH IRA, so I think VOO in a traditional to support the S&P 500 more.
Oh great! Sounds like you've been making wise choices. Thanks for sharing.
Watched this again and picked up more tidbits. Lots of great information in this video and comparing the S&P 500 to the Total Market.
Nice to hear you find the video informative!
@@MikesFinancialEdge Absolutely - I thought I knew the difference, but I learned so much from this video.
Great! Happy to hear it was worth your time.🙂
Great video and so informative. I see people debate this question all the time and they seem to have strong opinions, but I don't think they know the facts. They should watch this!
Yes, I've seen some strong opinions about which is best, too, and that's on both sides of the argument. Some people may be surprised to know the facts.
@@MikesFinancialEdge I know some people that think VTI has less volatility because it is more diversified. I guess that is wrong. I thought the actual comparisons of holdings was really interesting too.
Yes, I know a few people that think the same thing, too. I suppose there's more than one thing people may be surprised about from the video.
Thank you Mike
Oh, you are very welcome! Thank you for the comment. I hope the video was helpful and informative.
Great great video you explained very well Im subscribe now.
Thank you for the comment! I'm glad you liked the video and I appreciate you subscribing. Welcome!
This is a great channel!
Thank you
Great video! I currently have 359 shares of ITOT. I have been investing in ITOT for 5 years and I’m up 12K in profit.
That's great! It's been a good 5 years. Glad to hear you liked the video and thanks for the comment!
This is a very informative video with everything organized very well! I am on the VOO side.
I agree!
Nice to hear you felt it was well organized and informative!
Thanks!
I have a 3 fund portfolio but I have finally decided to invest in ETFs, alongside. I’m looking at SCHD, VOO, XLK or SCHG.
What are you currently holding in your 3-fund portfolio? VOO is an excellent choice as the core holding for most any portfolio. SCHD is great too with only a 8% overlap with the S&P 500. XLK is very aggressive with over 42% in just two stocks. SCHG does have a 54% overlap with VOO and it also has a 39% overlap with XLK. Depending on what you are holding now, you may not need all of these. Anyway, thank you for checking out the video and leaving a comment.
which companies would you suggest I invest 50k to get the best returns/dividends right off the bat?
I know you're not allowed to give financial advice, but perhaps if you can suggest a few from your current holdings i wouldn't mind lol
Most people would be far better off using low-cost ETFs rather than trying to pick stocks. Also, we should remember that companies with seemingly high dividends may not be able to sustain them long term, those dividends hurt growth, and if they need to lower those dividends, the stock price could take a big hit. Therefore, I would probably recommend dividend-paying ETFs for someone looking for dividends. Naturally, we always want to keep costs/expense ratios low, and the biggest thing is to avoid making silly errors due to our own behavior and emotions. You might be interested in these two videos for more on that.
The 20 Most Important Investment Rules & Lessons Every Investor Needs to Know:
ua-cam.com/video/WxEYYZSo4wI/v-deo.html
How To Invest BETTER And Avoid STUPID Mistakes
ua-cam.com/video/FqKCDqcOqWg/v-deo.html
I was also curious about your approximate age. If you are still quite a ways from retirement, focusing too much on dividends may not be the best strategy. Many of the best-performing stocks over the past decade or two have paid very little or no dividends at all. Before making recommendations, it’s important to consider the overall plan in relation to a person’s age. Those two videos I linked in the other message should be helpful, though. Let me know if you have more questions.
I agree with a lot of what you have said, and index funds - based on the S&P 500 - are my core holdings. However, I was wondering what your reasons are for not considering international stocks. I agree with a lot of what J.L. Collins and John Bogle say about them, but I was curious to hear your thoughts too.
There’s nothing wrong with having a relatively small portion of a portfolio devoted to international stocks using a low-cost ETF. Personally, I don’t have any, and over the past decade, they have severely underperformed. I'll link a BlackRock study below. Decades ago, it made more sense to gain exposure outside of the U.S. That’s where developing economies were, and it was wise to invest in emerging markets to seek better growth and balance out the U.S. economy. However, in today’s global economy, most large companies are truly global, with much of their revenue coming from outside the U.S. In fact, approximately 41% of the total revenue generated by companies within the S&P 500 comes from outside the U.S. Here's a Blackrock study of assets and their performance. www.blackrock.com/corporate/insights/blackrock-investment-institute/interactive-charts/return-map
Wow, I never would have thought of that. It was interesting how you showed that all diversity isnt equal in the market.
What surprised you?
