I’d encourage beginner investors to get started as soon as humanly possible. Of course, there’s a lot of chatter out there that tells you to buy at the low and sell at the high. It’s a pretty easy rule to go by, isn’t it? The problem is that nobody, not even the best investors on Earth, has any idea where stock markets are headed tomorrow, next week, next month, heck, even a year from now. Black swan events that nobody saw coming could easily derail a thesis.
On the flip side, profound generational tailwinds, like what’s going on with generative artificial intelligence (AI) right now, may also act as positive surprises for the global economy. Indeed, many of us had no idea that AI would be right around the corner when the pandemic struck way back in 2020.
The AI surge is booming. So are stocks. So, don’t time the market.
Fast-forward to today and the AI surge is alive and well. Once again, the top GPU maker is pulling a rabbit out of a hat with massive growth numbers topping the average Wall Street analyst’s expectations. I have no idea where the generative AI boom goes from here. Regardless, I do think it sweetens up the long-term thesis for many stocks, including those in traditional, old-school industries.
Who couldn’t use a bit of a cost saver at a time like this, when the world is healing from the heavy hit of the pandemic and the years of inflation that followed?
Though I’m a big bull on AI, I also acknowledge that stocks could bake in far too much hype surrounding the technology. That’s why I continue to stand by modest valuations in even the fastest growers.
Of course, higher multiples may or may not be worth paying for. Regardless, new investors should stick with what they know in this environment and not seek to buy stocks at any price. As the great Warren Buffett once put it, looking at the price of a stock is not investing!
Starting out? Keep things simple!
In this piece, we’ll strive to keep things short and simple. We’ll dig into a top exchange-traded fund (ETF), which new investors can get started with today. In short, ETFs are like a mutual fund (a basket of stocks) that trade publicly on exchanges such as the TSX Index.
Indeed, you don’t need to rush in or rush out because, with the following investment, you’ll be able to expose yourself to the overall American economy. Although I’m not against betting on Canadian index ETFs, I’d much rather opt for a U.S.-focused one that tracks the S&P 500.
Why?
There’s greater diversification and more AI upside to be had from the firms down south. As you grow your wealth, I’d definitely urge you to consider adding some exposure to Canadian stocks, however.
Keeping it simple with an S&P 500 ETF
For now, let’s keep it simple with the Vanguard S&P 500 Index ETF (CAD-hedged) (TSX:VSP). It’s one of the better S&P 500 index ETFs out there, with an absurdly low management expense ratio (MER, or the fee you’ll pay to the fund’s managers for their passive (or hands-off) services) of 0.08%.
The hedging portion makes it such that fluctuations between the U.S. dollar and Canadian dollar are taken out of the equation. Indeed, given how weak the loonie has been of late, hedging may prove wise, especially if Canada’s dollar can regain some of the ground lost to the greenback in recent years.
So, there you have it, a quick and easy way to expose yourself to 500 companies at the lowest cost possible. For new investors, I’m a big fan of the VSP, and its like.
