Younger, more aggressive investors might opt for a fund that holds bargain-priced small-cap stocks, such as Vanguard Small-Cap Value ETF. If you are closing in on retirement and are seeking to boost income through dividend-paying stocks, you might choose SPDR S&P Dividend ETF.
This section includes 32 choices that allow you to craft a more specialized mix. Or perhaps you want to further diversify your portfolio by using alternative assets, such as real estate or commodities. You may prefer to keep a small stake in actively managed funds, for instance, in hopes of earning a bit more return. Even a well-diversified core portfolio may not be enough to meet all of your needs. You should be able to construct a well-diversified portfolio with as few as three or four of the broad-market index funds found in the building-block section.Ĭustom funds. Studies show that most active managers fall short of their benchmarks because of the higher fees, trading costs, and timing errors associated with frequent trading. Why just index funds? Low-cost indexes offer the purest and cheapest exposure to broad swaths of the markets, which you'll want for your core. This category, which contains 14 low-cost index funds and ETFs, is designed to help you assemble your core portfolio, which you're likely to hang on to for years and which represents the bulk of your assets. We reconfigured the list into three broad categories, based on how elaborate you want your portfolio to be.īuilding-block funds.
Rather than grouping funds based on the types of stocks or bonds they own, the new MONEY 50 categorizes funds based on how you might use them.įor instance, do you plan to use them as building blocks for the core part of your portfolio? Or will you hold them in small doses, to customize your strategy?ĭespite those changes, the purpose of the list remains the same: to help you build a balanced portfolio that will get you to your most important financial goals, such as putting your kids through college or achieving a comfortable retirement. In addition to being more concise, the list is organized differently. That is in part why we overhauled the list.
stock funds has beaten this approach over the past five years, raising doubts about whether you need to sift through scores of funds to create a diversified and effective portfolio. ETFs, which are baskets of securities that you can buy and sell throughout the day, are now part of the mainstream.
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