Overview of the Schwab Healthcare ETF

Charles Schwab Healthcare ETF

The secret to top-level investing is easy: find a commodity or service whose value does not degrade.

The Schwab Healthcare ETF is one of the best exchange-traded funds (ETF) you can add to your portfolio. According to recent data, the long-time established healthcare fund remains in excellent standing despite the US economy’s ups and downs.

If it’s your first time to add a healthcare ETF to your investment portfolio, here are a few things you need to know about healthcare ETFs first. Furthermore, we’ll give you insight and comparisons of the Schwab Healthcare ETF against other top fourth-quarter healthcare ETFs in 2020.

What is Healthcare ETF?

An exchange-traded fund (ETF) collects stocks from numerous businesses in a single or mixed industry. A healthcare ETF, such as Schwab Health Care, is a diversified collection of stocks that focus on everything happening in the healthcare industry.

Healthcare ETFs expose investors to growth in medical equipment procurement, medical technology improvements, private hospital activities, and funding, to name a few.

Joining a healthcare ETF brings many advantages, such as a stabilizer for your portfolio, especially if you’re an investor with a high appetite risk.

Despite bull and bear markets, healthcare industries and businesses have always thrived. For example, the Covid-19 outbreak in 2020 saw an enormous uptick in medical supply and equipment manufacturing, quality control, and research. Indeed, investors saw a great increase in healthcare ETF value during the time.

However, it has advantages and disadvantages, like any other investment vehicle.


  • Diversification

A single healthcare ETF, such as the Schwab Health Care Fund, holds dozens of healthcare stocks in the market. Additionally, the market is broad, similar to other industries, such as computer and technology, mining, construction, and infrastructure development. Therefore, you can expect all healthcare ETFs to remain balanced across numerous industries, giving you stable and virtually guaranteed returns upon investing.

  • Industry-Targeting

On the other hand, some ETFs focus only on specific industries. For example, biotechnology is a rapidly-evolving industry. Some healthcare ETFs focus on investing in numerous bio-technology-oriented companies to take advantage of their skyrocketing growth.

    • On the other hand, you can expect targeted healthcare ETFs to hold a higher risk and less diversification than its non-targeted variation. However, during the most bullish markets in the healthcare industry for these specific industries, you can see plenty of growth.


  • Possible Stagnancy

Diversified healthcare ETFs will always prevail and pay within optimal or pessimistic estimates. They’re predictable, making them the best but an enormous investment for low-risk appetite investors.

On the other hand, growth-oriented investors fast-tracking their portfolios will find healthcare ETFs an excellent safety net because of their stagnancy. Growth in the sector has strict limitations because of the slow technological and equipment progress, requiring in-depth study, peer evaluation, and maximum safety quality checks.

Regulations and limitations in other markets create stagnancy and minuscule growth, which still rings true with healthcare ETFs.

  • Requires an Enormous Amount of Technical Knowledge

The only way to invest exceptionally in any market is to invest in technical knowledge about it. Investors who find medical technologies, practices, implications of existing and new medical equipment, and healthcare market movements will find healthcare ETFs a challenging but rewarding market.

Therefore, the healthcare ETF industry reserves itself to investors willing to understand and take note of immense technical and scientific knowledge. Truthfully, much of medical technologies focus on healthcare improvement, meaning investors need to know its contributions to operating procedures, hospitals, and patients suffering specific health problems.

Everything You Need to Know About the Schwab Healthcare ETF (SWHFX)

One of the healthiest and average-performing funds in the market is the Schwab Healthcare ETF (SWHFX). In the last decade, its performance has been stellar and grew immensely in 2020 after the economic downturn that Covid-19 caused during the year.

Here are some specifics:

  • Performance over 1-Year: 9.57
  • Expense Ratio: 0.80%
  • Annual Dividend Yield: 1.02%
  • 3-Month Average Daily Volume: -3.31
  • Assets Under Management: UnitedHealth Group (UHG), Johnson and Johnson (JNJ), Merck & Co Inc. (MRK), Abbott Laboratories (ABT)
  • Inception Date: July 3, 2000
  • Issuer: Schwab Healthcare Fund

About The Schwab Healthcare ETF

Fund managers of the Schwab Healthcare ETF place the entire fund inside the healthcare industry, just as any healthcare ETF.

It changes its course by purchasing equity securities that healthcare sector companies issue. SWHFX doesn’t focus on a single industry, meaning it is a prime example of a well-diversified portfolio.

It will invest in pharmaceutical, biotechnology, medical technology development, medical science, and other industries its fund managers see fit to grow in the next few years.

The Schwab Healthcare ETF aims to produce long-term capital growth. For investors with high-risk appetites, it means limited portfolio growth. However, it remains a stable source of income despite any economic downturn. Truthfully, it’s the best choice for low-risk appetite investors because of its consistency and stability.

The fund has a solid policy: it will invest around 80% of its assets in various healthcare industries providing equity securities. Any investor comfortable putting almost all their eggs in the healthcare industry have nothing to lose with the SWHFX

Why Is It Worth Investing in the Schwab Healthcare ETF?

