Ask investors across all experience levels, and I'm sure many of them will tell you they'd take a redo on their first investments if they had a chance. It happens to the best of us, myself included.
Knowing what I know now, I'd use my first $1,000 to cover as much ground as possible, which is what the following four exchange-traded funds (ETFs) accomplish. These alone contain companies of all sizes, industries, and regions of the world. Investing in ETFs might not be the sexy choice, but it's effective.
1. Vanguard S&P 500 ETF
The S&P 500 tracks the 500 largest public U.S. companies and serves as the stock market's primary benchmark. In fact, the stock market's performance is often viewed as interchangeable with the S&P 500's performance.
If I had to personally choose just one vehicle to invest in, it would undoubtedly be the S&P 500. It's as close to a one-stop shop as a long-term investor could need. It contains large-cap companies from all major sectors, includes blue chip stocks, and has a proven track record.
Different financial institutions put together their own S&P 500 ETFs, but since they all mirror the same index, the only tangible difference between them is usually cost. The Vanguard S&P 500 ETF (VOO 1.26%) is a great option because of its low 0.03% expense ratio, which means you pay just $3 per year in fees for every $10,000 you invest.
I would commit $600 to invest here.
2. Vanguard Russell 2000 ETF
The Russell 2000 tracks the smallest 2,000 companies in the Russell 3000 and is considered the primary benchmark for small-cap stocks, similar to the S&P 500 for large-cap stocks.
Small-cap stocks are typically riskier investments because they're more volatile and less financially stable than larger ones, but with this added risk comes a chance for higher returns.
Their smaller size gives small-cap stocks more room for growth, which often translates to good returns for investors. It's much easier for a company to double in size and go from a $500 million to a $1 billion market cap than to double from a $100 billion to a $200 billion market cap.
Investing in a broad ETF like the Vanguard Russell 2000 ETF (VTWO 1.74%) gives investors access to small-cap stocks while minimizing some of the risks of investing in individual companies (such as susceptibility to macroeconomic conditions). I'd invest $100 here.
3. Vanguard Mid-Cap ETF
Mid-cap stocks don't get as much attention as large-cap or small-cap stocks, but they can often be the sweet spot in the middle: large enough for more stability but small enough for high growth opportunities.
These are usually companies that have outgrown the initial uncertainties and risks that come with smaller sizes yet are still innovative and agile because they the bureaucracy that can come with huge companies.
The Vanguard Mid-Cap ETF (VO 0.84%) is my go-to because of its diversification (340+ stocks) and its blend of value and growth stocks. It covers a lot of bases without being too sector heavy. (The S&P 500, by contrast, is more than one-quarter information technology stocks.) The most represented sector in the Vanguard Mid-Cap ETF is industrials at 16.2%.
I would invest $100 here.
4. Vanguard Total International Stock ETF
Being truly diversified means owning stocks in companies outside the U.S.
In general, international markets are categorized as either developed or emerging. Developed markets have more advanced economies, stable industries, and solid infrastructure. Emerging markets don't exhibit the same level of economic or infrastructure development, but they're viewed as headed in that direction.
The Vanguard Total International Stock ETF (VXUS 0.96%) is a great option because it contains more than 7,900 companies from both developed and emerging markets. There's an added layer to researching international companies because you need to consider factors like local economy and politics, so a broad international ETF like this saves you that time.
A common rule of thumb is to have 20% of your stock portfolio in international stocks, so I would invest $200 here.
