question about buying and holding ETFs

[pdz]

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If I want to buy a couple of ETFs just to hold them for 3-4 years so my money (hopefully) grows, do I have to go through an online brokerage firm (fidelity, etrade, etc..)? If so, any recommendation?
The reason I ask this is that I'm a bit confused. To me it seems that most of these firms are tailored to people who actually trade on a frequent basis. In my case, I just want to buy 2-3 ETFs, and probably continue buying them throughout the year, and then after 2-3 years probably sell them. Any advice on this? I'm thinking of VTI, EFA and IYM.

Thanks for any advice!

 

[The White Coat Investor]

If I want to buy a couple of ETFs just to hold them for 3-4 years so my money (hopefully) grows, do I have to go through an online brokerage firm (fidelity, etrade, etc..)? If so, any recommendation?
The reason I ask this is that I'm a bit confused. To me it seems that most of these firms are tailored to people who actually trade on a frequent basis. In my case, I just want to buy 2-3 ETFs, and probably continue buying them throughout the year, and then after 2-3 years probably sell them. Any advice on this? I'm thinking of VTI, EFA and IYM.

Thanks for any advice!

You are correct that to do what you want you would have to pay annual brokerage fees plus trade fees. It may be less expensive to just buy mutual funds directly from the company you want such as Vanguard or Fidelity.

Now, let me just point out that ETFs generally are invested in stocks and 2-4 years is really an inappropriately short time horizon to buy stocks. I would recommend a good money market fund (Vanguard Prime has been the best one over the last 20 years) or a high yield savings account such as HSBC, ING etc. If you do decide that you want to invest this money for retirement or another long-term goal, I would open a Roth IRA with Vanguard and buy the funds directly (VTI is just a share class of Total Stock Market Index Fund, EFA is similar to Developed Markets Index Fund and for example.) IYM is an interesting addition to what otherwise sounds like a great long-term portfolio. Is there some reason you want to make a bet on industrial materials?

Good luck investing.

 

[pdz]

You are correct that to do what you want you would have to pay annual brokerage fees plus trade fees. It may be less expensive to just buy mutual funds directly from the company you want such as Vanguard or Fidelity.

Now, let me just point out that ETFs generally are invested in stocks and 2-4 years is really an inappropriately short time horizon to buy stocks. I would recommend a good money market fund (Vanguard Prime has been the best one over the last 20 years) or a high yield savings account such as HSBC, ING etc. If you do decide that you want to invest this money for retirement or another long-term goal, I would open a Roth IRA with Vanguard and buy the funds directly (VTI is just a share class of Total Stock Market Index Fund, EFA is similar to Developed Markets Index Fund and for example.) IYM is an interesting addition to what otherwise sounds like a great long-term portfolio. Is there some reason you want to make a bet on industrial materials?

Good luck investing.

Thanks for your comments.

About the money market fund/high-yield savings, don't you think their returns are too low compared to how much you can actually get if you invest in the market?

The reason I don't want to put that money into my IRA is because I'm actually planning to use that money in 5 years to buy real state, as I will be relocating then.

Maybe instead of ETFs I should follow your advice and invest directly into mutual funds. I have some money to start and will be probably putting 1k every month into it. Since the funds I mentioned you said were for long-term, are there any funds out there that would be good for a horizon of 4-5 years?

IYM includes energy and precious metal sectors, which I thought would add a good diversification to the portfolio.

Thanks!

 

[The White Coat Investor]

Thanks for your comments.

About the money market fund/high-yield savings, don't you think their returns are too low compared to how much you can actually get if you invest in the market?

The reason I don't want to put that money into my IRA is because I'm actually planning to use that money in 5 years to buy real state, as I will be relocating then.

Maybe instead of ETFs I should follow your advice and invest directly into mutual funds. I have some money to start and will be probably putting 1k every month into it. Since the funds I mentioned you said were for long-term, are there any funds out there that would be good for a horizon of 4-5 years?

IYM includes energy and precious metal sectors, which I thought would add a good diversification to the portfolio.

Thanks!

Remember that with a total stock market fund you already own energy and precious metals stocks, so when you talk about MORE diversification, you are actually getting less by "making a bet" or "introducing a tilt" to your portfolio. If you think those things will outperform, that's fine to put some in your portfolio, but don't do it thinking you're adding diversification.

As far as a good fund for a 4-5 year horizon, you might consider a short to intermediate term bond fund or if you really want to go crazy, something like Vanguard's Wellesley Income fund, which is 35% stocks and 65% bonds.

Everyone always wants higher returns, but they only come with higher risk. How high of returns do you NEED to meet your real estate goals? Would it be easier to take less risk and save a little more?