If you don't yet have any investing experience, you might be wondering how to get started on the right foot. You may not be ready to sit down and start picking individual stocks, a task that requires some time -- especially if you're a novice. Yet you'd like to benefit from the gains of today's market leaders, and you like the idea of collecting passive income through dividends too.
Well, I have some fantastic news for you. You can gain access to all of this in the blink of an eye and without a minute of research -- even if you're an absolute beginner. And this is through investing in an exchange-traded fund (ETF) that tracks U.S. companies known for growing their dividends. The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) does the job, mimicking the performance of the S&P U.S. Dividend Growers Index, an index that includes companies that have lifted their dividend for at least 10 straight years.
Let's find out more about this way to put you as a newcomer on the fast track to investing success.
Image source: Getty Images.
What are ETFs?
So, first, let's talk a little about ETFs. They are funds that own a variety of stocks corresponding to a particular theme, such an industry, index, or investment style. They trade continuously throughout the trading day just like individual stocks, so you can buy them as you would a stock.
The one main difference between stocks and ETFs is ETFs have fees, and this is expressed through the expense ratio . You'll want to go for an ETF with an expense ratio of less than 1% in order to preserve your overall return. The Vanguard Dividend Appreciation ETF fits the bill as its expense ratio is only 0.06%.
Now, let's consider this dividend fund and why it's so attractive for a new investor. As mentioned, it offers you access to some of today's top performing stocks and at the same time guarantees you a stream of passive income . A great idea is to invest in this fund now, and as you research various companies and industries and gain more investing experience, progressively add individual stocks to your portfolio. This should result in a diversified well-thought-out portfolio that could grow wealth over time.
A well-diversified investment
Today, information technology stocks are most heavily weighted -- at 24% -- in the Vanguard Dividend ETF, with Apple , Broadcom , and Microsoft as the top three holdings. But the fund includes nine other industries with a broad range of market values -- from large cap to small cap -- making it a well-diversified investment. Financials, healthcare, industrials, and consumer staples also are weighted in the double digits.
Of course, these weightings can change according to stocks entering or exiting the fund. The S&P index of reference and therefore the ETF periodically adjust to ensure all stocks fit the investment theme. This model has proven itself over the long term, as the index has climbed nearly 68% over the past five years.
Now, speaking of time, above, I say this investment could put you on the fast track to success -- this doesn't mean it will deliver wealth to you overnight. It's important to remember that the best way to invest is for the long term, meaning at least five years but typically around a decade or more. This offers the company -- or group of companies if you're buying an ETF -- time to grow and you the opportunity to benefit from the various milestones along the way.
Key elements for long-term success
So, when I say "fast track" I mean the Vanguard Dividend fund will offer you key elements for long-term success -- dividend growth and exposure to many solid companies -- through just one simple purchase. But you'll want to hold onto the investment for the long haul to potentially maximize your winnings.
The Vanguard Dividend fund represents a great first step into the world of investing, but that doesn't mean it's only right for newcomers. Seasoned investors too may consider adding shares of this top ETF to their portfolios to gain access to a number of leading companies, smaller quality players, and guaranteed passive income growth.
Should you invest $1,000 in Vanguard Dividend Appreciation ETF right now?
Before you buy stock in Vanguard Dividend Appreciation ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Dividend Appreciation ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $845,679 !*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of October 14, 2024
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Vanguard Dividend Appreciation ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
Local News
Comments / 0