For early investors, it can be hard to figure out WHAT to buy.
You know you like a few companies, but you don’t know if together they’re a good idea.
That’s where studying ETFs come in 👇🏻
Firstly, what’s an ETF:
Like index funds, ETFs are a fund of multiple stocks. Some have 100 holdings, some less or more. But they give you good diversity matching an index or sector.
Even for experienced investors they can be a great catch-all to passively invest.
👇🏻
There are 2 main types:
Passively managed (cheaper fees) — like $DGRO
Actively managed (more expense because they are closely managed with more buying/selling activity to try to increase the fund earnings) — like $ARKK
How to study them:
Google a high performing ETF that you have your eye on.
Search for: The ETF ticker symbol + Top Holdings
For example, $DGRO is one of my favorites focused on dividend growth stocks.
This will now unlock for you what stocks the fund holds 🔐
Look at the top 10-15 stocks a fund holds to understand how it is diversified and what the majority of its direction is controlled by.
With $DGRO, it’s names like Microsoft, Apple, Johnson and Johnson, Verizon, etc.
If you’re a beginner unsure what to invest in — this can be a great hack to pick a few individual stocks to study and potentially start with.
If the core holdings make a fund like $DGRO or $VOO successful, there’s a good chance they can work for the average investor.
Holdings Weight 🧾
Another important thing to note is the weight of the top holdings. Some ETFs have stocks that make up 10% or more of the whole fund!
For $DGRO, the highest weight is $MSFT at about 3%.
If a fund is largely 1️⃣ or 2️⃣ stocks, it isn’t very diverse.
Why not just buy shares of the ETF, like $DGRO? You can!
However, ETFs generally comes with a management fee or “expense ratio”.
Before buying shares in an etf, google its ticket symbol + expense ratio to see.
In the case of $DGRO, it’s cheap!
For every $1000 you own in $DGRO, they charge you $0.80 cents a year.
Nothing huge.
But some ETFs can charge over a percent! That adds up and cuts into your gains.
So, if you study the top holdings of an ETF you like and the weight of each holding —
You have an option to just buy some of the top holdings and never pay an expense fee!
This can also just be a great tool to see what works for a potential “portfolio” that you might design.
For example, another popular ETF $ARKK has 1️⃣ stock that makes up over 10% of its fund — and is a big part of its success.
$TSLA is 10% of the fund.
And the expense ratio is a big 0.75% ($7.50 for every $1000 you own).
Lastly, even if you just buy ETFs (they make up almost 50% of my portfolio because I’m lazy):
Still study the holdings, weight, and expense ratio.
You could be holding multiple ETFs that basically hold many of the same stocks — making them redundant.
And some could be pricey!
Or, you could be holding one charging you an insane amount for just a few stocks you could buy yourself.
ETFs are both a great investment tool 🔨 AND a great way to study investing 📚
Now that you know how to study them — GO forth, and research!
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Saving money is something you can get better at it the more you do it.
Eventually, you can save money without having to think much about it at all.
Here’s 5 tricks I’ve used to consistently save 50%+ of my income a month:
Number 1
Write it all down. In the beginning you need to understand what you spend and why. How often. On what. That means you need money data.
When I started this I’d carry a pen and small notebook with me and I’d write the date, what I bought, and how much I spent
Number 2
Start talking to your friends and family about saving money. Talk to strangers. Talk to anyone who will talk to you about saving and spending. How much is their cell phone bill? Where’s the cheapest place for groceries? What’s their favorite way to save?
We suck at money because we’re afraid to talk about money. Talk about it with people and you’ll learn what they know.
Here are 5 quick ways to hack your mindset so you’ll spend less and save more
#1: Put a ‘time roadblock’ in front of your spending
I always wait a few days before buying anything new (that’s a want vs need)
Often after a few days, I don’t even want it anymore
Mr. Money Mustache calls this putting stuff in the spending machine to slow it down
#2: Separate wants vs needs (and be honest!)
It’s okay to want something. But it’s not okay to pretend you NEED something you WANT. Basic necessities like food, shelter, clothing, etc. are needs. Most other things are wants.
The Dogs of the Dow is a high yield dividend technique that most investors don’t know about
Its outperformed the stock market in some years, and can be a great way to find high yield dividend stocks
I’ll walk you thru the steps here \\thread\\
At the beginning of the year, the investor picks out the 10 highest yielding stocks on the Dow Jones Industrial Average and invests an equal amount into each
Highest yield refers to the stocks yearly dividend payout percentage compared to its share price
It’s called the Dogs of the Dow because stocks with a high yield are thought of as down on their luck (aka in the doghouse)
But there are be times when stocks go up in dividend yield and are undervalued
Here are the Dogs of the Dow and their dividend yields
50% of my investing portfolio is in index funds/ETFs
This gives me a diversified base to invest from, so worst case I will still have those if my other investments fail
Here are my Top 5 ETFs:
$VTI
THIS is the fund. If I held just one, it’d be this one. It’s vanguards Total US stock market fund.
Owning shares of these mean I own small pieces of every publicly traded company in the United States.
This is a great long term hold with growth and a small dividend.
$VXUS
This is vanguards international fund (basically exposure to the world minus the United States). I hold less of this than VTI (I try to keep it to 20% of my $VTI exposure or less). I hope the US continues to outperform but if not this gives me exposure to the globe.