How Stock Funds Build Wealth (7 funds worth knowing)

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Stock funds can:

- Simplify investing.

- Make investing easier.

- Help you build wealth on autopilot.

Unfortunately, there's over 10,000 stock funds to choose from.

 

The Options

 

According to an article in Yahoo Finance.

Top reasons people don't invest is because they:

- Don't have enough time.

- Don't know how to invest.

- Don't have enough money.

Fortunately, many stocks funds only require $5 to start investing.

And don't require much time or fancy investing skills.

 

 

Like it was last month, I remember getting my first job in finance.

I was hired to work as a banker in Downtown Seattle.

The bank branch was next to a Starbucks.

And there was a 5-story mall on the same block.

It was a busy place to work.

And 10+ years later.

I still remember one of my first customers.

 

He looked like an average, nicely dressed guy in his 40s.

And said he received a wire transfer of money into his checking account.

And was trying to decide what to do with the money.

It took me a few minutes to pull up his account.

It was my first month as a banker.

And I was still figuring everything out.

 

But what I saw next was shocking..

Something I wasn't expecting to see.

This guy had $1M sitting in his checking account.

A little over $1M to be exact.

Something like $1,045,000.

 

The $1M Checking Account

 

This was the first time I ever saw $1M in a checking account.

I found my mind racing...

What the heck would I do with $1M in my checking account?

I'd surely pay off the $80k in debt I was struggling with at the time.

I'd surely invest a large chunk of the money.

Hell, I probably would have quit my 9-5 job that week.

 

Over the next month I found myself thinking a lot about that $1M.

All of the different ways it could be invested.

All of the different types of investments.

How to make the money last as long as possible.

 

After working in banking for many years.

And finally getting rid of my debts.

And focusing hard on investing.

I became a big fan of stock funds.

 

 

The Stock Fund

 

Here's 7 stock funds worth knowing.

And how each has grown over the past few decades.

Let's dive in.  

 

1. The S&P500: VOO

 

This is one of the largest stock funds.

It tracks the 500 largest companies in the U.S.

And an S&P500 stock fund is what legendary investor Warren Buffett suggests for most non-professional investors.

Fund history:

Best Year: +32% (2013)

Worst Year: -18% (2022)

10 Year Average: +14%

 

^{The history}

Many stock funds like VOO allow people to start investing with just $5.

Instead of buying a whole share of stock.

S&P500 stock funds include the 500 largest companies in America.

 

2. The Total US Stock Market: VTI

 

This stock fund tracks the entire U.S. stock market.

Instead of just tracking certain types of companies.

It tracks everything.

Thousands of stocks.

Fund history:

Best Year: +31% (2013)

Worst Year: -38% (2008)

10 Year Average: +13%

 

^{The history}

Total stock market funds include the entire American stock market.

 

3. The Invesco QQQ Trust: QQQ

 

This stock fund tracks the Nasdaq 100 index.

Which is 100 of the top (non financial) U.S. companies.

It's heavily focused on technology and innovation companies.

Companies like:

- Apple

- Nvidia

- Microsoft

Fund history:

Best Year: +78% (1999)

Worst Year: -41% (2008)

10 Year Average: +19%

 

^{The history}

Stock market funds that track the Nasdaq 100 index include 100 top technology and innovation companies in America.

 

4. The Small Cap Value: VBR

 

This stock fund tracks 800-900 smaller US companies.

Companies expected to grow.

Fund history:

Best Year: +36% (2013)

Worst Year: -32% (2008)

10 Year Average: +10%

 

^{The history}

Small cap value stock funds include smaller American companies expected to grow over time.

 

5. The Growth Stocks: VUG

 

This stock fund tracks over 400 large U.S. companies.

Many companies are technology or internet-related and expected to continue growing.

Companies like:

- Apple

- Nvidia

- Google

- Amazon

- Microsoft

Fund history:

Best Year: +46% (2023)

Worst Year: -38% (2008)

10 Year Average: +17%

 

^{The history}

Growth stock funds include large American companies with high growth potential.

 

6. The Tech Stocks: VGT

 

This stock fund tracks software, hardware, & other internet technology.

It includes large, medium, and small technology companies.

Over the past 10 years, it's the top performer on this list.

Fund history:

Best Year: +61% (2009)

Worst Year: -43% (2008)

10 Year Average: +21%

 

^{The history}

Technology stock funds include large, medium, and small American companies focused on information technology.

 

7. The Total World Market: VT

 

This stock fund tracks over 9,000 large, medium, and small companies around the world.

60% of the companies are in the U.S.

And 40% of the companies are outside the U.S.

Fund history:

Best Year: +32% (2009)

Worst Year: -33% (2008)

10 Year Average: +11%

 

^{The history}

Total world stock funds include large, medium, and small companies all around the world.

 

The bottom line

 

Two months later I saw the customer with the $1M in his checking account again.

He told me more about how he got the money.

That it came from the sale of a piece of property he bought a long time ago with a loan.

That he had to sell it because he owned the property with other people.

And those other people didn't want to own the property anymore.

 

He also told me he had decided to invest his $1M into something passive (like a stock fund).

That he wanted something hands off that didn't require any work.

That he didn't want to spend time picking individual stocks to invest in.

So investing in a stock fund is exactly what he did.

 

Narrowing down 10,000 stock funds to just 7.

And picking 1, 2, or 3 of them can still feel stressful for most people.

Deciding which stock fund to invest in each time I was paid.

Was something I thought a lot about the 10 years I was a banker.

Probably too much..

 

In the end, I chose to invest in just one stock fund.

An S&P500 fund like famous investor Warren Buffett suggests.

Most retirement accounts at work offer an S&P500 fund.

And it's easy to buy an S&P500 fund like VOO in most non-retirement investing accounts starting at just $5.

Simple and easy.

My favorite 2 things when it comes to investing.

That's all for today.

See you next Saturday.