Interested in cheap ETFs, need beginner advice | TigerDroppings.com
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SomeTigerFan
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Interested in cheap ETFs, need beginner advice

Hey MT,

So I've decided to try and learn about trading and decided ETFs are my best option as I'm still in college and have really really low funds I'm willing to spend. I know some popular ones are SPY and vanguards but those are a bit too pricy. I'm looking to get just 2-3 ETFs that are made up of some large caps as a learning experience while I'm working this summer.

I've been interested in SCHD, around 37.13 at the moment and has holdings in PG, JNJ, VZ, T, and Msft.

Any opinions?


Iowa Golfer
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re: Interested in cheap ETFs, need beginner advice
I wouldn't start trading. I'd start investing. It's really commendable that you're interesting while in college, but trading is a different animal. A lot of guys say they are traders. All you need to do is ask them which brokerage they use. If it's E-trade, or Ameritrade, they aren't serious traders. You need a broker like IB, where you can route trades to selected market centers, place hidden orders, and access dark liquidity pools.

If your heart is set on trading, find an account to practice on with fake money. Even then, you aren't even beginning to touch on how to properly route and hide orders.

What I would do if I was you is buy a couple of dividend paying stocks, and let this sit until we have a real market correction. I'd buy some utilities right now. Then to further your education in "trading", if this is what you want to do, you can show discipline and restraint, and take no action until we've had a real correction. Discipline is an important quality in trading, and you might have to wait several years before you have real opportunity. Then you could sell your dividend payers and buy the Wilshire 5000 index as close to the bottom as you can come. And by then you should have some more funds, and can conservatively trade around the broader market index.

Or go ahead and start to "trade", and guys like me will rip you to pieces. Because I trade, and I still get ripped to pieces, I just win slightly more than I lose. And I've done it a long, long time.


SomeTigerFan
New Orleans Saints Fan
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Member since Oct 2012
3221 posts

re: Interested in cheap ETFs, need beginner advice
Shit, I'm sorry, I think essentially what I meant to say is investing. Like you said, trading would be rough due to low funds, broker fees on every transaction, and the time I wouldn't have. Looking for an ETF in the 20-40 range with mid/large caps in their top 10 holdings that I can just monitor and learn from. PFM, FDL, and SCHD are all ETFs with solid dividend payers in their 10.

Thanks for the advice!


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rintintin
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re: Interested in cheap ETFs, need beginner advice
By the looks of his post I don't think he meant "trading" as you're thinking of it. I think he meant to say investing, or simply getting in the market. I don't see why he would "trade" ETF's over anything else.


SomeTigerFan
New Orleans Saints Fan
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Member since Oct 2012
3221 posts

re: Interested in cheap ETFs, need beginner advice
Exactly, just looking to get a position in something and while ETFs usually have 2-4% as a major holding, it's still something at the level I'm at.


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Iowa Golfer
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re: Interested in cheap ETFs, need beginner advice
I misunderstood. But golly, when I read trading I thought it was my duty as a decent guy to do everything to discourage him. It's a full time job.

What I said about buying some utilities and waiting for an opportunity to buy a broad based index fund after a significant correction still goes though. My opinion only. I bought the Wilshire and SPX in 2009. Everyone always says buy low and sell high, yest almost everyone can't do this. I'm not sure now is the time for the young man to be buying an ETF. All he has is time. Why not wait it out and get paid some dividends without a lot of risk to capital in the interim?


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Cmlsu5618
McNeese State Fan
Destin, FL
Member since Sep 2010
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re: Interested in cheap ETFs, need beginner advice
I like the way you think.

Golf is terrible though.


Iowa Golfer
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re: Interested in cheap ETFs, need beginner advice
Tell that to my bank account.


Cmlsu5618
McNeese State Fan
Destin, FL
Member since Sep 2010
3462 posts

re: Interested in cheap ETFs, need beginner advice
I'd say if you kept those long term habits up you should be able to afford the golf lifestyle.

Just take a month off if you debate hitting up the sperm bank for a tee time.


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Chris Farley
Maryland Fan
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Member since Sep 2009
3792 posts

re: Interested in cheap ETFs, need beginner advice
Are you looking at the 20-40 range because you can afford more shares than you could of SPY, or because you can't afford 1 share of SPY? Nothing wrong with that if so, especially as a student, but don't let the number of shares cloud your judgement. Lots of goons around here buy 10,000 shares of a penny stock and think they are some big swinging dick market genius, but the share count is irrelevant and simply a number. Buy whichever one you want now and start spreading your positions out once you can make buys of $500-$1000 at a time.


