Key Points
You’ll often hear that it’s important to save well for retirement because you can’t expect to live comfortably on Social Security alone. But funding a retirement account is only one piece of the puzzle.
It’s just as important to invest your money wisely so your savings are able to grow. But that doesn’t have to mean undertaking the daunting task of researching stocks individually and constantly rebalancing your portfolio.
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An easier path may be to invest in a broadly diversified exchange-traded fund, or ETF. And the Vanguard Total World Stock ETF (NYSEMKT: VT) could be a great opportunity to do just that.
A truly global approach to investing
A lot of retirement savers build portfolios around U.S. stocks, whether by holding them individually or investing in an S&P 500 ETF. And there’s a reason for that. The U.S. is home to many of the world’s largest and most successful companies.
But going all in on S&P 500 companies or an S&P 500 ETF means you lose out on exposure to companies outside the U.S. If you really want to branch out, you may want to consider the Vanguard Total World Stock ETF.
The Vanguard Total World Stock ETF tracks the FTSE Global All Cap Index, which covers both well-established markets and markets that are still developing. The fund invests in companies across a range of market caps and from various corners of the globe. That diversification could reduce the risk of relying too heavily on the performance of any one economy or stock market.
Plus, like many Vanguard funds, the Vanguard Total World Stock ETF has a remarkably low 0.06% expense ratio. That means you won’t lose a lot of money to investment fees.
A “set-it-and-forget-it” investment
Some people prefer to be hands-off investors. If you’re one of them, you may want to choose a fund that offers superior diversification so you don’t have to constantly worry about rebalancing. The Vanguard Total World Stock ETF fits the bill.
Of course, the Vanguard Total World Stock ETF isn’t necessarily the right choice for every investor. Because of its strategy, the fund could experience significant losses during market downturns. And political upheaval abroad could also impact the value of your investment.
In other words, the fund has strong growth potential, but it’s far from risk-free. And even though it offers loads of diversification, it’s generally a good idea to hold other assets in your retirement portfolio. But if you’re looking for a simplified way to build retirement wealth without having to do a ton of legwork, you may want to lean on the Vanguard Total World Stock ETF.
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Maurie Backman 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 a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
