2 No-Brainer Exchange-Traded Funds (ETFs) to Buy With $650 in July | The Motley Fool


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2 No-Brainer ETFs to Buy With $650 in July: A Smart Start for Any Investor
As the summer heat ramps up in July, savvy investors are looking for straightforward ways to put their money to work without overcomplicating things. If you've got $650 burning a hole in your pocket—perhaps from a bonus, a side hustle, or just some disciplined saving—exchange-traded funds (ETFs) offer an accessible entry point into the stock market. ETFs are essentially baskets of stocks, bonds, or other assets that trade like individual shares, providing instant diversification and low costs. In a recent analysis from investment experts, two particular ETFs stand out as "no-brainer" choices for beginners and seasoned investors alike. These aren't high-risk gambles or trendy picks; they're reliable, time-tested vehicles designed for long-term growth. Let's dive into why these two ETFs could be the perfect way to deploy that $650, exploring their compositions, historical performance, and the broader investment rationale behind them.
First up is the Vanguard S&P 500 ETF (VOO), a cornerstone of many portfolios and often recommended as a foundational investment. This ETF tracks the S&P 500 index, which comprises 500 of the largest publicly traded companies in the United States. Think household names like Apple, Microsoft, Amazon, and Alphabet—these tech giants, along with stalwarts from sectors like healthcare, finance, and consumer goods, make up the bulk of the index. The beauty of VOO lies in its simplicity: by buying shares of this ETF, you're essentially owning a tiny slice of America's economic engine. It's diversified across industries, reducing the risk that comes with picking individual stocks. For instance, if one company like Tesla hits a rough patch due to market volatility or regulatory issues, the impact on your overall investment is minimized because it's spread out among hundreds of others.
What makes VOO a no-brainer? Start with its rock-bottom expense ratio of just 0.03%, meaning for every $10,000 invested, you pay only $3 annually in fees. That's incredibly cost-effective compared to actively managed mutual funds, which can charge 1% or more. Over time, those low fees compound into significant savings, allowing more of your money to grow. Historically, the S&P 500 has delivered average annual returns of around 10% over the long term, including dividends. Of course, past performance isn't a guarantee of future results, but this track record has weathered recessions, booms, and everything in between. For someone with $650, you could buy several shares of VOO (priced around $500 per share as of recent market levels, though prices fluctuate), or even fractional shares if your brokerage allows it. This makes it feasible to start small and build from there. Investing in VOO is like betting on the resilience of the U.S. economy—it's not flashy, but it's steady. Experts often advise that for most investors, especially those new to the game, allocating a significant portion of their portfolio to a broad-market ETF like this is a smart move. It aligns with the principles of passive investing, popularized by legends like Warren Buffett, who has famously recommended index funds for the average person.
But diversification doesn't stop at U.S. borders, which brings us to the second no-brainer ETF: the Vanguard Total International Stock ETF (VXUS). While VOO focuses on domestic giants, VXUS casts a wider net, tracking thousands of stocks from developed and emerging markets outside the United States. This includes companies from Europe (like Nestlé and Volkswagen), Asia (such as Samsung and Tencent), and emerging powerhouses in Latin America and Africa. With over 8,000 holdings, VXUS provides exposure to a vast array of economies, from the stable growth of Japan and the United Kingdom to the high-potential volatility of markets in China, India, and Brazil. Why is this a must-have? In an increasingly globalized world, limiting your investments to just one country can be risky. Events like trade wars, geopolitical tensions, or domestic policy changes can disproportionately affect U.S. stocks, but international diversification acts as a hedge.
VXUS also boasts an ultra-low expense ratio of 0.07%, keeping costs minimal and maximizing returns. Its performance has been solid, though it can be more volatile than U.S.-centric funds due to currency fluctuations and varying economic conditions abroad. Over the past decade, international stocks have sometimes lagged behind the U.S. market, but periods of outperformance—such as during the early 2000s—remind us of the cyclical nature of global investing. For your $650, you could split it between VOO and VXUS, perhaps putting $325 into each for a balanced approach. This 50/50 split would give you broad exposure: about half in the familiar terrain of American blue-chips and half in the dynamic international arena. Financial advisors often suggest that international stocks should comprise 20-40% of a diversified portfolio, depending on your risk tolerance and time horizon. By including VXUS, you're not just chasing growth; you're building resilience against U.S.-specific downturns.
Now, why these two specifically with $650 in July? Timing the market is notoriously difficult, but July often sees a seasonal uptick in investor activity as people reassess their finances mid-year. With inflation cooling and interest rates potentially stabilizing, the economic backdrop could favor equities. ETFs like VOO and VXUS are ideal for dollar-cost averaging—investing fixed amounts regularly regardless of market conditions—which smooths out volatility over time. If you're using a brokerage like Vanguard, Fidelity, or Robinhood, buying these ETFs is straightforward, often with no commissions. Plus, they're highly liquid, meaning you can sell shares quickly if needed, though the strategy here is long-term holding.
Beyond the mechanics, consider the psychological benefits. Investing in ETFs removes the stress of stock-picking; you don't need to be a Wall Street wizard to succeed. These funds are managed passively, mirroring indexes rather than relying on a fund manager's hunches, which studies show often underperform the market anyway. For younger investors or those building wealth from scratch, starting with $650 in these ETFs can kickstart the power of compounding. Imagine reinvesting dividends automatically—VOO yields about 1.3%, while VXUS is around 3%—and watching your investment grow exponentially over decades. Even in uncertain times, like potential recessions or election-year jitters, the diversified nature of these ETFs provides a buffer.
Of course, no investment is without risks. Market downturns can happen, as seen in 2022 when both U.S. and international stocks took hits amid rising rates and inflation. Currency risks in VXUS could erode gains if the dollar strengthens. Always assess your own financial situation: ensure you have an emergency fund and aren't investing money you might need soon. Consulting a financial advisor is wise, especially if this is your first foray.
In summary, with $650 in hand this July, snapping up shares of VOO and VXUS represents a no-fuss path to building wealth. These ETFs embody the essence of smart investing: low costs, broad diversification, and a focus on long-term growth. Whether you're a novice dipping your toes in or a veteran adding to your holdings, this duo could form the bedrock of a prosperous portfolio. Start small, stay consistent, and let the market's historical upward trajectory work in your favor. Who knows? That modest $650 could be the seed of something much larger down the road.
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