The Schwab Healthcare ETF (SWHFX) is one of the top 20 highest-performing and most stable healthcare ETFs in the United States’ health sector.

According to US News Money, it came as 18 out of 124 of the best health funds existing in the country. Leading healthcare fund industry researchers consider SWHFX to be an essential healthcare ETF for any portfolio requiring a dependable safety net during economic downturns.

  • Fees

SWHFX has nominal to below-average fees if you compare this figure among its peers. It has an expense ratio of 0.8%, which is significantly lower than the 1.22% industry average. Additionally, management costs take up only 0.5%, significantly lower than the current category average of 0.74%.

Additionally, SWHFX does not charge anything for initial and deferred maximum sales fees. Furthermore, it does not charge administrative, redemption, and minimum investment fees. It’s one of the best ways to enter the healthcare ETF market with minimal overhead costs.

  • Performance

In the past year, SWHFX returned 9.51% in 2019. In 2017, it returned 8.39% and 7.7% in the last five years. Overall, its one-decade performance has been exceptional by achieving 13.79% during the last decade. While it significantly lags behind Schwab US Large-Cap Growth IDX Fund (SWLGX), which achieves a remarkable 29.16% yearly, Schwab Healthcare Fund is much more stable due to its focus on stability and equity securities.

  • Risks

Morningstar and other significant ETF performance reporters note that SWHFX has average risk by comparing its performance against similar products.

Its uncertainty and volatility measurements are as follows:

    • Standard Deviation: 14.919
    • Mean: 0.763
    • Sharpe Ratio: 0.507

In this light, it’s a great investment for any portfolio requiring stability and safeties during a bear market. On the other hand, it can achieve top-notch results for low-risk investors willing to go steady but surely in their long-term investments.

Comparing Schwab Healthcare ETF Performance With The Best Q4 2020 ETFs

Healthcare ETFs saw a tremendous uptick because of the Covid-19 worldwide pandemic in 2020. One among them is the Schwab Healthcare Fund, which guarantees stability for many investors across the country. On the other hand, it isn’t the only healthcare ETF that saw huge growth in the previous years. Here are three more best-performing Q4 ETFs that might see immense growth in the coming year.

ARK Invest Genomic Revolution Multisector ETF (ARKG)

Like Schwab Healthcare ETF, ARKG focuses on long-term capital growth. However, it invests 80% of its assets in different sectors, such as information technology, materials, energy, and healthcare. All its investment-oriented sectors focus on its goal of supporting the genomic revolution companies, including Twist Bioscience Corporation (TWST), Pacific Biosciences of California Inc (PACB), Teladoc Health (TDOC), and others.

Performance in the Last Five Years

The ARKG has nominal performance in the last half-decade, earning 94.68% value throughout its inception on October 31, 2014. It has an average expense ratio of 0.75% and has a Year-to-Date Total Return of 190.61%

  • Pros

As a multi-sector fund, ARKG has better stability potential than SWHFX theoretically. Schwab Healthcare ETF has an investment focus on biotechnologies, medical technologies, and relevant research and data-gathering ventures. On the other hand, ARKG focuses on technologies and utilities and their significant healthcare allocations, giving investors exposure to industrial and technological growth outside the healthcare market.

  • Cons

Truthfully, an ETF with more diversity will have higher stability yet only earn reasonable growth. The ARKG is not an aggressive earning fund. Like SWHFX, it focuses on long-term capital growth. Short-term hedge-oriented investors will find ARKG a stabilizing asset handy during economic downturns similar to mutual funds.

KraneShares MSCI All China Heal ETF (KURE)

The MSCI China All Shares Health Care 10/40 Index contains hundreds of China’s renowned healthcare institutions concentrating on medical technologies, research, biotechnologies, private healthcare, and more. KraneShares MSCI All China Heal ETF (KURE) monitors this index’s price and yield performance. In this light, it invests 80% of its assets in Chinese-focused healthcare companies, allowing it to track Chinese healthcare companies’ growth and provide investor exposure.

Performance in the Last Five Years

KURE reached 36.42% growth in the last two years. Overall, it has significantly grown since its inception on January 31, 2018, if you compare its performance with ETFs born in the same year. Furthermore, KURE has a Yield-to-Date Total Return of 53.11%

  • Pros

KURE is the perfect alternative to SWHFX because it focuses on the healthcare industry in China. Investors who see great progress in Chinese medical technologies and healthcare and looking for industry exposure will find KURE the best place to start.

  • Cons

However, KURE is non-diversified, meaning it invests only in Chinese healthcare companies and focuses on the MSCI All China Health Care 10/40 Index’s performance. It’s a gateway into the Chinese medical and healthcare industries, but your journey starts and ends only in-country.

Invesco DWA Healthcare Momentum (PTH)

The Dorsey Wright Healthcare Technical Leaders Index (DWHC) contains the fastest-growing healthcare sector companies across the United States. It selects only 30 of the most stable and strong healthcare companies across the country. The Invesco DWA Healthcare Momentum (PTH) focuses on investing 90% in these 30 companies’ securities, allowing investors exposure to any and highly-likely phenomenal growth.

