5 ETF’s every investor should hold. Short answer with pictures.

Hey guys,

What follows is the top five ETFs that every investor should own. These ETFs are great for passive income generation and select brokers allow a DRIP into them. DRIP stands for Dividend Reinvestment Program and it allows you to passively grow positions in major ETFs.

Lets jump right into it.

1.) SPY

The SPDR S&P 500 ETF tracks the Standard & Poor’s 500 Index. This S&P 500 index tracks the 500 largest U.S companies by market cap. By purchasing the SPY you are opening yourself up to long term capital appreciation.

The top 10 largest allocations of the SPY are below.

1. Apple inc.
2. Microsoft
3. Amazon
4. Facebook
5. Alphabet inc. (Google)
6. Alphabet inc class C shares
7. Tesla
8. Berkshire Hathaway
9. JpMorgan Chase
10. Johnson and Johnson

The SPY has consistently set the benchmark for the U.S economy and as such is a great asset to hold on to for the long term.

2.) VTI

Vanguard Total Market Index tracks the performance of the CRSP U.S Total Market Index. VTI differs from SPY because VTI has large, mid, and small cap equity holdings. Think of the SPY as only the top 500 companies while VTI is the total U.S market.

The top ten holdings of VTI are as follows.

1. Microsoft
2. Apple
3. Alphabet
4. Amazon
5. Facebook
6. Berkshire Hathaway
7. JpMorgan Chase
8. Tesla
9. Johnson and Johnson
10. Unitedhealth Group

On the surface level VTI resembles SPY but when we dive deeper we see that VTI has a little less risk than SPY. Because VTI is diversified across the entire market you are less exposed to the top tier companies and have a larger exposure to more sectors. That being said VTI typically has less liquidity and is not as well known as the SPY.

3.) IWR

iShares Russell Mid-Cap ETF. This ETF seeks to track the Russell Mid-Cap index. This index tracks 800 mid cap companies by market cap, or companies whose market capitalization is between $2 billion and $10 billion.

Mid cap companies offer the growth of small cap companies while also having stability and predictable revenue. As such many investors make their returns by investing in these mid-cap companies. With this ETF you can skip the research part.

The top ten holdings in IWR as follows.

1. IDEXX laboratories
2. Twitter Inc
3. DocuSign Inc
4. Roku Inc
5. IQVIA Holdings
6. Marvell Technologies
7. T. Rowe
8. Agilent Technologies
9. Trane Technologies
10. Pinterest

Investing in IWR will give you exposure to up and coming stocks while baking the risk inherent in mid-caps across 800 companies. It’s a good pick and that’s why I hold it.

4.) VT

VT is Vanguard Total World Index. It does exactly what it sounds like, VT aims to track the total world market. It does this by dropping developing economies such as Vietnam and Kuwait and instead invests in companies and assets that directly operate in those areas.

VT is different then other total world ETF’s because of VT’s inclusion of small-cap companies in niche sectors. As such VT covers a much broader scope and is considered by many to be the ideal choice for a safe investment. This is because if VT explodes and drops 50% then you have larger problems then your portfolio, like how to survive the impending economic collapse of the world.

Seeing as how that is not going to happen here are the top 10 holdings for VT.

1. Apple
2. Microsoft
3. Amazon
4. Facebook
5. Alphabet A
6. Alphabet C
7. U.S Dollar
8. JP Morgan Chase
9. Tesla
10. Tencent Holdings

Holding VT will expose your portfolio to other markets besides the United States and minimal risk. Further VT’s inclusion of small caps not only gives you more return but in theory gives you a much better view of what the world’s market is doing. I hold VT.

5.) VB

Going from macro with VT to now micro with Vanguards Small-Cap ETF, VB. VB seeks to track the performance of the CRSP U.S small cap index. There is a massive 1476 stocks that you will be exposed to by buying this ETF. This coupled with the U.S market has resulted in massive gains on capital over the past year at 60%!

This is one of the main reasons you invest in small-cap companies. The economic potential in the form of growth is insane. The hardest part is doing the proper research to pick a good investment. With VB that part is taken care of for you as the CRSP index does all the research. You just invest and make money.

The top 10 largest holdings of VB are as follows.

1. Devon Energy Corp.
2. Novocure LTD
3. IDEX Corp
4. Charles River Laboratories
5. VICI Properties
6. Pool Corp
7. STERIS plc
8. PerkinElmer Inc.
9. Bio-Techne Corp.
10. Avantor Inc.

By investing in a U.S small cap ETF you are exposing yourself to massive upside potential. The fact that VB is built around a proven small-cap index, CRSP, can give you some peace of mind. I hold VB in my portfolio and have made an amazing return over 2020.

Conclusion

There you have it. Holding these 5 ETF’s will give your portfolio a huge backbone that will only grow over time. The only international exposure you get is through VT but even then a majority of the holdings are U.S based companies. Companies which fall under the SEC boot and can be trusted to publish truthful investment reports.

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Until next time, I wish you the best of luck in your investments.

Sincerely,