Disclaimer: As the subtitle suggests, I’m not a professional financial advisor, and nothing you read here should be considered financial advice. Always do your own research and make your own financial decisions, or consult with an accredited professional before taking action.
Once again, the stock market is in the tank. Rising gas prices, and the cost of consumables, have conspired to whittle away at stock prices, while rampant inflation is further destroying the value of the actual dollars we hold.
There’s only really two ways of looking at this situation: With fear, or with patience. As we know from looking at history, no matter how great the fall, the markets always bounce back. It’s just a question of how long it will take for them to do so. Fear will tell us that they won’t bounce back fast enough, and we’ll be forced to live in poverty. Patience will tell us that this is a fantastic time to make money in the market, by buying assets at a deep discount, with increasingly less valuable money. Then, when the market inevitably roars back to life, and inflation comes back to manageable levels, your cheap stocks, bought with cheap money, will look a lot better and rosier than they do now.
I understand that a lot of you reading this don’t have any sort of sizable cash reserves to dump into the market right now. We’re all stretched thin financially right now. But, any money you can put into the market right now is better than doing nothing at this time. So, if you were to ask me, here’s what I would do if I only had an extra $50 a month to invest:
Buy Index ETFs
An Index Exchange Traded Fund (ETF) is the best, easiest, and most sensible thing you can do with small amounts of money each month. You don’t need the $3-5,000 minimum investment with an ETF. You also don’t need to pay hefty management fees for an ETF. You can create a free account on a number of different services (Robinhood, M1 Finance, or Schwab’s online platform are my personal favorites) and begin putting your money to work instantly.
While $50 a month won’t make you a millionaire anytime soon, even an amount as small as that will have a snowball effect over time. The problem is that there are thousands of ETFs out there, and hundreds of Index Fund ETFs, so how do you know which one to choose? Well, again, if it were me, here are my top 5 picks right now, based on historical performance, and positioning in the current market:
Vanguard S&P 500 ETF (Ticker: VOO)
An excellent fund, managed by the company that literally invented index funds, with a strong track record, and excellent positioning. You really can’t do better than VOO for exposure to the S&P 500.
Vanguard Total Value ETF (Ticker: VTV)
For those looking for less growth (and corresponding risk) and more predictable income, VTV is a great option. As the world markets shift from extreme growth orientation and shy away from flashy, but volatile tech stocks, the companies that form the bedrock of civilization are having their shining moment.
Schwab US REIT ETF (Ticker: SCHH)
Real estate bridges the gap between growth and value beautifully. The sector is projected to do very, very well in 2022 and beyond, and it pays out some of the highest dividends in the market, for those seeking income as well as growth.
Vanguard FTSE Emerging Markets (Ticker: VWO)
For those looking for a little more risk, and potential upside, emerging markets are coming back into vogue. After the upheaval and turmoil of the last two years of pandemic life, the emerging markets sector is starting to bounce back, although it’s still sharply discounted from pre-pandemic highs, making it an excellent time to get in.
Invesco DB Commodities Index Tracking Fund (Ticker: DBC)
Invesco’s commodities fund tracks the big boys of the commodities world, including oil, corn, wheat, precious metals, and natural gas. This is the play to make if you’re looking for exposure to the things that make society function. While it’s riskier than some other potential buys, a 2 year ROI of 126% drowns out a lot of other arguments.
There you have it. Simple, repeatable, immediately actionable steps that would be my first moves if I were trying to break into the market at this time. Even with only small amounts of money, any one of these five ETFs has the potential to make you considerable amounts of money over time. Just remember, time in the market always beats timing the market.