Has investing become easier because more information and products are available today, or has it gotten more difficult due to the overwhelming number of choices?
I tend to believe it’s the latter, as the paradox of choice suggests that fear of making the wrong choice can discourage a person from investing.
Some advocate for purchasing ETFs to avoid the need to select individual securities. Yet, in the US alone, there are 3,109 ETFs, showcasing the breadth of options but also the complexity of choice.
Of course following the popular ETFs can make the decision easier. The S&P 500 ETF remains a favorite, boasting over $1 trillion in assets, with the three largest ETFs all tracking the S&P 500.
Invesco QQQ Trust is another popular ETF but some investors might find it too narrowly focused on tech stocks and too volatile.
Even with the S&P 500’s diversification and stellar century-long return performance, some investors question whether US dominance will persist throughout their own investment horizon.
For those seeking utter simplicity, a subculture of investors on Reddit endorses the “buy VT and chill” philosophy. There’s even a T-shirt for it on Amazon.
VT, the Vanguard Total World Stock Index Fund ETF, includes stocks from nearly every global corner, totaling 9,767 holdings. While it is predominantly invested in North America (63.8%), it is poised to adjust allocations should global power dynamics shift, sparing investors from needing to forecast geopolitical trends.
This approach suits investors indifferent to future global outcomes, advocating for a singular investment in one ETF and disregarding the rest. Should global stock markets falter, it’s a shared fate with no refuge anyway.
For US investors, VT is a fitting choice, whereas international investors might lean towards the Vanguard FTSE All-World UCITS ETF (VWRA) for tax advantages due to its Ireland domicile, reducing dividend taxation from 30% to 15%.
Opting for VT (or VWRA) might be straightforward, but it’s hardly easy. Similar to weight loss, which requires less eating and more exercising—a simple concept that’s challenging in practice—investing in a 100% equity ETF is simple, but holding it through stock market crashes is anything but easy.