@@MikesFinancialEdge It surprised me the difference between these two options. I always thought of them as almost the same.
Well, the differences and similarities are interesting, but both are an excellent choice for any core holding in a portfolio! No reason to have both, but either one is great. Happy to hear you like the video. Thanks for the comment!
Great explanation!! S&P for the win again!
Well, it has been winning slightly over the past 10 years. No one can predict the future, though. Thanks for checking out the video. I hope it was helpful.
Can't go wrong with the S&P 500.
Always a great choice for the core holding of any long-term investor. VTI is great too.
Hi Mike, your videos are excellent and very accessible for someone new to this type of financial content such as myself. Have you covered in your videos why you prefer ETFs over regular index funds? Thanks!
I'm glad to hear that you find the videos helpful and easy to follow. Thank you for watching and taking the time to leave a comment. I hope I can clarify your question a bit. In some of my videos, I've discussed why ETFs are often preferred over mutual funds.
Exchange-Traded Funds (ETFs) and Index Funds share many similarities. ETFs are traded on stock exchanges like individual stocks, allowing you to buy and sell them throughout the trading day at market prices. Index Funds are any investment funds designed to mirror the performance of a benchmark, like the S&P 500, by replicating its composition. But, an Index Fund can be structured as either an ETF or a mutual fund. When structured as mutual funds, Index Funds are typically bought and sold only at the end of the trading day at the net asset value (NAV).
ETFs generally tend to be more tax-efficient than mutual funds due to their structure, which may minimize capital gains distributions if held outside of a retirement account. Additionally, Index Funds structured as mutual funds often have slightly higher expense ratios. There are a few more subtle differences, but I hope this helped clarify things a bit. When making recommendations, it's often simpler to just go with low-cost ETFs.
@@MikesFinancialEdge thanks for the thorough response and breakdown. If I’m looking to set up my portfolio and plan on scheduling monthly contributions from my bank account and keeping my interaction with the portfolio to a minimum except from rebalancing it one a year, does an ETF or index fund generally lend itself to this better than the other?
Being consistent and investing monthly using dollar-cost-average is an excellent way to create wealth. Just stick with the plan through all the ups and downs. And an ETF or other index linked to the S&P 500 or Total Market fund is a great way to do it or at least for the core of most any portfolio. You might find this video about dollar-cost-averaging surprising and there are other recommendations in it too. ua-cam.com/video/QVUqNbvaGWI/v-deo.html
Yes - great channel!
Thank you
SPY has a higher MER, but it has a very liquid option chain. Do you have any historical data comparing holding VOO vs. holding SPY & selling covered calls? Thanks for your great video 🙏🤠
Yes, SPY has a little higher expense ratio, but it's still pretty low and is certainly acceptable. As you mentioned, it is highly liquid with an average daily volume over 51M compared to VOO at a little over 5M. SPY and VOO are nearly identical for a long-term investor, though. As far as historical data of selling covered calls with holding SPY, I don't really have any good data on that and it would depend on the individual, too. Over the long-term, I would guess it would end up putting somewhat of a drag on the performance. Anyway, I'm happy to here you enjoyed the video. Sorry I wasn't mroe help with the question.
Thank you 🙏😊
Thank you for checking out the video and the comment. Your support is much appreciated. Sorry I wasn't a bit more help.
Thanks Mike! Does it make sense to go with the VTI because its price per unit is cheaper and that’s what I can afford as a beginner investor?
And thank you for checking out the video! If you are interested in something like the S&P 500, but a lower price per share is helpful, you can use the ETF SPLG. It's identical to VOO, but it's price per share is only around $67.
@@MikesFinancialEdgeGreat! I have heard about it. I will check it out! Any recommendations on bond ETFs 🙈
Yes, SPLG is great for people just getting started because of its lower price per share, and it's the one I usually recommend. Its expense ratio is actually slightly lower than VOO, but the difference is pretty insignificant.
One of the most common bond funds people mention is BND, Vanguard's total bond fund. However, I’m not really a fan of bonds. If someone wants something stable, HYSAs and CDs are still paying 4.5-5% these days. I understand that bonds are meant to provide stability and reduce volatility, but over the long term, they tend to drag down a portfolio’s performance. Plus, they’re not always safe. In 2022, when the stock market dropped about 18%, the total bond fund was down over 13%. The 10-year average for BND is only 1.62%, while SPLG’s 10-year average is 12.87%. Since its inception in 2007, BND has averaged 3.07%, whereas the S&P 500 has averaged around 10%, even considering the housing crisis of 2008-2009. However, having said all that, there is nothing wrong with having a bond fund if it helps one feel better about staying invested.
