Fisher Investments Founder Ken Fisher analyzes the state of the economy and the market on ‘Making Money.’
This time of year welcomes milder weather as well as a newly minted class of college graduates entering the workforce with short- and long-term financial goals. Exchange-traded funds, or ETFs, can be a smart way to diversify a new college grad’s emerging portfolio. Here’s why.
Why ETFs?
ETFs are baskets of securities which investors can purchase and sell on a stock exchange. These investments can offer tax advantages, less risk as well as diversification in portfolios.
“ETFs are a great option for new college grads because of their easy access, low fees, and no minimum on initial investments,” says Bryan Armour, director of passive strategies research for North America at Morningstar. Plus these investments are accessible. “In many ways, ETFs have democratized fund investing; anyone with a brokerage account has access to a litany of investing strategies that cost the same for all levels of investors,” Armour tells FOX Business.
ETFs can help new college grads invest in the stock market in diversified portfolios with little initial capital. (Erik McGregor/LightRocket via Getty Images / Getty Images)
What is a good choice for an ETF for new college grads?
Diversified, low-cost ETFs, says Armour, are among the most reliable long-term performers and should be the building blocks of any new investor’s portfolio that they can build on throughout their career.
“The magic of compounding returns is that investors earn returns on their returns – maintaining a diversified portfolio increases the odds of keeping that train on its tracks, even in volatile markets,” he says. “Concentrated, expensive strategies may work for periods but will ultimately derail.”
What ETFs do the investment experts recommend?
Armour says that an ETF to consider is Vanguard Total Stock Market ETF VTI.
“As Jack Bogle said, ‘Don’t look for the needle in the haystack. Just buy the haystack!’ VTI does just that, giving investors access to nearly 4,000 U.S. stocks for a low price of 0.03% annually,” Armour says.
In addition, he says exposure to international stocks can provide a boost for portfolios when U.S. investments stall. One ETF that fits the bill is iShares Core MSCI Total International Stock ETF, he says.
“It pulls in over 4,000 stocks from around the world, excluding the U.S., and charges just 0.07% annually,” Armour says.
Also worth noting is that ETFs aren’t just index funds.
“Fidelity Total Bond ETF is one of our favorite actively managed ETFs because of its sensible, repeatable approach,” explains Armour. “It holds over 2,000 bonds and charges a relatively low 0.36% annual fee. Bonds tend to be a market where low-cost active managers can be highly effective; investors would be wise to take advantage of their market expertise here.”
Roxanna Islam, associate director of research with VettaFi, also provided some ETF recommendations for new college graduates.
Vanguard 500 Index Fund
“The S&P 500 is the most widely accepted measure of the U.S. stock market, which is one of the most resilient economies in the world,” explains Islam. “This ETF has historically generated positive returns and has a low expense ratio of 0.03%.”
The Vanguard Group headquarters are seen in Malvern, Pennsylvania, U.S., on Friday, Sept. 5, 2003. Vanguard Group is a major supplier of ETFs. (Mike Mergen/Bloomberg via Getty Images) (Mike Mergen/Bloomberg via Getty Images / Getty Images)
Vanguard Total Bond Market ETF
According to Islam, BND provides broad exposure to taxable investment-grade U.S. fixed income. Since many new investors are less experienced with fixed-income investments relative to equities, this ETF can provide an investor with diversified bond exposure without having to select individual bonds, she says.
Islam says that QQQ tracks the Nasdaq-100 Index, which focuses on technology, growth, and innovation stocks.
“This can be a good choice for newer investors who want to add growth and tech exposure to their portfolio, while still sticking to relatively large and liquid holdings,” she says.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
