What ETFs should I buy?

First, let’s break down what this portfolio is. It’s exactly two ETFs, both offered by Vanguard.‎

VT: The Vanguard Total World Stock ETF. It contains 8,849 stocks from around the world, weighted in proportion to the size of the company. (So the most of the biggest company, second most of the second biggest company, etc).‎
BNDW: The Vanguard Total World Bond ETF. It contains 16,332 bonds from around the world. It’s a mix of investment grade treasury, government and commercial bonds.‎

These two ETFs basically cover every sector, country, index, stock, market cap, etc. Buy buying these two ETFs you’re guaranteeing yourself your fair share of the world’s market growth. The younger and/or more aggressive you want to be, choose more VT. The more conservative, choose more BNDW. For example, a 25 year old might choose 90% VT, 10% BNDW.‎

I’m constantly asked questions about specific stocks or sectors. These questions sound like “Should I buy tech stocks”, “Should I buy Tesla”, “Should I buy international”, “Should I buy Nasdaq”, etc, etc. ‎

When you decide to buy into a specific stock or sector, you’re actually making another decision to NOT buy everything else. So when you buy a tech focused fund, you’re deciding NOT to buy biomedical, not to buy energy, not to buy financial, not to buy industrial, etc, etc. And each of THOSE sectors always has the opportunity to produce great growth or outperform expectations and become the NEXT hot sector.‎

The market is very “efficient”. That means each stock and each sector is priced based on all available knowledge. THAT means picking one sector is no more or less likely to outperform the rest of the market than any other sector. So when you do pick stocks or sectors you’re just accepting greater volatility in exchange for no greater expected return. In investing, that’s a bad trade.‎

So keep your investments simple. Buy the entire market at a low cost, like in these two ETFs. If you want to make more money, put more money in and/or let it grow for longer. ‎

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.‎


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