"When it comes to growing your money, one of the greatest tools at your disposal is time. The more years you give your investments to grow, the more wealth you might end up with. But when you're new to investing, it can be tricky to know which assets to add to your portfolio. For this reason, you may want to favor ETFs, or exchange-traded funds, over individual stocks."
"The Vanguard S&P 500 ETF (VOO) aims to match the performance of the S&P 500 index. The S&P 500 consists of the 500 largest publicly traded companies. The inherent advantage here is that you're getting access to 500 different companies across a range of industries, all of which are larger, established businesses. But there are a few limitations of VOO you should know about."
"First, since it only invests in S&P 500 companies, you're missing out on small and mid-cap stocks. Also, the S&P 500 is a market cap-weighted index, which means the companies with the largest market cap influence it the most. This also means that if a few select S&P 500 companies suddenly lose value, VOO's share price could plummet. Over time, VOO could still be a pretty stable investment, though."
Time amplifies investment growth through compounding, so a long investing horizon increases potential wealth. New investors often favor ETFs over individual stocks to gain exposure to many companies at once and reduce single-stock risk. A 22-year-old with roughly 40 years until retirement should emphasize diversified, growth-focused ETFs. VOO tracks the S&P 500, offering access to 500 large, established companies but excluding small and mid-cap stocks and carrying market-cap concentration risk. VTI covers the total U.S. stock market, providing exposure across companies of all sizes for broader diversification.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]