Start investing today with one of these low-cost index funds.
Investing is cheaper than ever. With exchange-traded funds and mutual funds that offer little to no expense ratios, investors can get the benefit of diversification without having to pay a hefty fee. The only challenge is sometimes you have to make a big buy-in. Many mutual funds have investment minimums of $1,000 to $5,000. ETFs can be less expensive, but even they can have share prices in the hundreds of dollars. What if you only have about $50 to invest? Should you wait until you can double your money before getting started? Absolutely not. Here is a list of low-cost index ETFs for less than $55 (give or take a dollar) to help you start or expand your investment portfolio.
SPDR Portfolio S&P 500 Growth ETF (ticker: SPYG)
You can’t buy growth for much less than SPYG. With a 0.04% expense ratio, you can’t buy much of anything for less than SPYG. The fund tracks the S&P 500 Growth Index, which focuses on the faster-growing side of the S&P 500. Now, given that the S&P 500 is 500 of the largest U.S. companies, and large companies can’t grow as fast as small companies, the growth you’ll see with SPYG isn’t going to be as fast-rising as with a small-cap growth fund. That said, a larger-cap take on growth will be less volatile than one using smaller companies. Plus, if you only have around $50 to invest, a share of SPYG is a lot more affordable than many of the big small-cap growth index funds.
Invesco S&P 500 Low Volatility ETF (SPLV)
Speaking of low volatility, if that’s what you’re after in a low-cost index fund, you should consider the Invesco S&P 500 Low Volatility ETF. SPLV strives for low volatility by picking the 100 least volatile S&P 500 companies over the previous 12 months. It then weights those least-volatile companies by their volatility, so the least volatile of the least volatile have the highest weighting in the portfolio. The result is an S&P 500 index fund that doesn’t experience as sharp of declines. The flip side of that is it also doesn’t reach as high during bull markets. Alas, you can’t have it both ways in investing, so you’ll have to pick your poison: sharper declines or lower upside potential. If you’re OK with the latter, a share of SPLV can be had for a bit more than $50.
Schwab US Large-Cap Value ETF (SCHV)
Value and large-cap tend to go more hand-in-hand than growth and large-cap, and SCHV has leveraged this to create a diversified, low-cost portfolio with low turnover. With the Dow Jones U.S. Large-Cap Value Total Stock Market Index as its guide, SCHV seeks out the cheaper and slower-growing large- and mid-cap stocks in the U.S. market to use in its portfolio. The result is many familiar names, like Johnson & Johnson (JNJ), Procter & Gamble Co. (PG) and JPMorgan Chase & Co. (JPM). Being big and slower-growing, these companies should provide a less volatile investing journey. The fact that they can be had for only a 0.04% expense ratio should only increase value investors’ delight.
Vanguard FTSE Developed Markets ETF (VEA)
The Vanguard FTSE Developed Markets ETF is a great option for investors looking for low-cost, diversified foreign stock exposure. The fund tracks the FTSE Developed All Cap ex U.S. Index, which includes 23 foreign developed markets. Note the use of “developed” here: That means the fund won’t give you exposure to emerging markets like China and India. The upside to this is developed markets tend to be less volatile. The downside is they also have lower long-term growth potential than emerging markets. The fund does include stocks from companies of all sizes, although being market capitalization-weighted means the big guys get a little more space in the portfolio than the small ones. With VEA’s expense ratio of only 0.05% and a share price of just more than $40, it’s easy to add this one to your portfolio.
Schwab Emerging Markets Equity ETF (SCHE)
For that high-growth-potential, emerging-market exposure at rock-bottom pricing, look to the Schwab Emerging Markets Equity ETF. The fund follows the FTSE Emerging Index of large- and mid-cap stocks from 23 developing nations. These include China, Taiwan and India (the three biggest components of the portfolio), but does not include South Korea because FTSE considers South Korea to be a developed market, differing from some other emerging-market indexes. Holding more than 1,500 companies in the portfolio helps mitigate the risk inherent in emerging-market investing. And at less than $28 per share and only 0.11% net expense ratio, it’s easy to wade in slowly should you so choose.
iShares Core Dividend Growth ETF (DGRO)
One popular dividend investing strategy is to look for dividend aristocrats, or companies that not only pay solid dividends, but also have a track record of doing so for many years. This is the approach the iShares Core Dividend Growth ETF takes. It tracks the Morningstar US Dividend Growth Index, an index of U.S. companies with a history of consistently growing their dividends over the past five years. The fund is designed for investors seeking income, but since it uses dividend stocks instead of fixed income for that income, you also have the potential for growth. It has a trailing 12-month dividend yield of 2.5% as of July 31. With an expense ratio of only 0.08% and a share price of around $40, it’s a bargain all around.
Vanguard Tax-Exempt Bond ETF (VTEB)
Morningstar gives VTEB a gold rating as a low-cost option for investment-grade, tax-exempt bond exposure. It tracks the S&P National AMT-Free Municipal Bond Index of investment-grade munis with $25 million face value and at least one month until maturity that are not subject to alternative minimum tax. By using municipal bonds, VTEB protects investors from federal income tax on their interest. The trade-off to that, however, is municipal bonds usually have lower pretax yields than comparable taxable bonds. But if you’re in a high tax bracket or just hate paying taxes and are shopping for low cost, VTEB’s expense ratio of 0.06% is 0.4 lower than the category median, something that’s helped it outperform its category average by 0.28% through the end of 2019.
Inexpensive index funds:
— SPDR Portfolio S&P 500 Growth ETF (SPYG)
— Invesco S&P 500 Low Volatility ETF (SPLV)
— Schwab US Large-Cap Value ETF (SCHV)
— Vanguard FTSE Developed Markets ETF (VEA)
— Schwab Emerging Markets Equity ETF (SCHE)
— iShares Core Dividend Growth ETF (DGRO)
— Vanguard Tax-Exempt Bond ETF (VTEB)
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