Many Exchange Traded Funds (ETFs) very simple investment strategy. Their goal is to track an index designed to measure the returns of a specific asset class. This makes them ideal investments to hold for the long term.
Here is a brief introduction to three ETF purchase $1,000 and hold it for life.
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State Street SPDR S&P 500 ETF Trust (NYSE: SPY) It is one of the ETFs with the largest assets under management, with assets exceeding US$700 billion. The reason so many investors entrust their money to this fund is its simple investment strategy. Its purpose is to track S&P 500 Index Index, one of the best-known market benchmarks measuring the performance of the 500 largest public companies.
this Annual returns for the S&P 500 have reached average levels It has grown by 10% over the past half century. invest in State Street SPDR S&P 500 ETF Trust Allowing you to get this return before you spend it. This ETF has a very low expense ratio of 0.0945% (about $0.95 per year per $1,000 invested). An annualized return of 10% will grow a $1,000 investment to more than $117,000 in 50 years. This ETF is focused on the S&P 500 and has low costs, making it an ideal core long-term holding.
this iShares Core Dividend Growth ETF (NYSE: DGRO) Tracks an index comprised of companies with a history of consistently increasing their dividends. Dividend growers have historically delivered strong returns. Over the past 50 years, dividend growers and originators in the S&P 500 have delivered an annualized return of 10.2%, according to Ned Davis Research and Hartford Funds. This is significantly higher than companies with an unchanged dividend policy (annualized return of 6.8%) and companies that do not pay dividends (annualized return of 4.3%).
The index indicates iShares Core Dividend Growth ETF A screen that tracks companies that have increased their dividends over at least the past five years. It also excludes companies with dividend payout ratios above 75% and the top 10% of stocks with the highest yields. This helps weed out companies that may struggle to achieve sustained dividend growth in the future. Long-term returns from dividend cuts and eliminations are poor (-0.9% annualized over the past 50 years). The fund currently holds nearly 400 stocks, providing investors with broad exposure to high-quality dividend growth stocks. It also yields 2% based on trailing 12 months of payments, nearly double the S&P 500’s level. Therefore, it provides investors with more passive dividend income.
The fund’s focus on dividend growth stocks has paid off over the long term. The fund has delivered annualized returns of more than 11% over the past one, three, five and 10-year periods and since its inception in 2014. The fund’s expense ratio is as low as 0.08%. The combination of high returns and low costs makes it a great long-term investment.
Vanguard Total Bond Market ETF (NASDAQ: BND) Provides investors with broad access to the market for taxable investment-grade U.S. dollar-denominated bonds. Investment-grade bonds are high-quality fixed-income investments.
Bonds play a vital role in portfolio diversification. They provide income while helping to reduce the risk profile of a portfolio. Most advisors recommend allocating 40% of a portfolio to bonds (60% to stocks) to achieve the best risk-adjusted returns.
The Vanguard Total Bond Market ETF holds nearly 11,500 bonds. Its holdings include U.S. Treasury securities, mortgage-backed securities, corporate bonds and debt securities issued by foreign entities. This ETF currently offers a yield of over 4% and has the lowest expense ratio (0.03%). Its broad exposure to high-quality bonds makes it an important portfolio pillar.
These three ETFs are great additions. SPY can deliver market returns; DGRO offers higher return potential; and BND reduces risk by providing broad bond market exposure. With simple strategies and low costs, they are great ETFs to buy and hold for life.
Before purchasing SPDR S&P 500 ETF Trust shares, consider the following factors:
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Matt DiLallo holds a position in the Vanguard Total Bond Market ETF. The Motley Fool owns and recommends the Vanguard Total Bond Market ETF. The Motley Fool has a disclosure policy.
3 Simple ETFs You Can Buy with Just $1,000 and Hold for Life Originally Posted by Motley Fool