If you’re just starting to invest, you may be feeling overwhelmed. There are thousands of stocks to choose from, and it may feel impossible to know which ones are best for you.
In order to guide you on your journey to investing success, three experienced Motley Fool contributors suggest three options that are bound to be winners. You can’t go wrong with any of them, as long as you hold them for the long term.
Make it easy: Buy the world
Chuck Saletta: Investing in stocks can be a great way to build wealth over time. The problem is that not every stock turns out to be a winner. Indeed, history is littered with the carcasses of companies that were unable to sustain themselves for the long haul.
As a result, if you want to make money investing in stocks, you either have to spend time researching and watching businesses or find a way to invest that doesn’t require all that effort. That’s where buying broad-based index funds can come in handy. They let you get the market’s long-term performance without all the research.
When it comes to index funds, the Vanguard Total World Stock Index ETF (NYSEMKT:VT) stands out as one with a particularly broad objective. It aims to track a wide-ranging index that encompasses large-, mid-, and small-cap companies based all over the world. Because this exchange-traded fund (ETF) casts such a broad net, investors are set up to get returns based on the overall global economy, not any one stock or country’s performance.
Combine that scope with its tiny 0.08% expense ratio, and this ETF is a great way to get the global market’s returns without the effort or risk associated with picking specific stocks.
Of course, you’re still exposed to overall market risk, and there’s no guarantee that the market will go up. That’s why the Vanguard Total World ETF — like any stock-focused investment — should only be used for money you don’t expect to spend for at least the next five years. With that longer-term time frame, you can better stomach the ups and downs of the market as you won’t be putting your immediate needs at risk from the daily volatility inherent in stocks.
A real digital moneymaker
Eric Volkman: One class of stocks I have always found to be appropriate for beginner investors is real estate investment trusts (REITs). A REIT is a company that puts its money in either properties, the mortgages that undergird them, or (in relatively rare instances) a combination of both. There are scores of REITs on the market, and many specialize in one or only a few types of real estate.
Essentially, a REIT is a real estate fund in which investors place their confidence in an experienced manager who knows how to squeeze juicy profits out of a set of property assets.
One very appealing facet of REITs — particularly for people just starting out in their stock investing life and looking for a reliable return on their money — is…