Investing in ETFs for dummies by Russell Wild

What you should know and try to remember:

• a “basket” of products
• they tend to represent indexes, but almost any kind of financial products can be included
• all costs incurred are present in the ETFs, as they all have yearly management comission
• you should strive to get the ones with 0.1% or even less
• you should try to trade them with minimum costs, there are companies (Vanguard, Schwab, TD Ameritrade) which will allow you to do just that

Capitalization usuals : large (over 5bn USD) mid (1-5bn USD) small (less than 1bn USD)

Large Growth and Large Value ETFs

• Vanguard Large Cap (VV) 9bps (0.09%) - recommended for smaller portfolios
• Schwab US Large Cap (SCHX) 4bps - tracking Dow Jones US Large Cap 750 Total Stock Market Index
• Vanguard Mega Cap 300 Growth ETF (MGK) 11bps - tracking MSCI US Large Cap Growth Index - should combine with small caps in portfolio
• Vanguard Value Index ETF (VTV) 9 bps - tracking MSCI US Prime Market Value Index 400
• Vanguard Mega Cap 300 Value Index ETF (MGV) 11bps - to be combined with small caps, or use one above

• to avoid: DIA / SPY / PWB

• for everything average, you (should not) consider Vanguard Total World Stock (VT) 17 bps - with a broad scope of index tracking stocks from US and across the world

• Vanguard small caps growth (VBK) 9bps / iShares S&P small cap 600 growth (IJT) 25bps

• consider having a percentage of your investments in outside of country ETFs (in this case US, but adjust accordingly) as a recommended target aim for 40-50%
  • always try to look for instruments with low correlation with the US (or your local) market
  • you can consider currency hedged funds, to dimish a possible impact on currency rates
• Coming up in Chapter 11 (no financial advice books should have this chapter :)) unless it is a lessons learned)
• consider adding Real Estate Investment Trusts (REIT) in your portfolio - they have limited correlation, high dividends, connected to property
• ETFs backed by precious metals (gold, silver) - you can keep some, but not bigger than a couple of percentage
• ideally a portfolio is adjusted to each own’s situation, with varying ratios depending on your risk appetite and available funds
• consider for retiring 20-25x your current yearly spending
• sample portfolio Vanguard Mega Cap MGC 300 - 20% Vanguard Small Cap VB - 20% Vanguard FTSE all world index VSS - 20% Vanguard Total Bond BND - 15% iShares Barclays TIPS TIP - 5%
• portfolio Large cap growth Large cap value Small cap growth Small cap value