Anyway, for the portion of a portfolio that someone may want to be less volatile than stocks, I personally prefer CDs, HYSAs, or money market accounts. Then, of course, there are other types of ETFs that can provide more diversification and stability, too.
@@MikesFinancialEdge Thank you so much for your lengthy reply! God bless you!
I appreciate you being part of the channel. I hope you enjoy some of the other videos, too.
Should an investor consider the NAV when choosing a fund? VOO NAV is around $510 a share. VTI is around $282 a share. Should an investor consider this or does it not matter?
VOO and VTI are, of course, slightly different investments, but we can compare something like VOO and SPLG, which are nearly identical. VOO’s share price is around $526, while SPLG is about $67 per share.
Both are ETFs, which trade just like stocks and have a fluctuating price per share throughout the day. Mutual funds, on the other hand, don’t trade throughout the day and are priced at what’s called the NAV (Net Asset Value), calculated after the market closes. Therefore, NAV doesn’t apply to ETFs.
That said, your question is a good one! Comparing SPLG and VOO’s price per share, the price is irrelevant in terms of performance. SPLG might just make it easier for some investors to purchase shares because of its lower price point. Both track the S&P 500, so if the S&P 500 rises 10%, both VOO and SPLG will also increase by 10%. Therefore, whether someone invests $5,000 in either fund, they will perform exactly the same.
Im 51 and I do have V00+QQQ+SCHD+DGRO in my Roth and reg B/ ACC what you think? please and thank you.
I think that’s a nice mix of funds. Looks like you have been making good decisions. It would depend a little on the percentage devoted to each fund, or do you divide it up equally between them?
What is the best ETF to invest when that we know interest rates are gonna go down? What is the relation between S&P 500 and interest rates?
It would be great if someone knew the answer for sure. But, quite honestly, no one can predict the future! Some of the worst advice comes from even the so-called best analysts and their predictions. One study looked at the track record of stock market experts, reviewing over 6,600 forecasts made by 68 different "experts" over an 8-year period, and their accuracy rate was only 47%. You’d have been better off flipping a coin! Jim Cramer, a well-known figure, had an accuracy rate of 47%, and a former chief U.S. investment strategist at Goldman Sachs was only right 35% of the time.
Forecasts are simply not reliable. It’s better to tune out the noise, have a plan, and stick to it. Ignore the hype, predictions, and speculation. Since no one can predict the future, it’s essential to control what you can-like your savings rate, your emotions, and the risks you take. The best plan is one you can stick with, even through market volatility.
Now that I’ve shared all that, I'll share a few general ideas many people believe. I’m not a big fan of bonds for long-term investors, but many feel bonds will perform better in a falling interest rate environment than they have been doing. In addition, real estate (REITs) should benefit too. Over the past several years, small-cap ETFs have underperformed, but many expect them to do better along with some dividend-paying funds.
When it comes to investing, anything over the next 1-2 years is short-term, and no one should assume they can predict that. There are just too many factors, such as the unrest in the Middle East, to consider. For long-term investors, low-cost index funds for the broad market should be at the core of any portfolio-something like the S&P 500.
Let’s take a look at the historical returns for the S&P 500, including dividends, for periods ending in 2023:
Over the past 5 years, it averaged 15.75%.
Over the past 10 years, it averaged 12.07%.
Over the past 20 years, it averaged 9.69%.
Over the past 30 years, it averaged 10.16%.
Over the past 40 years, it averaged 11.37%. (And, it's up around 20% this year already)
These impressive returns are only possible for those who stayed fully invested through those periods. Anyway, I know I didn't answer your question as you probably hoped, but I don't feel anyone that is a long-term investor should try and keep changing their portfolios based on what they markets may do over the next year or two.
Sorry I missed your question until now. I appreciate you checking out the video and leaving a comment. Regarding predictions, remember that no one can predict the future! Some of the worst advice often comes from analysts and their forecasts. One study reviewed the accuracy of predictions by over 68 stock market experts, analyzing more than 6,600 forecasts made over an eight-year period. Their accuracy rate was just 47%-essentially no better than flipping a coin. Jim Cramer had a 47% accuracy rate, and a former chief U.S. investment strategist at Goldman Sachs was right only 35% of the time. Forecasts aren’t helpful. Instead, try to tune out the noise, make a plan, and stick with it. Ignore the hype, predictions, and speculation.
