Simple Stock ETF Plays for Big-Picture Investors

Stocks, index ETFs, and commodities have been relatively muted in light of the shocking scenes out of Afghanistan after Taliban fighters took over Kabul, the Afghan capital on Sunday. President Ashraf Ghani fled the country the country, along with American and international diplomats worried over retaliation in the new regime.

President Joe Biden expedited 5,000 troops to Kabul to secure the airport and assist in the withdrawal of American diplomatic personnel, while the Pentagon authorized an additional 1,000 troops Sunday.

“It’s a terrible situation for those U.S. folks who are still there,” J.J. Kinahan, chief market strategist at TD Ameritrade, told MarketWatch in emailed comments on Sunday.

But despite the tragic chaos, a number of analysts are reminding investors that the stock and commodity markets don’t always react to world events the individuals  might expect.

“As far as the markets go, we’ll have to wait and see on the longer-term implications,” he said.

To be sure, two of the three major benchmark stock indexes, the Dow Jones Industrial Average and the S&P 500 are essentially breakeven on the day coming into the last hour of trading on Monday.

Meanwhile, the major stock ETFs are also mixed Monday. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY) are both trading near flatline, while the Invesco QQQ Trust (QQQ) is showing modest losses.

According to Ben Carlson, portfolio manager at Ritholtz Wealth Management LLC, the market’s reaction to the possibility of military tensions may be contrary to expectations.

Carlson has said in the past, in response to the market’s reactions to war, that “markets don’t always respond to geopolitical events the way you think.”

The comment is sage advice for both veteran investors and newbies who may be interesting in dipping their feet into stock and index ETFs, given the stellar performance of stocks in recent years.

For investing legend Charles Ellis, author of the book “Winning the Loser’s Game,” the key to investing is not to complicate things.

“Most of us do way too much decision-making about investing,” he told CNBC contributor Jenny Harrington in an interview for CNBC Pro (Harrington is CEO of New Canaan, Connecticut-based Gilman Hill Asset Management).

“Fewer instructions works better,” added Ellis, an advocate of passive investing in assets like index funds, over active investing. “Fewer decisions work better.”

Other experts agree.

“This is the age of distraction,” said Alford-Cooper, who is vice president of planning at Glen Echo, Maryland-based Law & Associates. “In your mind, you need to stay away from the noise and stay focused and disciplined about the things you can control.”

For those who have stood on the sidelines during the recent stock run-up, or for those who have taken a break and are now just re-entering the stock market, Ellis advises starting simply.

“It’s a little bit like ‘how do you start eating ice cream?’” said Ellis, founder and former managing partner of Greenwich Associates. “You start eating vanilla, and plain vanilla would be either the total market index or the Standard and Poor’s 500 Index, which represents a very substantial fraction of the total market.”

While index ETFs are relatively quiet on Monday, they have continued to track stocks higher in the low-volume summer trading, assisted by robust quarterly earnings reports. However, investors remain leery of the explosion in coronavirus cases and the more transmissible delta variant, as well as geopolitical uncertainty, heightened inflation, and a possible termination of the Federal Reserve’s asset-purchase program by mid-2022.

“Although we had a generally great earnings season this past quarter, we may be past the peak of recovery,” said Sean Sun, portfolio manager at Thornburg Investment Management, who is buying stocks tied to digital transformation themes. “The market kind of sees the storm on the horizon — delta flare ups everywhere and weak consumer confidence.”

For investors looking at potential ETFs that keep things “simple,” there are a number of options besides SPY, DIA, and QQQ.

The iShares Core S&P Total U.S. Stock Market (ITOT) offers an extremely low fee structure and broad exposure to a robust portfolio of more than 3,000 stocks. The underlying index essentially is created by combining the S&P 500 with popular small cap (600 stocks) and mid cap (400 stocks) indexes.

The Vanguard Small Cap ETF (VB) is an option that focuses on small cap stocks for slightly more aggressive investors. This particular ETF, since it focuses on both value and growth securities, could provide more of a diversified play than products that just focus on “growth” or “value” securities within this segment.

Finally, the Schwab U.S. Large-Cap Growth ETF (SCHG) is a good choice for growth-oriented investors looking to use ETFs for investing. It is worth keeping in mind that about 37 percent of the ETF is allocated toward tech stocks, however.

For more market trends, visit  ETF Trends.