Performance in the Last Five Years

PTH has significantly grown to 159.09% in the last five years. Furthermore, its Yield-to-Date Daily Total Return boasts a 66.19%, making it an appealing ETF for any discerning investor.

  • Pros

The DWHC has an unparalleled capacity to deliver exceptional returns by identifying the best healthcare sector performers. PTH ensures that investors will always get exposure as DWHC continues to update its list.

  • Cons

On the other hand, 30 securities from top performers is a small market. Betting on more than two dozen top-performing healthcare companies with high growth potential sounds like an excellent portfolio until they all experience limited growth.

Healthcare ETFs Aren’t Invulnerable, But They’re Efficient

Many investors dive straight to food and medical services, especially during bull markets. While undeniably a rocky investment road, its risk and payoffs are adequately acceptable for low-risk appetite investors.

The healthcare sector in any country will never cease to grow because of our innate need for excellent healthcare services. Despite their imperfections, healthcare ETFs, such as the Schwab Healthcare ETF, will always remain excellent choices.

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Index Fund vs. ETF: What’s the Difference?

Business Woman with Scale Comparing Index Funds vs ETF difference

Knowing the differences between an index fund and an ETF is important as these could help you with your finances and your strategies as an investor, both in the short and long run. But what are these things exactly, and which among them should you choose?

A lot of financial managers and professionals would understand that it is natural to get confused on these things because of some characteristics (like, for example, both are managed passively, yet one is more actively engaged with than the other).

One major characteristic that differentiates ETFs and index funds is you can buy and sell trades any time of the day, while with index funds, you can only buy or sell with prices already set at the end of the trading day.

Both types, however, have clear differences, and it would help you make more informed decisions as you buy or sell your investments in the future.

Index Fund Vs. ETF: An Overview

When it comes to investing, it is important to understand what makes an index fund and an exchange traded fund (or ETF) crucially different from each other. For one, ETFs are usually known to be more convenient and even flexible than most mutual funds.

Similarly, ETFs are those that can be easily traded when compared to traditional mutual funds and index funds. You can even purchase and sell ETFs at any time and cost lower than other mutual funds where they are only priced after the day has ended.

Furthermore, index mutual funds are usually perceived in the market as somewhat pooled investment avenues that are managed by an investment advisor, or financial management professional. An ETF on the other hand, is seen as baskets of securities that are being actively managed and traded in the market, just like stocks.

Difference Between ETF and Index Fund

Index Fund Exchange Traded Fund
Trading- Sell and Buy Priced only after the day has ended Any time of the day
Pooled Investment Yes No
Activity in the market More passive More active
Expense Ratio Relatively lower Relatively higher
Market Liquidity Less liquid More liquid

What Is An ETF?

As pointed out earlier, ETFs are incredibly liquid on the market (which in essence, means that you can trade these easily). Because they are highly liquid, the prices for these funds go down or up throughout the duration of the day. If you invest in ETFs, you will usually need to set aside a commission fee to some brokers in the market each time you make a trade.

It is, however, very notable that ETFs are typically and normally passively managed in the market, as these attempt to come up to par with an index benchmark, rather than outperform it. Also, if you are a person who wants to be more actively engaged in the market, and would want to be more, sort of hands-on on your investments, then ETFs would be more suited for people like you.

What Are the Types of ETFs in the Market?

1) Stock ETFs

Stock ETFs, in hindsight, is something that gives investors the opportunity to engage with baskets of equities without having to buy individual stocks in a specific sector of the market. The following are a couple of characteristics for stock ETFs:

  • Charges for management fees are low;
  • Stock ETF is ideal for new investors that eye for low costs with actively managed returns.
  • Stock ETFs is a good choice if you would want to diversify your financial portfolio using lower costs.

2) Sector ETFs

A sector exchange traded fund or sector ETF, is, as compared to stock ETFs, an investment that you would build through specific industry sectors. Here are the things you should know about this traded fund:

  • You can use a sector ETF to invest in an entire and specific industry without having to put together the individual funds and stocks belonging to that sector;
  • Because of its high liquidity, there barely are any tracking errors from the underlying index.
  • Assets are also passively managed when in an underlying index.

3) Commodity ETFs

As the term implies, these are goods that are being used as inputs in the economy. Those basic goods are seen as a potential for investments that can help cushion economies from the traps of inflation. Engaging in this needs to have a portfolio manager as well. But, what makes this different from the other ETFs in the stock market?

  • Commodity ETFs are avenues for investors to have less expensive as well as accessible opportunities to various commodities in the market index.
  • Commodity ETFs, exist as wide arrays of goods in the market, from gold to oil and even to agricultural goods such as livestock;
  • This type of ETF can, when designed, impact your risk as an investor, including your returns on your investments and your tax portfolio as well.

4) Bond ETFs

Bond ETFs are investment types that are usually invested specifically in financial bonds. It may look the same as a bond mutual fund because both of them carry on a portfolio of bonds but just with varying trading strategies.

