The S&P 500 Is Not Enough: My 3-Stock Starter Portfolio for New Investors
Index funds still have their place in most people's portfolios. But some individual stocks are light on risk and long on reward.
Overview
Are you new to the stock market? Maybe you're watching from the sidelines, looking for the right picks to start with. Or perhaps you're still just trying to learn the mechanics of buying a stock.
Wherever you are in your journey, I'm sure by now you've heard the virtues of owning an index fund like the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) or the Vanguard S&P 500 ETF (NYSEMKT: VOO), both of which simply mirror the performance of the S&P 500 (SNPINDEX: ^GSPC) itself. This index is a proxy for the near-entirety of the stock market in that it holds stakes in 500 different stocks that make up more than 80% of the market's total value, which means while your position in an S&P 500 index fund will never beat the market, it won't underperform it either. You'll simply match its long-term average annual gain of 10%, with some years better than others.
Details
I'd never deny that buying and holding a true "forever" position in an S&P 500 index fund is a little bit... shall we say, ho-hum? Picking a couple of individual stocks can make matters much more interesting.
Source
Originally published at www.fool.com.