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You don’t have to be a rocket scientist to make money in the stock market. There are intelligent steps that everyday investors can take to become richer.
If you have about $1,000 that you don’t need for living expenses or to pay off debt, and you want to invest, here are two exchange-traded funds (ETFs) that are particularly smart purchases today.
A core index fund with a smart approach to equity weightings
Large capitalization stocks serve as excellent fundamental investments for many investors’ portfolios. An index fund that follows the price S&P500made up of 500 of America’s biggest and best companies, can be a great way to gain exposure to this wealth-building asset class.
The Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP) goes one step further. Unlike most S&P 500 index funds, which are weighted by market capitalization, Invesco’s ETF, as its name suggests, weights the stocks it buys equally.
For investors who want to own large-cap stocks but are concerned about mega-cap stocks Nvidia, AppleAnd Microsoft have grown too large and account for too large a portion of many index funds, the Invesco S&P 500 Equal Weight ETF could be an excellent choice.
By evenly weighting its investments, Invesco’s fund reduces concentration risk. In this way, the ETF provides a greater degree of diversification for its shareholders, which it maintains by rebalancing its investments every quarter.
Rather than being overloaded with tech stocks like many large-cap index funds, the result is that Invesco’s ETF holdings are more broadly spread across sectors. Information technology was actually the fourth largest sector on September 10, after manufacturing, finance and healthcare.
Finally, Invesco’s fees are reasonable. The Invesco S&P 500 Equal Weight ETF has an expense ratio of 0.20%. That works out to just $2 per $1,000 invested per year.
Smaller companies, bigger potential rewards
If you’re looking to add even more growth potential and diversification to your investment portfolio, take a look at the Vanguard Russell 2000 ETF (NASDAQ: VTWO). Vanguard’s ETF gives you a low-cost way to invest in a broad collection of small- and mid-cap stocks. These smaller companies usually have enormous expansion potential.
The Vanguard Russell 2000 ETF has holdings in more than 2,000 stocks with an average market value of $3 billion. That’s very different from the average market cap of stocks held by the Invesco S&P 500 Equal Weight ETF, which was nearly $100 billion as of June 30. The two funds are therefore complementary. Together they can add both ballast and powerful growth to your portfolio.
Small businesses in particular tend to be very sensitive to interest rates. In the current economic climate that could very well be the case. With inflation slowing, the Federal Reserve has indicated it may begin cutting rates as soon as this month. That could be a boon for small-cap stock owners. Small businesses often rely on loans to scale their operations, which typically makes them more profitable when interest rates fall.
With an annual expense ratio of just 0.1%, the Vanguard Russell 2000 ETF could give you a simple, low-cost way to profit from a rate-cut-driven rally in small-company stock prices.
Should you invest $1,000 in the Vanguard Russell 2000 ETF now?
Before you buy shares in Vanguard Russell 2000 ETF, consider the following:
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has one disclosure policy.
The Smartest ETFs You Can Buy Right Now for $1,000 was originally published by The Motley Fool