  • Just like a stock ETF, bond ETFs are traded and managed very much passively, especially on the stock market.
  • Because traditional bonds exist and are relatively inaccessible to investors that have less money, bond ETFs make it easier for investors to engage in the stock market because they trade in major indexes and major stocks, such as the New York Stock Exchange.

5) Currency ETFs

What makes currency index ETFs very much different from other exchange traded funds is that they are financial items that are designed to give exposure on investments to foreign currencies (also known as forex). As usual, these are also being managed passively in the stocks. Here are a few other features:

  • With currency exchange traded funds, you won’t have to be burdened in investing with individual trades because of being exposed to various foreign exchange funds.
  • An investor like you can use currency funds like this to study forexes in the market, or provide a buffer for yourself from currency risks, or simply to diversify your investments and funds portfolio.
  • A currency traded fund may include having cash deposits, forex contracts, and even short-term debt that is denominated in a particular currency.

6) International ETFs

The last but not the least category of an ETF is an international ETF. An international ETF revolves around specializing in foreign-based securities in the market.

  • You can track global markets, or monitor a benchmark index of a specific country using an international ETF.
  • When investing, you can not only diversify your financial portfolio with an international ETF, but you can also expand your political and geographic risks in the market that are associated with such portfolios.

Charts and graphs of Index Fund

What Is an Index Fund?

Index fund shares is a branch under the category of a mutual fund that is designed to observe, track and compete on aspects of the financial market index. This includes the S P 500 index. These types of funds are expected to keep the market exposed to broader opportunities and with a lower expense ratio.

If you would like to maintain competitive retirement accounts, then an index fund should be the ideal financial portfolio holding for you. 401k accounts and IRAs are usually affiliated heavily on index funds. In other words, you use such funds to rather imitate the composition and performance of an index in the financial market. These have lower fees and operating expenses when compared to actively managed funds (meaning these are managed passively as well)!

Index funds are relatively more long term in nature, meaning, your index returns and capital gains for the fund are meant to get back to you at a relatively longer period of time. As compared to ETFs which are relatively actively managed funds, index funds are for those people who are more conservative and those who would take rather lesser risks when it comes to their funds.

Read more: Index Funds for Dummies

How Do ETFs and Index Funds Work?

Index funds are those types of funds that serve as a theoretical portion of the stock market. Index funds can represent huge or small companies or even those companies that you can segregate depending on which industry they are affiliated with, among others. Index funds are passive investments and include stocks in the process.

Now, because index funds, per se, are not investable in nature, index fund investors can still somehow put an investment through a mutual fund (as this is constructed to “imitate” or to “mimic” the aforementioned index).

With mutual funds, you wouldn’t have to spend much on administrative fees or on fund managers, or merely on shareholder transaction costs. So if you would want to become an investor with a lower expense ratio and become tax efficient, then a mutual fund would work perfectly for you.

ETFs, on the other hand, are considered as investing securities that come in forms of asset baskets. They can be sold or bought any time and any day, as long as an exchange can be made. This is very much different from a mutual fund, because you can only trade at particular hours of the day.

An investment advice professionals would give you on this is that if you want to engage in investing passively, ETFs are a way to go, as they are more knit together to equities and are more liquid when compared to mutual funds.

Choosing Between Index Mutual Funds and Index ETFs

As mentioned numerous times in this article, you can exchange ETFs at any time of the day because they are relatively more liquid than index funds. So, if you would want to actively engage in the market more often, then you should choose using ETFs than mutual funds.

It will be easier for you to choose between an ETF or an index mutual fund as investments after knowing that when you invest in an ETF, you will need to spend it on a brokerage account, a personal finance manager, or a commission share price every time you make a trade. This is very different with mutual funds, as lower operating costs are expected.

Another factor to help you choose between index funds and ETFs is that both are usually being managed passively. The reason behind this is that both try to come up with some match on an index benchmark, rather than to try to outperform it. But if you would want to have relatively actively managed funds, then you can choose investing on some types of ETFs.

Given that you now have more knowledge on the types, differences, and similarities between index funds and ETFs, which do you think suits your financial plans better?

Bottom Line

As a conclusion, the very basic and crucial things for you to remember is that, for one, index funds as mutual funds are more fit to those who would like their investments to be less complicated and wait for returns in the long term (such as merely investing on your long term retirement plan). Now if you would want to keep your investments simple and if you would want to minimize your expense ratios, then you will surely benefit with index funds over time.

On the other hand, funds ETFs are more suited for those who would want to keep their investing more hands-on. If you have more diverse investment strategies and would be willing enough to take higher risks, then exchange traded funds will work just right on you. Because of higher risks, you may buy and sell more actively and get capital gains in the short run.

Now, while you can get easily confused with these two major types of investments, all you have to do is remember which fund can easily be traded and which doesn’t, which is better for the long run and the short, among others. If you are looking for more knowledge and pro-tips about Stocks and Funds, just subscribe to our Investoralist’s Newsletter and be ready to equip yourself with the financial knowledge you deserve!

