SlateStone Wealth partner and chief market strategist Kenny Polcari offers his perspective on the markets, Federal Reserve policy and oil prices on 'Mornings with Maria.'
As a parent, one thing I often try to instill in my children is the importance of hard work. Study a little for the test, and you might walk away with a 95. Read more, and you can get 100 instead.
I'm not someone known for hard work either. There's a reason I spend 40 or more hours a week at my desk as a freelance writer when I can barely work. I'm a big fan of pay.
But when it comes to investing, I happen to think it's okay to be a little lazy.
A portfolio that includes mid-cap and large-cap stocks provides balance. (Michael Nagle/Bloomberg via Getty Images)
While some investors spend hours each week analyzing their portfolios and selecting stocks to meet their long-term savings and retirement goals, others may choose a more hands-off approach. And I think it's great to find a lazy person's ETF, or exchange-traded fund, that you can put money into regularly and call it a day.
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There is one ETF in particular that I really like this approach. And if your goal is to grow your money without putting in much effort, you might want to add it to your portfolio.
How the Vanguard Total Stock Market ETF lends itself to “lazy” investing.
The Vanguard Total Stock Market ETF is ideal for lazy investing because it provides broad market exposure in a single fund. As the name suggests, when you buy shares of the Vanguard Total Stock Market ETF, you are effectively investing in thousands of US companies in many industries and markets.
The last point is important. Exposure to large-cap, mid-cap and small-cap stocks is important because each category plays a different role in a diversified portfolio.
| A ticker | Security | Finally | Change | Change % |
|---|---|---|---|---|
| VTI | VANGUARD TOTAL STOCK MARKET ETF – USD DIS | 369.36 | -0.10 |
-0.03% |
Large fund companies are usually stable businesses with a proven model. Some may be ready for steady growth, while others may have a long history of paying and increasing dividends. These companies can offer the benefit of consistency and may hold up better during periods of market volatility.
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Mid-cap stocks, meanwhile, are usually companies that are still growing but have reasonably established businesses. They can provide a good balance between stability and growth potential.
Finally, small stocks tend to be companies that have not yet been established. That can be a mixed bag. Smaller stocks may carry more risk, but they also offer more growth opportunities.
A portfolio of only small stocks can be risky. But a portfolio that includes mid-cap and large-cap stocks provides balance.
With the Vanguard Total Stock Market ETF, you don't have to rack your brain trying to come up with the right allocation to all the large, mid-cap and small-cap stocks. The bag itself does it for you. And if you stick with it for a long time, you will likely come back with strong returns.
A BEGINNER-FRIENDLY ETF PORTFOLIO THAT REQUIRES ALMOST MAINTENANCE AND DELIVERS LONG-TERM RESULTS.
ETFs can trade at small premiums or discounts to the value of their underlying assets. (Spencer Platt/Getty Images)
Over the past 10 years, the Vanguard Total Stock Market ETF has generated an average return of 295%. And the cost of this very simple strategy is just 0.03% expense ratio, which is pocket change compared to the 0.72% expense ratio found in all similar funds.
There is nothing wrong with being simple
You might think investing in the Vanguard Total Stock Market ETF takes the easy way out. However, it is. And if your goal as an investor is to beat the market, this is not the way to do it.
But if you're happy with the idea of your portfolio mimicking the returns of the broader market, there's nothing wrong with bypassing the pressure to pick individual stocks and going back to a broader market ETF instead. And perhaps no fund fits that bill better than the Vanguard Total Stock Market ETF, especially if your goal is to combine the simplicity and protection that comes with having a diversified portfolio.
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Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a policy of disclosure.
