Over the long run, U.S. equities have provided a sizable return, but short-term volatility may make or break investments in the market and exchange traded funds (ETFs). Investors should invest intelligently to maximize potential gains in U.S. stocks.
Inflation poses a short-term threat to equities, but over the long-term, one can get higher returns owning corporate stocks, writes Mitch Tuchman for USNews.
Tuchman notes four basic ETF investment strategies when looking into U.S. equities:
- The whole market. Investors may own a single ETF that will provide exposure to the total U.S. stock market. For instance, the Vanguard Total Stock Market ETF (NYSEArca: VTI) holds a basket of 1,200 to 1,300 U.S. stocks, which are allocated by market capitalization – larger companies hold a larger weighting.
- Market cap. Another option is to invest by picking out small-, mid- or large-cap equities-based ETFs, such as the iShares S&P SmallCap 600 Index (NYSEArca: IJR), iShares S&P MidCap 400 Index (NYSEArca: IJH), and the S&P 500 (NYSEArca: SPY).
- Value & Growth. An investor may also choose between value or growth stocks if one is so inclined to believe that one area will do better than the other. Examples include: Vanguard’s Small-Cap Value (NYSEArca: VBR), Vanguard’s Small-Cap Growth (NYSEArca: VBK), iShares Mid-Cap Value (NYSEArca: IWS), iShares Mid-Cap Growth (NYSEArca: IWP), iShares Russell 1000 Large-Cap Value (NYSEArca: IWD) and iShares Russell 1000 Large-Cap Growth (NYSEArca: IWF).
- Sectors. The Select Sector SPDRs partitions the S&P 500 into nine sector ETFs. Investors who believe that one sector go above and beyond the rest may invest accordingly.
For more information on investing in ETFs, visit our ETF 101 category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.