Don't Have Time to Invest? Buy This ETF and Call It a Day.
Key Points
Choosing stocks at random is not a good strategy.
If you don't have the time to put a portfolio together, a broad market ETF could come to your rescue.
The Vanguard Total Stock Market ETF gives you exposure to the broad market at a low cost so you don't have to do a thing.
Life has a way of getting busy. Between work, maintaining your home, and maybe parenting kids or taking care of pets, you may only have limited time to work on building an investment portfolio.
After all, building a portfolio from scratch takes time. You have to decide which companies deserve your money, how much to invest in each one, and whether you're diversified enough across different industries. Even then, there's always the risk that one bad earnings report or unexpected event could send a stock tumbling.
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That's why it's important not to rush the process. Buying stocks without understanding the businesses behind them can lead to costly mistakes. If you don't have the time or the interest to thoroughly vet individual companies, you're often better off taking a simpler approach: buying shares of an exchange-traded fund (ETF) that gives you access to the stock market on a whole.
An easy way to invest your money
If you don't have time to hand-pick stocks, the Vanguard Total Stock Market ETF (NYSEMKT: VTI) could be a solid choice to fall back on. This ETF gives you exposure to virtually the entire U.S. stock market through a single investment.
You'll often hear that maintaining a diverse investment mix is important. With the Vanguard Total Stock Market ETF, that's taken care of. The fund holds thousands of stocks -- from tech giants to midsized players to small companies trying to make a name for themselves. That diversification can help protect you from company- or sector-specific declines.
What to know before you invest
While the Vanguard Total Stock Market ETF simplifies investing, it's not risk-free. Remember, you're putting your money into the stock market -- all of it. So there's bound to be volatility.
If you're investing over the course of decades, near-term declines don't have to be a problem. But if you're the type to sell in a panic when your portfolio loses value, then this may not be an optimal investment for you.
Also, remember that the Vanguard Total Stock Market ETF focuses on U.S. companies. If you want exposure to international stocks, you'll need to branch out.
But if you're looking for an easy way to build a diversified portfolio without spending countless hours researching individual stocks, the Vanguard Total Stock Market ETF is probably worth a look. And like many Vanguard funds, it offers a low expense ratio of just 0.03%, which means you can put your money to work without facing hefty fees in exchange for that convenience.
Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.