The One ETF That Should Be The Building Block For Your Portfolio

Which ETF belongs in your portfolio?

If you are just starting out, it makes total sense to invest in the entire US market. You’ve got exposure to stocks and diversification all in one package. Except, how does one do that?

SPDR S&P 500, aka SPY, is the most traded ETF by volume and if you own it, you are basically invested in the entire US market. That’s because SPY tracks, or attempts to recreate the performance of the S&P 500, which itself is an agglomeration of the biggest 500 stocks in the US financial market.

VFINX is Vanguard’s first index mutual fund. It started way back in 1976 and it also invests in such a way as to track the S&P 500. It’s got the pedigree, it’s got the history and to round out the bunch, we’re also going to look at the iShares Core S&P 500 – which also follows the S&P 500.

Given these three very similar choices, which one should you go for?

It’s hard to separate one from the other. In theory, they should all be the same as they are tracking the same index but as we all know, the devil is in the details.

Learn About Expense Ratios

Let’s look at their expense ratios to start. They all have expense ratios than are very affordable.  The expense ratio is important because it’s the fee you pay for owning the fund. The lower the expense ratio, the more money you make in the long run.

The average mutual fund has fees between 1.25% and 1.5%. Here’s what you can expect from our contenders.

expense_ratios

The chart above really crystallizes the choice for the investor who needs to pull the trigger. While all the expense ratios are very low, iShares really stands out with an expense ratio of just 0.04%.

If that weren’t enough, the iShares ETF also has the best dividend yield of the three contenders, at 1.83%.

On the weight of the numbers alone, you should probably go for the iShares Core S&P 500 (IVV).

However, you should consider a few other factors because making the final decision. The iShares fund is also different in that it uses derivatives, portfolio lending and other relatively riskier strategies than SPY or VFINX. There’s a little more risk, but potentially also more reward.

The final consideration is that SPY does not immediately reinvest its dividends like iShares. Instead, SPY holds the dividend as cash for a while. With immediate reinvestment, your money has longer to marinate – so to speak.

What about performance?

You might think that SPY, VFINX and IVV would all have the exact same performance as the S&P 500 but it makes sense that it would actually do slightly worse. That’s because these funds have to buy and sell stocks to keep their internal ratios accurate while the S&P 500 is this ideal, frictionless, trading-fee less portfolio.

spy-vfinx-s&p500

Rebased to 100; Jan 2001; source: Google Finance

So really not much to choose from there. Theoretically you can expect each one of these indexes to underperform the S&P 500 by their expense ratios, since that’s the cut that the company is taking versus the S&P 500.

The one ETF that needs to be in your portfolio?

Congratulations, it’s the iShares Core S&P 500.

*** BEST STOCK NEWSLETTER of 2020 ALERT ***

Updated October 15, 2020

At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others--The Motley Fool Stock Advisor.

TWO of Motley Fool's 2020 Stock Picks Have Already Quadrupled, ONE has tripled, and another TWO Have Already Doubled in just 9 months of of 2020!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's 5 years and 120 stock picks. As of Friday, October 23, 2020 the Motley Fool's January 2 stock pick (TSLA) is up 388%, their March 19th pick (ZM) is up 313% in just 7 months, and another two have more than doubled. In addition, 9 of their 2019, 9 of their 2018, 10 of their 2017, 9 of their 2016 and 14 of their 2016 picks have also doubled. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 169%. That beats the SP500 by an average of 124%. And that's even accounting for all of this COVID mess that has wreaked havoc on most stocks. BUT, the Fool has done so well because they have quickly identified stocks this year that will perform well in the post-COVID world. THAT is how the Fool consistently does so well--they adapt and constantly pick stocks before everyone else realizes the opportunities.

  • PINS -- October 1, 2020 pick is already up 19%
  • FVRR-- September 3, 2020 pick is already up 36%
  • CrowdStrike (CRWD) -- June 4, 2020 pick is already up 41%
  • Shopify (SHOP) – April 2, 2020 pick and it is already up 196%
  • Zoom Video (ZM) – March 19, 2020 pick and it is already up 313%
  • DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 35%
  • Tesla (TSLA) picked January 2, 2020 before the crash and it is up 388%
  • HubSpot (HUBS) picked December 5, 2019 and it is up 105%
  • Netflix (NFLX) picked November 21, 2019 and it is up 56%
  • Trade Desk (TTD) picked November 11, 2019 and up 221%
  • Zoom Video originally picked Oct 3 and it is up 565%
  • SolarEdge (SEDG) picked September 19, 2019 and it is up 216%

Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. The important thing about the Fool stock picks is you have to buy them the day they are recommended because they usually pop 5-10% in the first 72 hours after the release their recommendation. So to maximize your returns, you MUST buy them the day they are released. During this POST-COVID market we are in, they have been excellent at picking stocks that will excel. The average return of their 2020 stock picks is +68% which beats the market's return of only 12%. You sure don’t want to risk missing out on their next pick.

Normally the Fool service is priced at $199 per year but they are currently offering a NEW SUBSCRIBER DISCOUNT that allows you to get theiir next 24 stock picks for just $99/year. HERE is the LINK to visit their New Subscriber Discount page.

CLICK HERE to get access to all The Motley Fool’s Stock Picks and their next 12 months of picks for just $99 per Year! 



GET UP TO $1,000 IN FREE STOCK

WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT

Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW (before it’s too late)



Leave a Reply

Your email address will not be published. Required fields are marked *