I'm a beginner in stocks—should I just buy ETFs these days?
I've been getting interested in personal finance since last year and have been studying stocks, but individual stocks are too volatile and scare me. So lately, I've been dollar-cost averaging into US S&P 500 ETFs and Nasdaq ETFs. People around me say ETFs tend to trend upward in the long run, so I feel reassured, but the recent market instability still makes me a bit anxious. For those of you who build your portfolio solely with ETFs, are your returns decent? Or would it be better to mix in bond or commodity ETFs?
4 answers
Using ETFs alone is a perfectly solid strategy. I've been dollar-cost averaging mainly into the S&P 500 for three years now, and while there's some volatility, I'm seeing an average annual return of around 10%. Individual stocks carry higher risk, so ETFs are indeed a safer choice for beginners. However, keep in mind that mixing in 10–20% bond ETFs can further reduce volatility.
I had similar concerns, but ETFs alone turned out to be fine. Especially if you invest regularly through dollar-cost averaging, the compounding effect is significant. I avoid risky leveraged ETFs like TQQQ and just buy a bit of QQQ and VOO. If you're feeling anxious, keeping about 10% in cash is also a good strategy.
Buying only ETFs isn't the answer, but I think it's a really good starting point for beginners. I've mixed in a few individual stocks myself, but ETFs provide stability, which puts my mind at ease. If you're considering commodity ETFs, be cautious with gold ETFs (GLD) or oil ETFs (USO) as they have high volatility. For bond ETFs, I recommend TLT or BND.
I've been running a 100% ETF portfolio for 5 years now, and I'm pretty satisfied with the returns. However, when the market gets shaky, I sometimes switch from SPY to defensive sector ETFs like Consumer Staples (XLP) or Utilities (XLU). For beginners, sticking with S&P 500-focused strategies like now is fine, and if you have some room, mixing in about 5% commodities wouldn't be a bad idea.