Not ready to dive into individual stocks yet? Worry not. This article is for you. Whether you're investing $1,000 or $10,000, investing in exchange-traded funds (ETFs) is a great way to wade into the investing pool and build a diversified portfolio along the way. Here are three easy options for building up any portfolio.
Follow the S&P
Investing in S&P 500 ETFs is a smart move because they offer broad market exposure to 500 of the largest U.S. companies, which helps reduce risk through diversification. These ETFs track the performance of the index, providing a low-cost, passive investment strategy with consistent long-term growth potential. Historically, the S&P 500 has delivered strong returns, gaining roughly 88% over the last five years. At the bare minimum, this is a great way to learn more about the stock market.
The iShares Core S&P 500 ETF (IVV -1.32%) is just the ticket. This ETF looks to track some of the largest stocks traded in the U.S. by being invested across the entirety of the S&P. By investing in this fund, you own Nvidia, Berkshire Hathaway, Microsoft and the other hundreds of stocks that make up the S&P 500 index.
Don't forget dividends
Looking for yield? I don't blame you. Dividends are the gift that keep on giving. Investing in dividend-centric stocks is a smart move for any portfolio because they provide a steady income stream through regular payouts, which give you the opportunity to reinvest over time. The Schwab U.S. Dividend Equity ETF (SCHD -0.55%) is a great option for those looking to add dividends to their portfolio, as it is currently producing a 3.56% yield.
Holding names like Cisco Systems, Bristol Myers Squibb and Home Depot, the Schwab U.S. Dividend Equity ETF is a great way to start learning about dividend stocks, while netting a nice return in the process. Not only does the ETF offer strong yields, but it has also gained nearly 48% in value over the last five years. As Fool.com contributor Matt DiLallo points out, this fund has created annualized total returns of 12.9% since 2011.
A play on tech
It's tough to avoid tech these days. The top tech companies are becoming an ever integral part of business and our day-to-day lives. This week provided a perfect example of why diversification is key.
News of China's cheaper DeepSeek artificial intelligence (AI) model sent Nvidia crashing 18%. While the tech sector has partially regained its footing, this is a prime example of why it's arguably wiser to start with a tech-based fund like the Technology Select Sector SPDR ETF (XLK -1.90%), rather than single stocks. Aimed at tracking the technology space of the S&P 500, this fund is only down around 2.7% this past week because it's diversified across tech on a broader basis.
The ETF gives investors access to stocks like Apple, Broadcom, and Salesforce. Even with the turmoil this week over tech and AI, a tech-focused ETF has paid off over time. The Technology Select Sector SPDR ETF had returns of over 137% over the last five years, handily outpacing the S&P 500.
