Can you retire a millionaire with ETFs alone?
In a nutshell: Yes, ETFs alone are enough to make you rich. With just one investment, you can capture the growth of the overall stock market or a certain segment of it. For example, you can find ETFs that focus on pretty much any industry, investment theme, or region of the globe.
By investing in index funds or exchange traded funds (ETFs), you can achieve millionaire status at a lower price and with less risk. Here's what to look for in an index fund or ETF: Broadly diversified. Look for funds with stocks across a wide variety of industries.
Vanguard S&P 500 ETF
Billionaire investors like Warren Buffett and others are often known for their stock-picking abilities, and for good reason. But it's also important to know that many of the wealthiest investors in the world own exchange-traded funds, or ETFs, as well.
ETFs offer several advantages for IRAs. They often have lower expense ratios compared to mutual funds, which can result in higher long-term returns for your retirement savings.
Tax Implications – The IRS typically taxes covered calls income as short-term capital gains. Moreover, you could experience short-term capital gains if an option buyer exercises your covered call and you have to sell a stock you've held for less than one year.
You can make money from ETFs by trading them. And some ETFs pay out the money the ETF makes to investors. These payments are called distributions.
| Symbol | Name | Dividend Yield |
|---|---|---|
| NFLY | YieldMax NFLX Option Income Strategy ETF | 32.14% |
| AIYY | YieldMax AI Option Income Strategy ETF | 30.87% |
| FBY | YieldMax META Option Income Strategy ETF | 29.34% |
| FBL | GraniteShares 2x Long META Daily ETF | 29.07% |
| ETF | Assets Under Management | Expense Ratio |
|---|---|---|
| Invesco QQQ Trust (QQQ) | $254 billion | 0.20% |
| Vanguard Information Technology ETF (VGT) | $70 billion | 0.10% |
| VanEck Semiconductor ETF (SMH) | $16.3 billion | 0.35% |
| Invesco S&P MidCap Momentum ETF (XMMO) | $1.6 billion | 0.34% |
| Symbol | Name | 5-Year Return |
|---|---|---|
| COPX | Global X Copper Miners ETF | 16.72% |
| XMHQ | Invesco S&P MidCap Quality ETF | 16.71% |
| VUG | Vanguard Growth ETF | 16.57% |
| QTEC | First Trust NASDAQ-100 Technology Sector Index Fund | 16.39% |
Warren Buffett has long recommended the S&P 500 index fund and ETF, and through his holding company Berkshire Hathaway, he also owns two of these types of investments: the Vanguard S&P 500 ETF (VOO -1.36%) and the SPDR S&P 500 ETF Trust (SPY -1.38%).
Why is ETF not a good investment?
What's worse, an ETF's liquidity can be superficial: The ETF may trade one penny wide for the first 100 shares, but to sell 10,000 shares quickly, you might have to pay a quarter spread. Trading costs can quickly eat into your returns.
If you don't want to put a lot of effort into managing your investments, then S&P 500 ETFs are a good solution. But if you're willing to do the work, then you might do even better in the long run with a portfolio of hand-picked stocks (although, the odds are against you).
Key Takeaways. ETFs offer advantages such as low expense ratios, intraday trading, and diversification within a 401(k) plan. They are less popular in 401(k)s due to the traditional prevalence of mutual funds, which are more familiar to participants and have several benefits.
For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes, and of course — like any investment — ETFs also come with risk.
Nearly all leveraged ETFs come with a prominent warning in their prospectus: they are not designed for long-term holding. The combination of leverage, market volatility, and an unfavorable sequence of returns can lead to disastrous outcomes.
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at.
Because of their low cost structure and high quality, Vanguard funds are a great choice for retirement investing. March 14, 2024, at 3:01 p.m.
Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.
Most ETF income is generated by the fund's underlying holdings. Typically, that means dividends from stocks or interest (coupons) from bonds. Dividends: These are a portion of the company's earnings paid out in cash or shares to stockholders on a per-share basis, sometimes to attract investors to buy the stock.
You'll also get some excellent income starting from day one. The Vanguard High Dividend Yield ETF pays out 3.0% annually, or more than double the 1.4% yield you would get from an S&P 500 index fund. So invest $5,000 in the ETF, for example, and you can expect $150 per year of passive income.
What are the top three ETFs?
| Fund (ticker) | YTD performance | Expense ratio |
|---|---|---|
| Vanguard S&P 500 ETF (VOO) | 10.4 percent | 0.03 percent |
| SPDR S&P 500 ETF Trust (SPY) | 10.4 percent | 0.095 percent |
| iShares Core S&P 500 ETF (IVV) | 10.4 percent | 0.03 percent |
| Invesco QQQ Trust (QQQ) | 8.6 percent | 0.20 percent |
| Symbol | ETF Name | 10y Chg 4-2-24 |
|---|---|---|
| XNTK | SPDR NYSE Technology ETF | 457% |
| QTEC | FT Nasdaq 100-Technology Sector ETF | 452% |
| QQQ | Invesco Nasdaq 100 Trust ETF | 452% |
| IGV | iShares Expanded Tech-Software Sector ETF | 425% |
| ETF | Ticker | Assets Under Management (AUM) |
|---|---|---|
| Vanguard S&P 500 ETF | (NYSEMKT:VOO) | $435.2 billion |
| Invesco QQQ Trust | (NASDAQ:QQQ) | $259.6 billion |
| Vanguard Growth ETF | (NYSEMKT:VUG) | $118.8 billion |
| iShares Core S&P Small-Cap ETF | (NYSEMKT:IJR) | $79.8 billion |
Some experts recommend at least 15% of your income. Setting clear investment goals can help you determine if you're investing the right amount.