10 Best ETFs to Buy and Hold for Long-Term Investors

Man on Smartphone Searching For the Best ETFs to Buy and Hold

Renowned investors, such as Warren Buffet and George Soros, have always said that making your money work for you is the best way to work.

Truthfully, investing relies on your every decision, making it essential that you’re knowledgeable and well-informed of all entry and exit strategies with every share, stock, and investment vehicle you find potential.

One of the biggest challenges to making proper investments is constructing a well-rounded portfolio. However, “well-rounded” is a subjective term that differs with every investor.

On the other hand, both high and low-risk appetite investors agree: portfolio balancing depends on economic situations. Therefore, knowing different investment vehicles, such as exchange-traded funds (ETF), is always imperative.

Top 10 high-quality ETFs

During bear recessions similar to 2020, high-quality ETFs will have lower-priced entry barriers. This opportunity can give starting and experienced investors a chance to become part of the following funds’ growths:

1. S&P500 – Vanguard S&P 500 ETF (VOO)

  • Expense ratio: 0.03%, or $3 annually for every $10,000 invested
  • One-year return: 18%
  • Dividend yield: 1.8%

Any investor who has yet to purchase any ETF stocks that tracks an index fund will want to consider the Vanguard S&P 500 ETF (VOO). One of the best index funds available in the market, it reflects the U.S. economy’s current state, including the technology and biotechnology-oriented Nasdaq composite. The U.S. economy is a significant market that investors remain bullish despite any downturns, and VOO is the key to this top-level market exposure.

2. Gold – SPDR Gold Shares (GLD)

  • Expense ratio: 0.40% or $4 annually for every $10,000 invested
  • One-year return: 20.23%
  • Dividend yield: 0.0%

Gold might not directly correlate with the economy, but it still has a high worth across numerous markets. The SPDR Gold Shares (GLD) reflects the actual performance of gold prices in the market. It derives its value by subtracting gold’s current price against the trust’s operational costs. The GLD ETF has a very low expense ratio with extremely high one-year returns, making it an ideal choice for numerous investors.

3. Tech – Invesco QQQ Trust (QQQ)

  • Expense ratio: 0.20% or $2 annually for every $10,000 invested
  • One-year return: 47.02%
  • Dividend yield: 1.03%

Technology-oriented Invesco QQQ Trust (QQQ) monitors the Nasdaq-100 index’s price and complete performance based on the ETF’s decisions and performance. Nasdaq’s index is the direct reflection of the U.S.’ technology and biotechnology industries, both of which have continuously improved throughout the years. With a low expense ratio and exceptional one-year returns to date, this ETF is a long-term fund any investor wants to have.

4. Real Estate – Vanguard Real Estate ETF (VNQ)

  • Expense ratio: 0.12% or approximately $1 for every $10,000 invested
  • One-year return: -6.55%
  • Dividend yield: 3.45%

The real estate market isn’t in the best shape in 2020 because of the COVID-19 pandemic. However, real estate is always a rebounding asset, which the Vanguard Real Estate ETF (VNQ) prioritizes. Closely tracking the MSCI US Investable Market Real Estate 25/50 Index, VNQ makes its decisions using the index’s reports on all public REITs, valuations, and other real-estate relevant actions and investments. A non-diversified, aggressive stock, VNQ can go up and down at any period, but just like real estate values, it will always recover and give its investors high value.

5. Preferred stock – Invesco Preferred ETF (PGX)

  • Expense ratio: 0.52% or approximately $5 annually for every $10,000 invested
  • One-year return: 7.3%
  • Dividend yield: 4.91%

Renowned investor Warren Buffet has always been one to take calculated risks, and he believes preferred stocks always paved the way beyond any investment break-even. Invesco’s Preferred ETF (PGX) is an assortment of preferred securities while closely tracking the ICE BofAML Core Plus Fixed Rate Preferred Securities Index. One of the best non-diversified ETFs to buy, PGX invests most of its assets (80%) in its fund managers’ preferred securities in U.S. dollar-denominations using the underlying index.

6. Developed Market Stocks – Vanguard Developed Markets ETF (VEA)

  • Expense ratio: 0.05% or $0.50 annually per $10,000 invested
  • One-year return: 2.18%
  • Dividend yield: 2.11%

The FTSE Developed All Cap ex U.S. Index monitors 3,873 common stocks from all market caps sizes in Canada, Europe, and the Pacific. The Vanguard Developed Markets ETF (VEA) monitors and makes its decisions using the index’s data. Fund managers will replicate the target index by investing all of its assets in stocks making up the index to closely match the index. Truthfully, this is one of the best ETFs to buy in 2021.

7. Stable dividend – Schwab U.S. Dividend Equity ETF (SCHD)

  • Expense ratio: 0.60% or $6 annually per $10,000 invested
  • One-year return: 14.20%
  • Dividend yield: 3.55%

The Dow Jones U.S. Dividend 100 Index reflects the U.S. economy’s performance by evaluating its top dividend companies, such as UPS, Pfizer, Coca-Cola, Pepsi, and others. The Schwab U.S. Dividend Equity ETF (SCHD) is something you should buy and hold because of its dedication to closely tracking the Dow Jones 100 index. While not a truly diversified portfolio, you can receive great extra dividend income, which is a significant sign of market strength.

