We've all heard stories about the great-grandfather who bought a share of Coca-Cola stock in the 1920s—and who's now a multimillionaire. But what about everyone else?
The problem with identifying a single investment that's going to make a ton of money over the next few decades is that no one has a crystal ball.
Sure, now Coke looks like a smart investment. But back then, this legendary investor put the equivalent of several hundred dollars into something that was far from a sure thing.
There's always a risk of losing money when you invest. The good news is that you can avoid one type of risk—the risk of investing everything in a company that goes under—by buying hundreds or thousands of securities at a time.
This is what's called "diversification." It works best when you buy into multiple industries and include companies of all different sizes because this variety helps even out the ups and downs.
"Sounds great," you might think, "but where am I going to get the money for thousands of investments—and the time to find them?"
Luckily, that's exactly what mutual funds and ETFs (exchange-traded funds) are for. They find and invest in a diversified portfolio of individual stocks or bonds, and you, in turn, buy shares of the fund.
Find out more about the benefits of buying mutual funds or ETFs
For more information about Vanguard ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedules for limits. Vanguard ETF Shares are not redeemable directly with the issuing fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.