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Volvagia
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re: Interested in cheap ETFs, need beginner advice
You are better off to use ETFs as a buy and hold because you don't have enough to meet the mini for a mutual fund.

If the problem keeping you from Vanguard is the costly share costs, check out Sharebuilder as a broker.

You can buy fractional shares so you can always buy whatever stock you want even if it is Google.


Just don't set up automatic trades for TOO little an amount, or the cost basis will eat you alive.
This post was edited on 5/1 at 11:25 pm


SomeTigerFan
New Orleans Saints Fan
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Member since Oct 2012
3221 posts

re: Interested in cheap ETFs, need beginner advice
Sharebuilder is exactly what I'm using, 6.95 a trade on stocks/ETF, no annual fees, no inactivity fees, no minimum balance

Looking at ETFs with good majority holdings that I can just keep on a portfolio for now. I'm an accounting major, looking to dual in finance in a year, so really using this as a learning experience for the future and as a possible talking point in an interview.
I've been looking at stocks with high dividend yields but I think going the ETF route with diversified holdings means I'm not putting all my eggs in one basket, even if it's not that many eggs.

Overall solid advice


OnTheBrink
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re: Interested in cheap ETFs, need beginner advice
VUG
VYM
VWO


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slackster
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re: Interested in cheap ETFs, need beginner advice
If you plan on using this as a talking point in an interview, I wouldn't recommend saying that you bought "cheap" ETFs because their share price was affordable. Cheap is a measurement of P/E ratio, not a nominal dollar value.

For example, Nike is trading around $73 with a price to earning ratio of 24.97 - earning $2.93 per share. UnderArmor, on the other hand, is trading for the "cheap" price of $49.25, but it's PE ratio is 64.10 - earning only $.77 per share. Now, I'm not recommending one over the other, but by every measurement other than nominal stock price, UA is more expensive than NKE.

That being said, check out VOOG, the Vanguard Growth ETF, and VV, the Vanguard Large-cap ETF.

Additionally, the point of buying ETFs is for low-cost indexing, so if you're looking for large-cap ETFs, they are pretty much created equal outside of fees. I wouldn't be concerned with holding 2-3 ETFs that essentially track the same holdings.


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Volvagia
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Member since Mar 2006
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re: Interested in cheap ETFs, need beginner advice
quote:

6.95 a trade on stocks/ETF


I know it doesn't have the same thrill, but you want to use the automatic investment plan for cheaper fees to start.

Not sure as to what kind of tax wrapper you are putting this in, or your goals with it, but I would consider:

BIV (~10%)
VDC
VYM
VUG


SomeTigerFan
New Orleans Saints Fan
Over there
Member since Oct 2012
3221 posts

re: Interested in cheap ETFs, need beginner advice
Going to go with VYM, thanks for the advice

64.54, a 15 P/E so a 4.30 per share
This post was edited on 5/2 at 9:14 am


Iowa Golfer
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re: Interested in cheap ETFs, need beginner advice
Good choice.


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OnTheBrink
Alabama Fan
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Member since Mar 2012
4535 posts

re: Interested in cheap ETFs, need beginner advice
quote:

Going to go with VYM, thanks for the advice


I own it and it has been good to me. Up 10% since initial buy, and other additions to it.

If you watch VWO (Emerging markets), I have noticed since owning it, it fluctuates between $37.50 and $44ish. Watch it and I would jump in anytime it gets near $38.


Chris Farley
Maryland Fan
Regulating
Member since Sep 2009
3792 posts

re: Interested in cheap ETFs, need beginner advice
quote:

If you watch VWO (Emerging markets), I have noticed since owning it, it fluctuates between $37.50 and $44ish. Watch it and I would jump in anytime it gets near $38.


This is purely coincidental. Even if you believe that stocks trade in a range, this is the aggregate value of possibly hundreds of constituents of the ETF, not something that people buy and sell based on technical indicators(which I think are bs in the first place).


white perch
Northwestern St. Fan
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Member since Apr 2012
3506 posts

re: Interested in cheap ETFs, need beginner advice
If you use Charles Schwab as your broker, they have a few dozen no commission ETF's available through them. That may be a good place to start


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