Best ETFs For Stocks & Shares ISA

[jackparry]

Hi all,

I wanted to see if some of you more experienced investors could provide some advice.

I’m 21 and I’ve just opened up my first stocks and shares ISA with Freetrade and deposited my first sum of money to get started. My next step I believe will be to choose my ETF. Currently, I’m thinking to go with the S&P 500 as I’ve read it has a decent average return of around 10% annually.

Would you agree this is a good decision or are there other ones worth considering?

Any advice is much appreciated.

[J4ipod94]

Hi Jack, congrats on starting your investment journey nice and early.
What you choose to invest in really depends on how interested you are in economics and financial markets. If you’re after a decent return over a long time but have other hobbies that take up your time then passive investing could be the way for you. Here’s a topic where the community has discussed some passive portfolios

Passive Investors - ETF Portfolio Discussion

This thread is for passive investors / Bogleheads to discuss their portfolios. I couldn’t really find a good thread on this and unlike stock picking I don’t think it makes sense to have a load of separate threads as presumably the discussion will be broadly relevant. If there is interest I’ll try and update semi-regularly with my positions and thoughts, but I’m keen for others to also share their portfolios, thoughts or questions. Here are few discussion points based on decisions I’ve had to th…

If you want to get above average returns then you will need to invest some time to research where the best opportunities are. This is when you start to think about countries, sectors , themes that might see better returns than the average. It took me over 6 months to get to a stage where I felt confident in taking a more active approach in my investments (of course I was genuinely interested in the markets). Until I reached that point I stuck to a simple portfolio which consisted in ETFs that tracked some of the major indexes like the S&P 500, FTSE All World, FTSE 100 etc. Edit: Of which a large chunk is still in passive funds.

Lots of users have asked questions about where to get started so you can read some more topics in

First Time Investing 🐣

[SebReitz]

I’d like to point out here that passive investing beats almost every active investor over the long-run. Claiming that active investing and research generally leads to higher than market returns wouldn’t be correct.

So, for most people, it would be advisable to just stick to ETFs.

[Rob208]

I think passive investing should make up some or all of almost everyone’s portfolio and it’s definitely a good place to start.
However I think the idea it beats almost every active investor is down to fees and trading cost so with freetrade you’ve got a decent chance of beating the returns on passive investing. You just need a combination of a disciplined approach and a bit of luck.

[Rob208]

Going back to the original question though I think you’ve got the right idea, a S&P 500 tracker or something like the vanguard world etf is probably the best place to start. For me personally I went from there to more regional/ thematic ETFs and investment trusts then onto individual stocks as I learnt more and got more comfortable with investing. It just depends how much time you want to put in really.

[El_Chaffinch (David A)]

It’s a cliche but I’ve always thought a diverse portfolio is a good portfolio.
It depends how much is being invested on how diverse a portfolio can be but there is room it may be worth investing in more than one ETF to steady out dips, yield dividends & / or make the most of more specific areas that could grow.

Not financial advice, just an opinion, I’m a noob just look at my portfolio

[gioparra91 (Giovanni)]

@jackparry

Would you agree this is a good decision or are there other ones worth considering?

Hi @jackparry, SP500 EFT is a good choice to start. Consider Vanguard or Blackrock ETFs for that, and think about the fees you pay for it. You are young, so invest all in equity ETFs, in the long run they will outperform bond. Consider High Yield ETFs only if you want to build income, but with the current low yields, don’t bother on other corporate bonds or even less, treasuries. I suggest you look at some Emerging Market funds, the more they are diversified the best. SP500 if technology heavy index, so you might want to get other exposure somewhere else. Hope this help…of course buy “passive”, unless you are thinking or something exotic or risky where an active manager can generate alpha. In the US market, an ETF will do the job.

[RobOda (Rob)]

@El_Chaffinch

It depends how much is being invested

I’ve seen mixed arguments on this.

Some seem to say if you are investing small amounts, you should stick to 3-4 funds if that, as a maximum.

Others seem to say it doesn’t really matter as long as you’re not going over like 15+ (apparently at 20+ the benefits of diversification flatline anyway). Because, even if it is small amounts spread out, you should still be getting gains overall at the end of it (if all goes well).

I’m not sure what to think about it myself at the moment, because I’m one of those who can only invest what many people would say is a trivial amount, so personally I’m worried I might be spreading my own investments too thin (my own target is 15 total, 13 equities, 2 bonds).

It would be nice if there were a consensus on this.