FULL DISCLOSURE:
I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
I will not blog about any positions of stocks, ETFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
I am not receiving compensation by the company for this blog post.
I have no working relationship with any company whose stock, ETF, REIT or cryptocurrency mentioned in this blog post. Nor do I have a family member or friend who works with the company.
When I listen and observe long time investors, may it be in person or on an online group, you eventually learn that people tend to invest in an ETF that tracks a major Index for the S&P 500, NASDAQ-100 or the Dow Jones Industrial Average.
You’ll often hear it on CNBC and financial shows and you see it in commercials.
More often, it’s the most expensive ETF investment that one can own and while there may be more, the ones you probably will hear and see often are:
Vanguard’s VOO (Vanguard S&P ETF) – Tracks the S&P 500 Index
SPDR’s SPY (SPDR S&P 500 ETF Trust) – Tracks the S&P 500 Index
Blackrock’s IVV (iShares Core S&P 500 ETF) – Tracks the S&P 500 Index
Invesco QQQ – Tracks the NASDAQ-100 Index
Blackrock’s IWM (iShares Russell 2000 ETF) – Tracks the Russell 2000 Index
Vanguard’s VTWO (Vanguard Russell 2000 ETF) – Tracks the Russell 2000 Index
SPDR’s DIA (SPDR Dow Jones Industrial Average ETF Trust) – Tracks the Dow Jones Industrial Average
So, the question that people have when getting into stocks are what is the difference between Standard & Poor’s 500, NASDAQ-100, Russell 2000 and Dow Jones Industrial Average?
The Standard and Poor’s 500 (S&P 500) was created in 1957. A free-float weighted measurement stock market index of 500 of the largest companies listed on stock exchanges in the United States.
But the history goes back in 1860 when Henry Varnum Poor formed Poor’s Publishing, a guide for investor’s for the railroad industry. By 1923, the Standard Stastics Company began rating mortgage bonds and developed its first stock market index consisting of 233 US Companies. In 1941, both Poor’s Publishing and Standard Statistics Company merged to form Standard & Poor’s.
The NASDAQ-100 was launched on January 1985 by Nasdaq. The NASDAQ-100 consists of Industrial, Telecommunication, Biotechnology, Health Care, Transportation, Media and Service Companies traded on the NASDAQ market. While the NASDAQ Financial-100 consists of banking companies, insurance firms, brokerage firms and mortgage loan companies.
The NASDAQ stands for the National Association of Securities Dealers Automated Quotients Exchange and refers to an index. It is the largest electronic stock exchange in the world by Market capitalization after the New York Stock Exchange (NYSE) in the U.S.
The Russell 2000 Index was created in 1984 by the Frank Russell Company and tracks the smallest 2,000 stocks in the small-cap stock market index. It is seen as the most common benchmark for mutual funds that identify themselves as “small-cap” and is the most widely quoted measure of overall performance of the small-cap to mid-cap company shares.
Dow Jones Industrial Average (DJIA) is a stock market index created by Charles Dow (editor of Wall Street Journal) and statistician Edward Jones back in 1885.
The Index measures the stock performance of the 30 largest companies listed on the stock exchange. Why only 30? The DJIA was created back in 1885 and It’s because of the low number of stocks at the time and the data limitations, the DJIA is weighted by stock price and doesn’t use a weighted arithmetic mean.
Dow Jones is a financial and business news company and is not publicly-traded.
On television, you will often see these in comparison to each other in charts. As many financial analysts on TV show if the market has gone bullish (things are looking up) or bearish (things are looking downward) and whether or not the economy is fairing well.
So, for today’s blog, I’m going to discuss why I invested in Vanguard’s S&P 500 ETF (NYSE ticker symbol: VOO).
For me, I think of the VOO as a basket in which consists of stocks in the S&P 500 Index (which are the 500 largest U.S. companies). The ETF closely tracks the Index’s return and according to Vanguard, “offers high potential for investment growth, share value rises and falls more sharply than that of funds holding bonds. And is more appropriate for long-term goals”.
I decided that I want to have an investment in an ETF which covers the S&P 500, the NASDAQ-100 and the DJIA. As for the Russell 2000, at this time, I have not decided on if I wanted to invest in an ETF which tracks it just yet.
One of the reason why I often look towards Vanguard is because they tend to offer the lowest gross expense ratio (GER) which Vanguard has an 0.03% which is low. What that means is that only 0.03% of your invested dollars will go towards fund expenses annually, which allows more of the fund’s returns go to you.
The composition of VOO and its top five equity sector diversification is 26% going into information technology, 12.80% towards healthcare, 12.70% towards consumer discretionary, 11.40% towards financials and 11.20% towards communication services.
Now, Motley Fool has an article on why people should invest in VOO in a monthly basis but how one can double their retirement income by saving and investing in the ETF.
But I have invested in VOO. While I wish I could have bought in when it was low (I actually did buy it from Robinhood when it was lower, but sold it because I wanted to transfer my investments to another brokerage), so I was able to get it again at $360 and it’s now up to $382.95.
The ETF does offer two dividends of $1.32 (so, $2.65 total).
While the Motley Fool article focused on monthly investment towards it, I’m currently focusing on adding to other ETFs and REITS and to be realistic, I think my goal as of right now is if I can get up to five shares a year, that would be great, but as of right now, my primary focus is building my annual dividend total but also making sure I continue my diversification in numerous sectors.
As you can see from my asset location (as of May 2021), VOO is my largest holding but I have 18 sectors that I have invested in, so diversification right now, and achieving a higher annual dividend is my primary goal.
I have no intention of ever selling VOO, so I’ll be stuck to this ETF and will continue to add to it until retirement.
As always, perform due diligence and do a lot of research before investing. Talk to a financial advisor and find out if Vanguard S&P 500 ETF is a perfect investment for you.
