Got $1,000 burning a hole in your pocket and don’t know where to put it? I wish I had that problem. All jokes aside, consistently reinvesting spare cash after your expenses are paid for and emergency fund is maxed out is a great way to build wealth long term.
However, picking and choosing what to invest it in isn’t always good. Should you pick dividend stocks? Maybe a GIC? Growth stocks? Bitcoin? Meme stocks? Online, you’ll hear a variety of opinions, most of which are not looking out for your best interests.
At the end of the day, how you choose to invest should be based on your risk tolerance and objectives –how much you’re willing to potentially lose, and what you’re planning to use the money for. Here’s what I would personally invest in with $1,000.
Diversify, diversify, diversify
I love diversification – it’s literally the only free lunch in investing. Done right, you can decrease your risk without impacting returns too much.
The stock market is confusing and unpredictable, and contrary to what people might tell you, the majority of investors cannot outperform it consistently over time.
Therefore, I invest under the assumption that I have absolutely no idea which individual stock, industry, market cap size sector, style, or country will outperform.
I don’t make bets on growth stocks vs value stocks, small-cap stocks vs large-cap stocks, U.S. stocks vs Canadian stocks, or energy sector stocks vs tech stocks.
Logically, my own solution in this case is to invest in the world’s total market-cap-weighted stock market. Thankfully, there’s an exchange-traded fund, or ETF, just for that.
Buy the world (minus Canada)
My ETF of choice for a $1,000 investment that I could set-and-forget is the Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC). For a 0.22% expense ratio, you receive exposure to over 10,000 stocks from every market in the world except Canada.
VXC is as diversified as it gets. Right now, 60% of it is in the U.S. as that country has outperformed over the last two decades. As the composition of the global stock market changes over time, VXC will change as well, making it a great low-cost, passive way to index the world.
I picked VXC because I know many of the Fool’s readers like to pick and choose Canadian dividend stocks. Because VXC lacks Canadian stocks, using it as the core of your portfolio is a great way to build a solid base, while generating some income with Canadian dividend stocks. For great Canadian dividend stocks to pair with VXC, check out some of the Fool’s recommendations below!