8. Emerging market stocks – Vanguard FTSE Emerging Markets ETF (VWO)

  • Expense ratio: 0.10% or $1 annually per $10,000 invested
  • One-year return: 20.40% (in 2019)
  • Dividend yield: 3.82%

Emerging market countries have shown that many industries can compete in the global arena with their top-notch performance. The FTSE Emerging Markets All Cap China A Inclusion Index monitors emerging market business growth. The Vanguard FTSE Emerging Markets ETF does not closely track the index but takes some samples to hold a diversified collection of well-balanced securities.

9. Small caps – Vanguard Total Stock Market ETF (VTI)

  • Expense ratio: 0.03% or $3 annually per $10,000 invested
  • One-year return: 30.80% (in 2019)
  • Dividend yield: 0.11%

The CRSP U.S. Total Market Index monitors 100% of all investable U.S. stock market businesses of all caps, including micro or startup businesses with regular activity in the New York Stock Exchange and Nasdaq. The Vanguard Total Stock Market ETF (VTI) focuses on taking small-cap samples from the index to create a diversified portfolio. With an affordable expense ratio and exceptional one-year returns, it’s a must-buy and hold ETF for any investor for those unpredictable rainy days.

10. Bonds – iShares Core U.S. Aggregate Bond ETF (AGG)

  • Expense ratio: 0.04% or $0.40 annually per $10,000 invested
  • One-year return: 8.68% (in 2019)
  • Dividend yield: 2.20%

The investment seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index. The index measures the performance of the total U.S. investment-grade bond market.

The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments with economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.

The U.S. investment-grade bond market is volatile yet has demonstrated exceptional growth in the previous years. The Bloomberg Barclays U.S. Aggregate Bond Index monitors the investment-grade market’s performance.

About 90% of iShares Core U.S. Aggregate Bond ETF goes into copying the index’s bond component securities. Bonds are a great safeguard during economic downturns, making this ETF an important buy decision for numerous investors.

Portfolio-Building: The Significant Role of ETFs

Truthfully, numerous investors worldwide minimize their individual stock investments thanks to the dependable and reliable opportunities in exchange-traded funds.

As securities, your ETFs are essentially mutual funds – which comprises stocks, bonds, and other assets. However, unlike most mutual funds, high-quality ETFs focus on particular indexes. For example, the Schwab U.S. Equity Dividend ETF (SCHD) focuses on top-performing U.S. company dividends.

For most investors, they do not expect ETFs to have stellar growth in the next five years. However, they expect them to be the best safety nets against any possible economic downturns or bear markets. Depending on your chosen ETF’s quality, you’ll recoup and preserve the majority of your bull-market investments.

ETFs do not bet for or against the stock market. Most ETFs, such as the ones we’ve listed above, focus on stability and reasonable income. Even the most aggressive exchange-traded funds following and imitating the S&P 500 index, such as the Vanguard S&P 500 ETF (VOO), have relative investment safeguards allowing them to float evenly even during the most disastrous economic downturns.

Therefore, it’s wise to see ETFs as your safeguards allowing you to have higher risk appetites in prospective growth and secondary markets. A wise investor will take calculated risks to grow at any given point.

Check out here the Best Fidelity Mutual Funds for Bear Market.

Choosing Between Long and Short-Term ETFs

The majority of ETFs we’ve chosen above are long-term because of their effective bear market shielding and a low-priced barrier to entry. On the other hand, short-term ETFs do exist.

These short-term funds focus on bonds with high-interest rates, allowing them to cash in once all debtors have repaid. Unfortunately, it carries a high risk of debtors defaulting and failing to pay for their debts.

Long-term ETFs focus mostly on having a well-rounded approach depending on their market of focus. On the other hand, short-term ETFs see enormous growth within a quarter, making them a viable option for high-risk appetite investors seeking exponential growth.

With careful research, it’s possible to find the best-quality short-term ETFs in the market that focus on debtors with low credit risk.

For example: The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) focuses on high-quality debtors with a proven track record of debt repayments. In doing so, it has achieved popularity, amassing a significant investor following.

Low-risk appetite investors will always find peace-of-mind and slow-but-sure growth with high-quality long-term ETFs, such as those that we’ve listed above. On the other hand, if you have enough long-term funds on your portfolio, taking some calculated risks with short-term ETFs, as you would with day trading, is always a good portfolio-expanding investment move.

Understanding Market Exposure

The stock market is more than an exchange center of publicly-available business shares from different local companies. Additionally, it allows investors to obtain share ownership of multinational companies, commodities, and any industry they wish to enter. Investors must have in-depth knowledge regarding market exposure to both well-balanced and risk-aggressive portfolios.

An investor’s market exposure can be correlated and non-correlated. The oil and agricultural industries are different but have a correlation because oil prices affect agricultural goods. Higher oil prices create logistical frictions and obstacles for agricultural industries.

