- SUMMARY
Investing in a 3 Exchange Traded Fund (ETF) portfolio is a simple yet effective strategy to potentially build wealth over the long term.
This approach involves allocating your investments across three distinct ETF categories: a foundational ETF, a dividend ETF, and a growth ETF.
The foundational ETF serves as the core of your portfolio and should be one that you can hold for the long term.
It provides stability and diversification, typically consisting of a broad market fund such as an S&P 500 or total stock market fund.
Consider Vanguard’s VO or VTI for this category.
The dividend ETF aims to provide cash flow and mitigate risk.
Dividend-paying stocks tend to perform more steadily than growth stocks and generate passive income through dividend payments.
Some top choices include Schwab’s SCHD, Vanguard’s VYM, and iShares’ DGRO.
The growth ETF seeks to capture the potential for higher returns by investing in companies with strong earnings growth potential.
Technology and other rapidly growing sectors are often represented in growth ETFs.
Invesco’s QQQ, Schwab’s SCHG, or Vanguard’s VUG are examples of reputable funds.
Over the past decade, this modernized 3 ETF portfolio has outperformed both the traditional 3 fund portfolio and the S&P 500.
By investing $100,000 in this updated portfolio, you could potentially earn significantly more than with the traditional approach.
To invest in a 3 ETF portfolio, consider the following principles: Choose one ETF for each category to maintain simplicity.
Establish a clear investment goal, such as income, growth, or a combination.
Stay the course during market fluctuations and continue investing regularly to maximize your potential returns.
- Key Takeaways
Diversify with a broad-based ETF
Start with a broad market ETF, like Vanguard’s VO or VTI, to provide a stable foundation and reduce risk.
Seek yield with dividend ETFs
Include a dividend ETF, such as Schwab’s SCHD or Vanguard’s VYM, to generate passive income through dividend payments.
Capture growth potential with the right ETF
Add a growth ETF, like Invesco’s QQQ or Vanguard’s VUG, to your portfolio to gain exposure to companies with high earnings growth potential.