For any long-term investor, the S&P 500 is an excellent choice. Take a look at these returns (with dividends) for periods ending in 2023:
Past 5 years: 15.75% average return
Past 10 years: 12.07% average return
Past 20 years: 9.69% average return
Past 30 years: 10.16% average return
Past 40 years: 11.37% average return
And it’s up about 23% this year
But keep in mind, these returns reflect staying fully invested throughout. A total market fund is a great option too, with little difference in performance from the S&P 500. SPLG is also a solid choice for the S&P, priced at around $68 per share.
I am at the beginning of my "investment journey", planning to put 85K into dividend stocks so that I will be making up to 30% per year in dividend returns. Any advice?
Thanks for checking out the video! So, you have a lump sum of $85K to invest right now? How are you determining that you can make 30% per year in dividends? That's not realistic. Maybe I misunderstood what you meant.
Deciding to invest a lump sum all at once can seem scary, but there is good research and data on the best decision when choosing between lump-sum investing and dollar-cost averaging into the market. I think it would be helpful to check out the video I have on that topic, and I will leave a link below.
Also, how you might want to invest depends on your age and risk tolerance. If you have time, I'll suggest a couple of videos you might check out that could help with your decisions. Afterwards, I would be happy to answer any questions you may have.
Lump-sum vs DCA: ua-cam.com/video/V0m8r2Ft7kY/v-deo.html
Rick Tolerance: ua-cam.com/video/EMHi0yhc3ZA/v-deo.html
Optimal Order For Investments: ua-cam.com/video/tW5o5K7BDUs/v-deo.html
Details of the S&P 500: ua-cam.com/video/LL-lkcM1_4U/v-deo.html
Does mid and small cap truly make that much difference to choose VTI over VOO? I’m having a hard time believing it.
Did you watch the whole video? The difference between mid and small-cap companies is not as significant as people think, and VTI is actually slightly more volatile. I tend to prefer the S&P 500, but the Total Market Fund is great too. What are your thoughts after watching the video?
@@MikesFinancialEdge I did, it was very informative. It’s just hard to think that I am not as diversified as I could be. I own all VOO at the moment and have enjoyed the last year with the gains. I’m just wondering if it’s the right choice for another 30 years of investing.
Also, what do you think about investing into international ?
For a long-term investor, VOO is a great choice for a core holding and most really don't need more than that. There are many ETFs to choose from, but the benchmark against which professionally managed mutual funds are measured is the S&P 500. Interestingly, Warren Buffett also believes that individual investors should use it for their investments. In fact, over a 15-year period, over 90% of professionally managed mutual funds do worse than their S&P 500 benchmarks. It’s not hard to do better than professionals, and you don’t have to know anything about picking stocks. So don’t pay them a bunch of fees to do worse. In fact, look at these rates of return with the dividends it pays for the periods ending in 2023.
In the past five years it has averaged 15.75%.
The past ten years it averaged 12.07%
The past 20 years, it averaged 9.69%
The past 30 years, it averaged 10.16%
And the past 40 years it averaged 11.37%
Plus, it's up around 14% in 2024 already.
But those are only the returns if someone stayed completely invested throughout those periods of time. However, if you are wanting to feel a bit more diversified, there is certainly nothing wrong with that.
Nothing wrong with that at all. After all, no one can predict the future! But, I'll just offer some information to go along with this idea. Decades ago, it made more sense to get exposure outside of the U.S. That’s where the developing economies existed, and it made sense to get exposer to the emerging markets, intending to seek better growth and balance out the U.S. economy. However, in today’s global economy, most of the large companies are truly global and much of their revenue comes from outside the U.S. In fact, approximately 41% of the entire revenue generated by the companies within the S&P 500 comes from outside the U.S. Also, this asset map from Blackrock is interesting. It gives the performance of different asset classes over the past decade. www.blackrock.com/corporate/insights/blackrock-investment-institute/interactive-charts/return-map
Finally the video of the century has come. Mike-finance edge and popcorn.
HaHa - I hope it is helpful to people wondering about which is better. The S&P 500 or Total Stock Market. Thank you for the vote of confidence and leaving a comment!😉
It's a great channel!
Thank you
It seems certain stocks are undervalued, flying under the radar despite their potential. You can't help but wonder when the market will recognize their true worth. How can I invest $600K wisely to ensure our future security?
