Don’t Pick a Stock, Pick the Market: 5 Top ETFs to Consider
For most people, picking stocks is a fool’s game, something best left to those with a generous appetite for risk. Even most hedge fund managers, whose primary job is to identify winners and losers in the stock market, have a hard time beating the market. In 2013, for example, hedge funds returned an average of 7.4 percent for the year, according to Bloomberg, 23 percentage points behind the S&P 500.
To the credit of hedge fund managers, the S&P 500 had a phenomenal year. Hedge funds tend to shine when equity headwinds are howling, and the exact opposite has been happening ever since the Federal Reserve opened the throttle on quantitative easing. Hedge funds have underperformed the S&P 500 for each of the past five years, while many of those who have made aggressive and bullish bets on equities have profited enormously.
But most investors don’t have the time of day to develop a competent bullish investment strategy during a bull market or a savvy hedging strategy during a bear market. Most mom and pop investors, who are saving for retirement or a college education, are best off taking the advice of Warren Buffett, chairman and CEO of Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB): Own a slice of the market and invest in exchange-traded funds (ETFs). The famous investor has endorsed a strategy of maintaining a simple portfolio full of inexpensive index funds and said that some, if not much, of his own estate will be invested this way.
Here’s an overview of five popular ETFs that most investors should consider.