Ordering takeout for dinner seems like a simple option because it involves no grocery shopping or meal prep. But before you can set the table, you have to make some decisions. Narrowing your choices may be difficult in the moment (after all, you’re hungry), but the appeal of a ready-to-eat meal makes it worthwhile. The same is true for choosing an investment.
The 3 questions you ask and answer before ordering takeout can also help you choose an investment.
1. What do I want?
When you’re thinking about investing, the answer’s pretty straightforward. There are 3 major asset classes, and each has a different objective.
Let’s say you’re seeking long-term growth, and you’re comfortable knowing that means you may experience more ups and downs in the value of your investment. If so, you probably want to invest in stocks.
2. What should I get?
Maybe you decide you want pizza. But what kind of pizza? You face the same type of decision when selecting stocks.
Individual stocks allow you to own a piece of a company. There are thousands of options to choose from. You can pick stocks based on your own criteria, which allows you to focus on specific companies or sectors.
A stock mutual fund gives you access to hundreds (or even thousands) of stocks in a single fund. You can choose an actively or passively managed mutual fund, and you can invest in the total U.S. or international stock market or just a slice of it.
A stock ETF (exchange-traded fund) also gives you access to hundreds (or even thousands) of stocks in a single fund. Similar to mutual funds, you can invest in an ETF that represents the total U.S. or international stock market or just a slice of it. You can invest in an ETF for the cost of a single share, which is generally much less than the minimum investment for a mutual fund. ETFs are priced throughout the day, giving you the flexibility to make intraday trades.
If you have only a few hundred dollars to invest and like the idea of building a diversified portfolio with just a few funds, a stock ETF could be a good way to get started.
Why choose a Vanguard ETF?
- Vanguard is the only place you can buy and sell every Vanguard ETF® commission-free, regardless of how you trade.
- 81% of Vanguard ETFs® beat the returns of their peer-group averages over the past 10 years.*
- The average Vanguard ETF expense ratio is 75% less than the industry average.**
- Investors have entrusted $1.6 trillion of their hard-earned money to Vanguard ETFs.***
*For the 10-year period ended December 31, 2020, 41 of 51 Vanguard stock ETFs and 10 of 12 Vanguard bond ETFs—for a total of 51 of 63 Vanguard ETFs—outperformed their Lipper peer-group average. Results will vary for other time periods. Only ETFs with a minimum 10-year history were included in the comparison. Source: Lipper, a Thomson Reuters Company. The competitive performance data shown represents past performance, which is not a guarantee of future results. View ETF performance.
**Vanguard average ETF expense ratio: 0.06%. Industry average ETF expense ratio: 0.24%. All averages are asset-weighted. Industry average excludes Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2020.
***As of January 31, 2021.
3. How do I get what I want?
Pick up or delivery? Pick your own ETF or choose one from a short list?
Ready to choose a Vanguard ETF?
The individual ETFs you select should complement your target asset allocation. You can select an ETF from our full list of dozens of funds categorized by market capitalization. Or you can choose one or more of our building block ETFs, which represent different sectors of the total market. You can also choose an ESG fund, which offers you a way to invest in ETFs that consider environmental, social, and governance issues.
After weighing all your options, you decide to invest in a building block ETF—Vanguard Total Stock Market ETF. And for dinner? A thin-crust pepperoni pizza, delivered.
For more information about Vanguard funds, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedules for full details. Vanguard ETF Shares are not redeemable directly with the issuing fund other than in very large aggregations worth millions of dollars. ETFs are subject to market volatility. When buying or selling an ETF, you will pay or receive the current market price, which may be more or less than net asset value.
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in stocks and bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.
There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
ESG funds are subject to ESG investment risk, which is the chance that the stocks or bonds screened by the index sponsor for ESG criteria generally will underperform the market as a whole or that the particular stocks or bonds selected will, in the aggregate, trail returns of other funds screened for ESG criteria."If you can order takeout, you can choose your next investment",