Give your money a chance to grow over the long term
Reduce your investment risk
A stock ETF could contain hundreds—sometimes thousands—of stocks, making an ETF generally less risky than owning just a handful of individual stocks.
Get broad exposure to stock markets around the globe
You can invest in just a few ETFs to complete the stock portion of your portfolio. Each of these ETFs includes a wide variety of stocks in a single, diversified investment.
Vanguard Total Stock Market ETF holds more than 3,500 domestic stocks.
Vanguard Total International Stock ETF holds more than 6,000 non-U.S. stocks.
Wondering how much of your portfolio should be invested in stocks?
How to evaluate different stock ETFs
How much risk are you comfortable with?
Different types of stocks will expose you to different types and levels of risk. Knowing the general terms used to describe specific stock characteristics can help you assess how comfortable you are with the risks involved with investing.
For example, you can invest in growth stock ETFs, value stock ETFs, or an ETF that includes both growth and value stocks. Neither is consistently risker than the other—there have been periods when growth stocks returned more to their investors than value stocks, and vice versa.
You can also choose stock ETFs based on the average size, or capitalization, of the companies they invest in. In general, smaller companies' stocks can be riskier than larger companies' stocks, but smaller companies try to reward that risk with more potential for growth.
Do you want U.S. or international stocks?
Actually, investing in a combination of U.S. and international stocks can add another level of diversification to your portfolio. Consider splitting your stock allocation into about:
- 60% U.S. stock ETFs.
- 40% international stock ETFs.
Do you want to invest in a specific industry?
You can choose an ETF that invests solely in a specific sector of the market, like energy, real estate, or health care.
But keep in mind that because these ETFs have a very narrow focus, they can expose you to more risk. So sector ETFs should only be used to supplement an already well-diversified portfolio.
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LEARN ABOUT OTHER TYPES OF ETFs
Usually refers to a "common stock," which is an investment that represents part ownership in a corporation, like Apple, GE, or Facebook.
Each share of a stock is a proportional share in the corporation's assets and profits.
Represents a loan given by you—the bond's buyer—to a corporation or a local, state, or federal government—the bond's "issuer."
In exchange for your loan, the issuer agrees to pay you regular interest and eventually pay back the entire loan amount by a specific date.
A strategy intended to lower your chances of losing money on your investments.
Diversification can be achieved in many ways, including spreading your investments across:
- Multiple asset classes, by buying a combination of cash, bonds, and stocks.
- Multiple holdings, by buying many bonds and stocks (which you can do through a single ETF) instead of just one or a few.
- Multiple geographic regions, by buying a combination of U.S. and international investments.
A stock offered by a company that's still growing—and as it grows, its share price is expected to increase.
Company profits will most likely be spent on business expansion and new product and service development. Investors should have little to no income expectations because dividend payouts aren't a primary objective.
A stock offered by a company that's already relatively established. While the company may still be growing, there's not as much room for the kind of rapid expansion that growth companies pursue.
Company profits will most likely be distributed to its stock owners in the form of dividends (income). But investors shouldn't expect as much growth in the share price as there might be with a growth stock.
Indicates the size of a company as measured by the total value of its stock shares. Stocks are generally considered to be large-, mid-, or small-cap, although at the extremes you may also see references to mega-cap or micro-cap stocks.
The ranges for each category aren't firm—they move as the markets' overall value increases or decreases. But in general, large-cap stocks make up about 65% to 75% of the entire stock market, with mid- and small-cap stocks at about 10% to 15% each.