On the other hand, the pharmaceutical industry has no direct correlation with general goods manufacturing industries. The price of medicine does not directly affect the rise or fall of general good values, clearing them of any connection.

An aggressive or well-balanced portfolio identifies these correlations and welcomes or rejects them depending on the investor’s short and long-term goals. Short-term investors may choose to invest most of their resources to correlated industries, enabling them to propel growth at a higher risk of loss. On the other hand, long-term investors wanting a diversified portfolio will want to own non-correlated ETFs

High-Quality ETFs Makes Balancing Your Portfolio Easy In 2021!

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Fidelity Robo Advisor: What You Need to Know

Businessperson And Robo investment shaking hands

If you aspire to be successful in investing, but clueless on when and where to start your path, the lack of knowledge may cause confusion and make investing seem complicated and intimidating. Fortunately, there are a bunch of options you can seek to make things easier. Where one does not need a background in finance and which does not require a large amount to put your investables in the stock market. A popular example would be robo-advisory services.

Automated or digital investing platform or more commonly known as a Robo Advisor, is an investment advisory service that can be acquired online. To put it simply, it’s an online portfolio management service, where your basket of goods are managed by artificial intelligence. Revolutionary, isn’t it?

One of the companies that offer this service to potential and experienced investors is Fidelity. Fidelity’s robo advisor is called Fidelity Go.

Robo advisor or Fidelity Go in particular, claims to benefit their clients through setting achievable goals while taking a more passive approach with lesser management fees, or none at all. Distinctly, for investments below $10,000.

What Is a Robo Advisor?

Robo Advisor is an automated investing program powered by machine learning technology. It calculates ideal financial decisions for their clients based on the information that it was provided. Basically, the digital counterpart of an investment advisor that would otherwise be a real person.

Generally, a Robo advisor’s purpose is to build and manage portfolios. Which can render you with little to no effort at all.

How Do Robo Advisors Work?

Not all Robo Advisors function in the exact same way, nor do they offer the same features. However, most of them are still identical in a way. Here’s a gist of how they basically work.

As previously mentioned, it is a system that utilizes machine learning technology or artificial intelligence. This means that they feed the system with data gathered by asking the investors specific and general questions about their personal preferences and their financial objectives. Questions usually include one’s risk tolerance (aggressive or conservative), total investment amount, preferred profit amount, preferred turnaround time for profit, and more.

From there, the algorithm processes the data and provides clients with market predictions and data based conclusions with reasonable accuracy. The result will likely consist of suggestions regarding portfolio allocation. The portfolio allocation will indicate the specific commodities you should invest in, like funds, stocks, bonds, or a combination of such.

Moreover, clients are also presented with investment strategies that boost their chances of achieving their desired goal, within their desired timeframe. The more information you feed the system, the more accurate and evident its conclusion.

Once an investor agrees and opens a Robo advisor account, the Robo advisor will then integrate actions that it deems necessary to properly build and maintain the portfolio. Of which, the clients will be notified and updated online on a regular basis.

What’s a Hybrid Robo Advisor?

A hybrid Robo advisor is an upgraded investing solution that involves both the technological and human aspects of an investment advisory program.

Fundamentally, it leverages the benefits of a Robo advisor with active investment strategies instead of a more passive approach. With no guaranteed performance and minimal options to educate Robo-advisors on the art of trading, or the contemporary market issues that affect investment options, the unguaranteed effectiveness of Robo-advisors are offset by human integration. Basically, the elements of a Robo-advisor with a breathing financial advisor steering the wheel.

Based on economic and market conditions, risks differ over certain periods of time. A hybrid Robo advisor system is designed to overcome these risks and execute investment strategies according to market fluctuations. In essence, it creates a more responsive portfolio that makes the most out of emerging trends in the whole investment landscape. Fidelity Go is a prime example of a hybrid Robo advisor.

Can Robo Advisors Help Manage Some of the Risks in Investing?

Essentially, yes. As previously mentioned, market fluctuations are inevitable. The great thing about the inclusion of machine learning technology in Robo-advisory is that it provides an efficient market hypothesis, generating a blend of appropriate investments that are calculated to manage and surpass risks.

How Can Robo Advisor Help You?

It is wiser to evaluate both sides of the coin in order to assure and accrue financial investment counseling of a higher caliber, we listed below the key pointers of things you need to know how Robo Advisor can help you.

Where Robo-Advisor Shines:

1. Easy Account Setup

Most Robo-advisory sites provide a brief tutorial on how to sign up, including a tutorial on how their robot advisor service works. In Fidelity Go specifically, you can check the video on their sign up page.

Upon signing up, you will be presented with a questionnaire that will assess the accurate investments for you, based on the data you input.

The questionnaire will include your financial objectives. How much is your start up capital, when and how much are you expecting for the return, how aggressive or conservative you are in terms of risk tolerance, and other information that directly affects your financial objectives.

Once you have answered, they will provide you with the most ideal game plan for your investables. This includes strategies, a calculation of the potential value of your investments over time, and an estimation of possible additional costs.