If someone has a lump sum of $600K they are considering investing, the recommendations would depend somewhat on their age and how long they plan to leave it invested. It’s also important to understand the differences between lump-sum investing and dollar-cost averaging into the market. I suggest checking out the videos linked below; I think you'll find them helpful.
As for trying to pick individual stocks you believe are undervalued, it’s usually best to stick with low-cost ETFs rather than attempting to be a stock picker. Remember, over a 15-year period or longer, more than 90% of professionally managed mutual funds underperform their specific S&P 500 benchmarks, and those managers are actively making investment decisions. It’s not difficult to outperform the professionals, and you don’t need to know anything about picking stocks.
Anyway, start by checking out the videos when you have time, and I’d be happy to chat more if you have any questions afterward.
Lump-sum vs. DCA: ua-cam.com/video/V0m8r2Ft7kY/v-deo.html
The S&P 500 Explained in Detail: ua-cam.com/video/LL-lkcM1_4U/v-deo.html
The 20 Most Important Investment Rules: ua-cam.com/video/WxEYYZSo4wI/v-deo.html
Is it better to invest weekly or monthly?
Either method would be great. They would both be utilizing dollar-cost-averaging and, over the long-term, there would be very little difference between these to options. The most important thing would to be consistent and stick to a schedule regardless of what the market might be doing. To see some surprising examples of the benefits of dollar-cost-averaging, check out this video. I think you will find it helpful. ua-cam.com/video/QVUqNbvaGWI/v-deo.html
So our 30 year old daughter and her kids all now have investment accounts and wasn't sure which ETF to get them into for long term.
For a long-term investor, an ETF for the S&P 500 or a total market fund is a great choice. My son, who is in his mid-30s, only has an ETF for the S&P 500. For the S&P 500, VOO, IVV, or SPLG are all excellent options. SPLG can be appealing at times due to its lower price per share. While there are many ETFs to choose from, the benchmark against which professionally managed mutual funds are measured is the S&P 500. Interestingly, Warren Buffett also believes that individual investors should rely on it for their investments. In fact, over a 15-year period, more than 90% of professionally managed mutual funds underperform their S&P 500 benchmarks.
It's not difficult to outperform professionals, and you don't need to know anything about picking stocks. So, don't pay high fees for underperformance. In fact, take a look at these rates of return, including dividends, for the periods ending in 2023:
Over the past five years, it has averaged 15.75%.
Over the past ten years, it has averaged 12.07%.
Over the past 20 years, it has averaged 9.69%.
Over the past 30 years, it has averaged 10.16%.
Over the past 40 years, it has averaged 11.37%.
Plus, it's already up around 15% this year.
However, these returns only apply if someone stayed fully invested throughout those periods. The total market fund is also a great option, with very little difference in performance compared to the S&P 500. SPLG works well for the S&P 500 because it's priced around $60 per share. To learn everything you need to know about the S&P 500-its history, performance, the best places to open an account, and the best ETFs-check out this video. ua-cam.com/video/LL-lkcM1_4U/v-deo.html
Sorry I didn't see your comment until now. I usually try and respond right away because I do appreciate the people that watch the videos and take time to leave a comment. I can share that my son is now 35 and owns only one ETF. That's one for the S&P 500. When someone is in their 20's, 30's and 40's, the S&P 500 is a great choice. For this, the SPLG works great. Check this video out: ua-cam.com/video/LL-lkcM1_4U/v-deo.html
Sorry I missed your question until now. I appreciate you checking out the video and leaving a comment. There are many ETFs to choose from, but the benchmark against which professionally managed mutual funds are measured is the S&P 500. Interestingly, Warren Buffett also believes that individual investors should use it for their investments. In fact, over a 15-year period, over 90% of professionally managed mutual funds do worse than their specific S&P benchmarks. It’s not hard to do better than professionals, and you don’t have to know anything about picking stocks. So don’t pay them a bunch of fees to do worse. In fact, look at these rates of return with the dividends it pays for the periods ending in 2023.
In the past five years it has averaged 15.75%.
The past ten years it averaged 12.07%
The past 20 years, it averaged 9.69%
The past 30 years, it averaged 10.16%
And the past 40 years it averaged 11.37%
(And, it's up around 23% this year)
But those are only the returns if someone stayed completely invested throughout those periods of time. The total market fund is great too, there is actually very little difference in their performance. The SPLG works great for the S&P because it's only about $68 per share. To understand everything one should know about the S&P 500, it's history, performance, best places for an account, best ETFs and more, check out this video. ua-cam.com/video/LL-lkcM1_4U/v-deo.html