I am sitting on a good amount of cash right now, waiting for the perfect time to increase equity in my portfolio. The market is currently at a 21% decline in the past month, so we are officially in a recession. While many others are panic selling, I am sitting quite ready for the perfect opportunity to invest a bunch of cash I have been saving for years. I currently am holding Microsoft, Facebook, Uber, and two Biotech stocks. I am looking to invest my money into three diverse ETFs to diversify my portfolio because right now, I’m at 25% biotech stocks, 35% technology stocks, and 40% cash. I am looking to have my portfolio fully diversified by dumping all my money into these three ETFs.
Vanguard S&P 500 ETF (VOO)
The first ETF that I think is necessary for a long term portfolio is The Vanguard S&P 500 ETF (AKA VOO). This ETF has an annual dividend payout of $5.29, which makes it even more attractive for me to hold long term. The VOO averages a 10% yearly return, and that’s without the dividend. A low fee and a well-constructed benchmark make VOO well-positioned continue to produce stable risk-adjusted returns over the long haul. VOO offers diversified exposure to U.S. large-cap stocks, and it has a low expense ratio. A small fee and a reasonably representative portfolio make the fund well-positioned to do well in the future. Many of the fund’s most significant holdings are international firms that conduct business throughout the whole world. All of the companies in the VOO index fund have revenue generated in the U.S and around the globe, that’s what makes it such an ideal long term investment.
Vanguard Russell 2000 (VTWO)
This fund invests in growth and value stocks of small-cap companies. It seeks to track the performance of the Russell 2000 Index, by using full replication technique. Vanguard Russell 2000 ETF was formed on September 20, 2010. It is more aggressive than the VOO because it’s made up of smaller companies. This index has an annual dividend payout of $1.81. The fund tilts toward micro-caps where the waters get choppier, which raises market risk compared to the VOO. VTWO represents 8% of the U.S stock market. The fund is diversified across growth and value stocks, which makes me think it an excellent investment for the long term.
Vanguard Real Estate ETF (VNQ)
This fund invests in stocks issued by real estate investment trusts (REITs), these are companies that purchase hotels, strip malls, office buildings and other real property that is rented out for commercial or residential use. The goal of this fund is to closely track the MSCI US investable market real estate index. This fund gives out quarterly dividends of $0.65. The fund was formed on May 13, 1996. The fund is essential for a stock portfolio because of the constant quarterly dividend, and the low volatility risk it has.
The reason I am going to diversify my account into all ETFs is that I want more diversification in my portfolio. ETFs can contain all types of investments, including stocks, commodities, or bonds; some offer U.S. only holdings, while others are international. The reason I am choosing vanguard ETFs is that they provide low expense ratios and fewer broker commissions then buying individual stocks. ETFs reduce risk management through diversification and they have a huge impact on the market. For the future, I will be loading my portfolio up heavy on ETFs.