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Exchange-Traded Funds For Dummies®, 2nd Edition by Russell Wild, MBA

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Part II

Building the Stock (Equity) Side of Your Portfolio

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In this part . . .

Over the past 80 years, the S&P 500 (an index of large U.S. stocks) has enjoyed an average annual return of nearly 10 percent before inflation, and 7 percent after inflation — a substantially greater return rate than bonds, CDs, gold, silver, or even real estate. Most foreign stocks have done equally as well. Small stocks have done even better. Although history doesn’t always repeat, it does often echo. And for that reason, most investment advisors, including me, would recommend that a good parcel of your long-term investments be put into stocks.

As fate would have it, the majority of ETFs represent stock holdings. So it’s appropriate that I now ask you to turn your attention to how to use ETFs to invest in the stock market. In the first chapter of this section, I look at some basic concepts of equity investing, most notably diversification and risk control. In the seven chapters that follow, I guide you through a step-by-step exploration of the world of stock ETFs. We examine which ETFs may belong in your portfolio and how to best mix and match them.

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