The 3 ETFs That Created More Millionaires Than Any Stock

Investing in individual stocks like Amazon can lead to significant wealth, as a $1,000 investment nearly three decades ago would now be worth a million dollars. However, identifying such successful companies is difficult and often leads to losses. An alternative is to invest in Exchange Traded Funds (ETFs), which offer diversification by holding a basket of stocks. This approach allows investors to gain exposure to various companies, including potentially large ones like Amazon and Apple, alongside others like McDonald's and Coca-Cola, reducing the risk associated with picking a single stock. Not all ETFs are created equal, and some have historically outperformed others. This video highlights three ETFs that have been particularly effective in helping investors build wealth. It's important to remember that investing involves risk, and there are no guaranteed returns. Investors should conduct their own research and not rely solely on advice from online sources. ETFs can be bought and sold like individual stocks through brokerage accounts, each having a unique ticker symbol. When you purchase an ETF, you gain ownership in dozens, hundreds, or even thousands of underlying stocks. The first ETF discussed is **VOO**, which provides exposure to the S&P 500 index. Warren Buffett famously bet that the S&P 500 would outperform hedge funds over a decade, and his prediction proved correct. Hedge funds, with their high fees and stock-picking strategies, returned an average of 2.2% annually, while the S&P 500 returned approximately 7.1% after fees. The S&P 500 comprises the 500 largest companies in the U.S. stock market, including familiar names like McDonald's, Tesla, Nvidia, and Meta. Investing in VOO means you don't have to buy all 500 stocks individually; one share of VOO gives you exposure to all of them. A key advantage of an S&P 500 ETF is its self-rebalancing nature. If a company within the index begins to struggle and its market capitalization falls, it is removed and replaced by a larger, more successful company. This automatic adjustment protects investors from holding onto declining stocks, unlike investing in individual companies like Sears, which was once a major player but eventually fell out of the index and went bankrupt. Since the S&P 500's inception in the mid-1950s, only about 50 of the original companies remain, highlighting the importance of this dynamic rebalancing for long-term investors. The second ETF highlighted is **SCHD**, which focuses on income generation through dividends rather than just growth. Companies with substantial profits have three options: reinvesting in the business, saving for emergencies, or distributing profits to shareholders in the form of dividends. Dividends, typically paid quarterly, can create a regular income stream for investors. However, a common mistake is chasing high dividend yields without considering the underlying company's strength. A company with a weak business model may not sustain its dividend payments, leading to both loss of income and capital. SCHD invests in strong, dividend-paying companies that are also focused on growing their profits. This strategy aims for both dividend growth and capital appreciation. SCHD holds approximately 100 dividend-paying companies, including established names like Chevron, Coca-Cola, and Procter & Gamble. These companies often operate in sectors that are less volatile, such as oil, consumer staples, and beverages, providing stability during market booms and recessions. To be included in SCHD, a company must have paid a dividend for at least 10 consecutive years, ensuring a history of financial stability. The third ETF is **QQQ**, which offers exposure to the NASDAQ 100 index. This index consists of the 100 largest non-financial companies, primarily in the technology sector. QQQ has benefited from the significant growth in technology over the past decades. However, this sector can be very volatile. When markets decline, QQQ tends to fall more sharply due to the speculative nature of many tech companies. Conversely, it can also experience faster growth when markets rise. Over the past decade, QQQ has averaged around 20% annual returns, significantly higher than the S&P 500's historical average of 10%. This higher return comes with increased volatility. For instance, during the dot-com bubble burst in the early 2000s, the NASDAQ 100, and thus QQQ, fell by over 75%. Investors in QQQ must be prepared to hold through downturns, believing in the long-term power of technology. The key to successful investing in these broad-market ETFs, the video emphasizes, is not trying to time the market but adopting an "Always Be Buying" (ABB) strategy. This means investing consistently, regardless of market conditions – whether markets are up, down, or sideways, and regardless of political or economic events. Historical examples illustrate how attempting to time the market by waiting for a bottom often leads to missed opportunities. A practical way to implement ABB is through automatic investing. Many brokerages allow investors to set up automatic transfers from their bank accounts into their chosen ETFs on a regular schedule (weekly, bi-weekly, or monthly). This passive, systematic approach removes emotion and ensures consistent investment. During market downturns, instead of selling, investors should increase their contributions to buy more shares at a discounted price. For long-term investors (10-30 years), short-term market fluctuations should not alter their strategy. The video concludes by offering a free daily newsletter called "Market Briefs" and an investing masterclass to help investors stay informed and improve their knowledge. These resources are available via a link in the description. The speaker also encourages viewers to share the video to spread financial education. A brief mention is made of shifts in the housing market due to Wall Street's potential need to sell properties.