Best ETFs for Beginners and How to Invest

1. Vanguard S&P 500 ETF (VOO -0.91%): Large U.S. companies (The S&P 500 is often regarded as the best benchmark for the overall U.S. stock market).
2. Schwab U.S. Mid-Cap ETF (SCHM -1.72%): Midsize U.S. companies between those included in the S&P 500 and Russell 2000.
3. Vanguard Russell 2000 ETF (VTWO -1.73%): Smaller U.S. companies (The Russell 2000 is the most widely followed small-cap index).
4. Schwab International Equity ETF (SCHF -3.54%): Larger non-U.S. companies.
5. Schwab Emerging Markets Equity ETF (SCHE -3.53%): Companies from countries with developing economies, also known as emerging markets.
6. Vanguard High-Dividend Yield ETF (VYM -1.15%): Stocks that pay above-average dividends, mostly large-cap stocks.
7. Schwab U.S. REIT ETF (SCHH -0.60%): Real estate investment trusts (REITs), which own properties and tend to pay high dividends.
8. Schwab U.S. Aggregate Bond ETF (SCHZ -0.09%): Bonds of all different varieties and maturity lengths.
9. Vanguard Total World Bond ETF (BNDW -0.17%): Includes international bonds and U.S. bonds of various lengths and maturities.
10. Invesco QQQ Trust (QQQ -1.07%): Tracks the Nasdaq-100 index, which is heavy on technology companies and other growth stocks.

You may notice that this list is heavily weighted towards Vanguard and Schwab. There’s a good reason — both are dedicated to offering easy access to the stock market at a minimal expense, so ETFs from both tend to be among the cheapest in the business.

Strategies for investing in ETFs

Before you start buying ETFs, there are a few strategies you may want to consider:

• Dollar-cost averaging: This refers to incrementally buying shares at set intervals over time. For example, instead of investing $10,000 all at once, you might invest $500 on the 1st day of each month until you’ve invested all your money. This way, you’ll buy more shares when the ETF is cheap and fewer when it’s more expensive.
• Asset allocation: The Rule of 110 says that by subtracting your age from 110, you can determine how much of your assets (percentage) should be in stocks, with the remainder in fixed-income investments. ETFs can help you achieve and maintain a proper asset allocation.
• Invest in the right accounts: High-dividend ETFs and fixed-income ETFs can be an ideal fit for retirement accounts like IRAs, while growth-oriented ETFs can be best-suited for standard (taxable) brokerage accounts.

Let your ETFs do the hard work for you

It’s important to keep in mind that ETFs are generally designed to be maintenance-free investments. Newer investors often have a tendency to check their portfolios excessively and make emotional, knee-jerk reactions to major market movements. In fact, the average fund investor significantly underperforms the market over time, and overtrading is the main reason.

So, once you buy shares of some great ETFs, the best plan is to leave them alone and let them do what they’re intended to do: produce excellent investment growth over long periods of time.