Investing in the stock market is a smart financial decision that can pay off considerably over time. Choosing the right investments, however, is essential to maximizing your income.
Buying individual stocks is one way to invest, but it is not the right decision for everyone. This strategy involves in-depth research of dozens of different companies to determine which stocks are smart investments. While this isn’t necessarily a bad thing, not everyone has the time or interest to invest in individual stocks.
The good news is that there are other ways to invest that are much less research driven. If you are new to the stock market, you can’t go wrong with these three investments.
1. S&P 500 ETF
a S&P 500 The exchange-traded fund (ETF) is an investment that includes all of the same stocks as the S&P 500 Index, and it aims to reflect the long-term performance of the index. Each fund contains approximately 500 stocks of some of the largest US companies, all bundled into one investment.
The S&P 500 ETF is perfect for both new and experienced investors, and this type of investment has many advantages. On the one hand, it includes hundreds of stocks from a wide variety of industries, which offers instant diversification. The more diversified your portfolio, the less risk you run. Even though a few stocks in the fund may not perform well, when you invest in 500 different stocks, those few stocks will not sink your entire portfolio.
There is also a good chance that your investments will recover from market downturns when you invest in S&P 500 ETFs. The S&P 500 itself has been around for decades, and it has faced countless fixes and crashes over the years. of this period. However, he has recovered from everyone, and it is highly likely that he will recover from any future downturns as well.
Where to start : Since all S&P 500 ETFs track the same index, all of these funds are similar in many ways. Some of the more popular S&P 500 ETFs include:
2. Growth ETF
A growth ETF is a fund that contains stocks with the potential for rapid growth. The biggest advantage of this type of investing is that fast growing stocks usually generate above average returns, so you have a better chance of beating the market.
These funds can be slightly riskier, however, as high growth companies can also be more volatile. Fast growing businesses also tend to be younger organizations, and they can sometimes be riskier than more established businesses.
That said, growth ETFs can be a smart addition to any portfolio to help your investments grow faster. You may decide, for example, to invest most of your money in an S&P 500 ETF and then contribute a smaller portion to a Growth ETF to give your savings an extra boost.
Where to start : Each Growth ETF will be slightly different. Some contain only a few hundred stocks of a particular industry (like the tech sector), while others may contain thousands of stocks from multiple industries. Which ETF you choose will depend on your preferences and risk tolerance, but here are some of the more popular options:
3. Dividend ETFs
A dividend stock is an investment that will actually pay off for you to own it. Some companies return part of their profits to shareholders, which is called a dividend. A dividend ETF is therefore an investment that includes many different dividend securities.
The best part about investing in a dividend ETF is that you can gradually create a source of passive income. The more shares of an ETF you own, the more dividends you will receive each quarter or year. If you invest regularly, you could potentially earn thousands of dollars a year in dividends.
Another advantage of dividend ETFs is that you usually have the option of reinvesting your dividend payments to buy more shares of that ETF. It can help you grow your portfolio without having to invest extra money.
Where to start : The best dividend ETFs are those that contain quality stocks of healthy companies. These funds may not pay the highest dividends, but stocks themselves are more likely to perform well over time. Some of the more popular dividend ETFs include:
Going public can be overwhelming, but it’s one of the best decisions you’ll ever make. By investing in one of these ETFs, you will be on your way to building wealth.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.