ETFs (Exchange-Traded Funds) have revolutionized investing. They're how most smart investors build wealth today.
"My financial advisor had me in expensive mutual funds for years. When I switched to low-cost ETFs, I saved over $3,000 per year in fees—money that now compounds for MY retirement, not theirs."
What Is an ?
An ETF is a basket of investments (stocks, bonds, or other assets) that you can buy and sell like a single stock.
Think of it like a variety pack:
- Instead of buying 500 individual stocks
- You buy one ETF that holds all 500
- Instant in a single purchase
ETFs vs. Other Investments
| Feature | Individual Stocks | Mutual Funds | ETFs |
|---|---|---|---|
| Diversification | None | High | High |
| Trading | Anytime | End of day | Anytime |
| Minimum investment | Price of 1 share | Often $1,000+ | Price of 1 share |
| None | 0.5-2% | 0.03-0.5% | |
| Tax efficiency | You control | Poor | Good |
Types of ETFs
Index ETFs (Most Popular)
Track a market index like the S&P 500
- VTI - Total US
- VOO - S&P 500
- VXUS - International Stocks
ETFs
Hold bonds instead of stocks
- BND - Total US Bond Market
- VTIP - -Protected Bonds
Sector ETFs
Focus on specific industries
- Technology, healthcare, real estate, etc.
- More concentrated = more risk
Pro Tip
For most people, a simple portfolio of 2-3 broad index ETFs beats complicated strategies. Don't overthink it.
The Power of Low Fees
Expense ratio = the annual fee charged by the fund
| Fund Type | Typical Fee | Cost on $100k Over 30 Years |
|---|---|---|
| Actively managed | 1.0% | $57,000 |
| Average ETF | 0.20% | $12,000 |
| Vanguard/Fidelity index ETF | 0.03% | $1,800 |
Watch Out
A 1% fee sounds small but costs you HUNDREDS OF THOUSANDS over a lifetime. Fees are the biggest drag on returns.
How to Buy ETFs
- Open a brokerage account (Fidelity, Schwab, Vanguard)
- Deposit money
- Search for the ETF ticker (e.g., "VTI")
- Buy shares like you would a stock
- Hold for the long term
Most brokerages now offer commission-free ETF trading.
Building a Simple ETF Portfolio
The "Three-Fund Portfolio":
- US Stocks (VTI): 60%
- International Stocks (VXUS): 20%
- Bonds (BND): 20%
Adjust bond percentage based on age—more bonds as you get closer to retirement.
Quick Win
If you have a 401k or , check if it offers low-cost or ETFs. Switch from expensive actively managed funds if possible.