After that, setting up an account is just as easy as signing up on any website. You will be asked to input your name and other personal information. You will then be redirected to a funding page where you will connect your bank account so you can transfer the funds.

Moreover, this procedure proves to be time and cost efficient for the reason that in order to do this in a regular setting, you will have to set an appointment or endure a long phone call with your financial advisor regarding your information. This kind of accessibility is what sets this system apart from the traditional investing programs.

2. Goal Setting

Every investor’s goal is to gain more than what they have invested, whether it be in a limited or lengthy time frame. It is common knowledge in the market that obtaining a diverse portfolio is more likely to secure a more abundant and positive outcome for your financial assets. Robo advisor does exactly that.

With a Robo advisor, you are primarily granted with instant diversification. This is because Robo advisors tend to invest in Index Funds and exchange-traded funds (ETFs) to maintain a diverse portfolio. For example, it is likely that your Robo advisor will recommend investing in the S & P 500 index. S & P 500 includes the top 500 companies in the market.

The logic of this is that, as opposed to selecting just one, S&P 500 will provide you more security because you are always betting your money on the best performing companies. Additionally, since you are not necessarily investing in a fixed set of companies, just on the top 500 on the list, this allows your portfolio to gain more market exposure.

3. Customer Service

The main difference between a robo advisor and the traditional investment program is automation as opposed to personal attention. Generally speaking, this approach is more feasible to investors that favor an expedited process with minimal costs. Switching to digital offsets the various administrative and management fees.

In particular, Fidelity Go follows a tiered pricing system. They only collect 0.3% of your account balance. This means that for every $10,000 you invest, only $3 will be deducted on your balance. If you reach or exceed an investment initial capital of $50,000, the new percentage is priced at only 0.35%.

Additionally, they don’t require clients to pay advisory, trading, transaction, and rebalancing fees. Perfect for those who are interested in investing without much experience and capital.


Robo advisors like Fidelity Go are fairly easy to use. Fidelity itself actually provides it’s clients a mobile app they can use to further improve accessibility to their assets. Through their digital platforms, investors are regularly updated on a monthly or weekly basis. The report usually contains a summary of their weekly investment reports, investment strategy, and investment results. Through desktops or mobile apps, you can access these information in just a few clicks.

Another key feature is the ability to tap into your index funds and ETFs without exerting too much effort, you just have to input the funds on a monthly and weekly basis.

Globally, the robo-advisor industry is projected to double its AUM to $2 trillion in the next 3 years with an even better projected user growth of 21 million by 2022.

Where Robo-Advisor Fall Short:

1. Account Services

As initially stated, each robo advisor differs in the features they offer. Some of them are better than the other in different aspects.

A downside of Fidelity Go is that it lacks retirement arrangements under their goal attainments. This is an issue to investors who are seeking to invest for their retirement plans. Nevertheless, Betterment and Wealthfront are counterparts that offer this feature.

Another drawback of Fidelity Go is that they don’t allow transferring current assets to Fidelity and other firms. The only way to open a new account in Fidelity Go is with cash.

2. Portfolio Construction

Another negative aspect of Robo advisor is the limited customization of your portfolio. Previously, it was mentioned that Robo advisors primarily endorse index funds and ETFs. For this reason, if you are interested in acquiring stocks concerning precious metals or real estate, you are not necessarily allowed to do this, they simply don’t provide the option to.

Robo advisors are not necessarily great for everyone because it depends according to your specific needs. If you have a significant amount of wealth and a large number of assets, this may not be for you. This option may be more fitting for investors with minimal assets.

3. Portfolio Management

The main point of investing is to increase your initial financial assets so you can use it for future financial needs. With this in mind, you should ask yourself if you are really comfortable in granting Robo advisors access to your assets and take over your portfolio. After all, it’s your hard-earned money.

Robo advisors lack the ability to assemble a specifically tailored account. This is a key feature some investors seek and may not like the idea of its unavailability.

4. No Tax-Loss Harvesting

Tax-Loss Harvesting, also known as tax selling, is a method of reducing taxes while conserving the predicted risk and return profile of a certain portfolio. How it works is that it collects former undetected investment losses to offset taxes on other profits and income on your portfolio. Additionally, investors have the option to invest these tax savings back into their portfolios to yield significant growth.

However, this is quite challenging to achieve with Fidelity Go. They don’t normally set a band range to prompt a rebalancing. Because of the undetermined balancing, your Robo advisor account might face an unexpected tax deduction at an unanticipated time.

How Do I Know If a Robo Advisor or Hybrid Robo Advisor Is Right for Me?

There is no definite answer to this. In order to reap optimal results from Robo-advisors like Fidelity Go, it is important for investors to weigh the advantages and disadvantages, along with their specific preferences and financial objectives. This will help determine the most suitable integration of this technology in your investment ventures.

Bottom Line

Robo and Hybrid Advisors like Fidelity Go are still recognized as legitimate methods. However, one should keep in mind that the effectiveness of Robo-advisors is neither consistent nor guaranteed. Invest smart and research to avoid unfortunate outcomes.

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