When it comes to new investors, exchange-traded funds (ETF) are some of the best places to start. That’s mainly because these ETFs provide you with a portfolio of stocks, all chosen with a specific goal in mind, and by a group of professionals.
But just because you decide you want to invest in an ETF doesn’t mean the choice is a simple one. That goal could be investing broadly in the TSX. It could be looking at tech companies. It could be foreign investments, bonds, heck, even cryptocurrency! But if you’re new with just $500 on hand, here is what I would consider.
Think it through
If you want to invest in a top ETF, there are many points to consider. Let’s say you’re going to take that $500 and just put it into one ETF with the goal of creating passive income through returns and dividends. That means you want to have a solid ETF with top-notch performance, not those riskier options out there.
To get a solid performer, think about low cost and diversification. An ETF may invest in a lot of stocks, but that doesn’t mean it’s diverse. That’s why investing in a bunch of tech stocks or even a bunch of bank stocks may not be the best option. Instead, consider diversification in terms of sectors, sure, but also currencies, countries, market capitalization, all of it.
However, you also don’t want to be paying too much in management fees. These can seriously add up and can really take away from your overall goals — especially if you’re considering investing just $500. You also want ETFs that offer passive income that can really push forward your cash and use it to reinvest right back into the ETF itself.
A strong option
If you’re looking for a strong ETF then, I would consider Vanguard FTSE Canada All Cap Index (TSX: VCN). This ETF is well diversified, investing in a slew of Canadian companies across all market capitalizations. It offers low costs with 0% in net management fees, as it’s not an actively managed fund.
The company also provides you with a solid dividend yield, currently at 3.18%. That’s large enough that you can continue to take it out and reinvest it but not so high that you need to worry that perhaps shares aren’t doing so well.
Then, of course, there’s its performance. VCN ETF has grown by about 8% in the last year, seeing a huge amount of growth in the last few months alone. While that isn’t huge growth by leaps and bounds, again, it’s solid growth you can likely look forward to year after year.
Bottom line
There are a lot of ways to invest, but if you’re looking for stability, income and growth, then the VCN ETF is a strong option these days. You get the diversification of a strong ETF, with large investments across the board. With very little risk and a whole team of portfolio managers at your fingertips, it’s certainly a strong option to consider with just $500 on hand.
