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5 ETF's For Beginner Investors

|Includes: AGG, VTI, Vanguard Total International Stock ETF (VXUS), XLE, XLF

Once a week a reader will ask me how they can begin investing with a small amount of money.

Typically the money they have available to invest is below 100k; which is the minimum a person needs to invest with me.

I don't want to be rude or discourage them so typically I give them 5 great ETF's they can use to get started.

I finally realized it would be a good idea to list these 5 ETF's on my blog since it is obviously a very popular question.

Here are those 5 ETF's:

Vanguard Total Stock Market (NYSEARCA:VTI) is a good place to begin.

Few investments outperform the stock market over the very long term. Thus, the broad exposure of the Vanguard Total Stock Market ETF assures that you will reap the benefits of that long-term exposure to the entire American stock market.

VTI's top holdings are very similarly to the S&P 500′s, with Apple (NASDAQ:AAPL) and Exxon Mobil (NYSE:XOM) having the greatest weight. But the Vanguard Total Stock Market ETF also has exposure to small- and midcap stocks, which has helped it outperform the S&P 500.

VTI also has a bargain-basement expense ratio of 0.05%, or just $5 annually for every $10,000 invested. The fund's 1.8% in dividends will more than cover the cost.

iShares Core Total U.S. Bond Market ETF (NYSEARCA:AGG) gives your portfolio exposure to the fixed-income area of the investing world via U.S. investment-grade bonds.

The AGG is a fairly conservative fund, with 36% in Treasuries, and 71% of its overall holdings rated AA+ or AAA by S&P. Meanwhile, 65% of the portfolio leans toward the shorter end of the maturity curve at 10 years and under, with the average maturity being a modest 6.78 years.

AGG is a nice, safe bond fund that won't deliver big returns now, but as the Fed eases up on the QE pedal, rates will begin to rise and send AGG higher.

AGG costs 0.08% in expenses and offers a current yield of 2.1%

Financial Select Sector SPDR (NYSEARCA:XLF)

The first three funds will take care of broadening your portfolio; the next two are designed to give you a little concentration in other parts of the market that are ripe with opportunity.

I like the Financial SPDR (XLF).because financial services make the world go round. When you consider that everything humans do involves transactions, and the sheer number of companies that are somehow involved in the chain of financial transactions (the XLF holds roughly 80 of them), you begin to understand why I like this ETF. Financials have their rough times, naturally , but they always recover.

XLF top holdings include stocks such as Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM) at just more than 8% each, but also Berkshire Hathaway (NYSE:BRK.B) - a stock I think you could buy and hold forever - at 7.8%. XLF charges 0.16% in expenses and yields 1.5% in dividends.


I like the other thing that makes the world go around, and that's energy. The world will need oil well past our lifetimes, there is no sign of oil prices cratering, and gasoline prices remain at historic highs.

The Energy SPDR (XLE) is all about oil and natural gas, with its top 10 holdings - representing a pretty hefty 58% of assets - are 10 of the greatest energy companies in the world. We're talking names like Exxon Mobil and Chevron (NYSE:CVX), which as a pair represent almost 30% of the fund's total weight.

XLE yields 1.8% in dividends and matches the Financial SPDR in expenses at 0.16%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.