Dipping My Pinky Toe in Investing: I Bought My First ETF
So, I feel like for the two-plus years I blogged while still in debt I talked a big game on investing but never actually did anything. I was reading some, but not enough. But since August, I had some funds that I had marked for investing, which was just sitting as cash in my brokerage account. I own three individual stocks in my retirement account as well as a few mutual funds, but I wanted to look at buying shares of a lower-cost ETF. A lot of personal investors have raved about ETFs, and although I prefer holding a few stocks I have valued and understand deeply, I think the ETFs are good holdings as well.
I had my eye on the Vanguard Small Cap Value Index Fund (VISVX), but realized that the Vanguard Small-Cap Value ETF (VBR) was the same set of holdings and had a lower expense ratio (0.10% vs. 0.24%). I didn’t realize that ETFs and Index Funds were different (that’s how amateur I am) and Investopedia has a helpful reference page on the two.
Also, the ETF was offered through my brokerage account commission free, and since I wasn’t buying that many shares, it was nice to remove that $9.95 commission. As far as the index fund vs. ETF, they shared many similarities, but I liked the ETF’s pricing, which trades throughout the day, while the index fund is like a mutual fund and is only priced once per day when the market closes. So, while the government shutdown was sending shares all over the market tumbling, I decided to purchase the shares I had been thinking about for over a month that day at a respectable price, and VBR shares have climbed since. Of course, the market is pretty highly valued at the moment, and we may all see a correction soon. I have to decide whether I want to take my profit on these shares and then look for the next opportunity or hold on tight because I think the holdings in the ETF are still values. At the moment, I am comfortable holding.
My next venture into investing is choosing a stock or ETF for my Roth IRA. That account also has some commission free ETFs, but I may wait until the next downward cycle to make my purchases.
What do you think of this market? Are we headed for an ugly correction?