Best ETFs For First Time Investors
ETF investing is the safest and easiest investing strategy for most long-term investors. With this strategy, you won't buy the wrong stock if you buy all the stocks. As Jack Bogle, the founder of Vanguard, once said: "Don't look for the needle in the haystack. Just buy the haystack."
The Only 4 ETFs You'll Ever Need
ETF investing is the safest and easiest investing strategy for most long-term investors. With this strategy, you won't buy the wrong stock if you buy all the stocks.
As Jack Bogle, the founder of Vanguard, once said: "Don't look for the needle in the haystack. Just buy the haystack."
This guide covers the 4 ETFs that can help you outperform most investors:
- S&P 500 ETF — The gold standard
- All World ETF — Global diversification
- US Growth ETF — Higher potential returns
- Dividend ETF — Passive income focus
S&P 500 ETF — The Gold Standard
This ETF tracks the top 500 companies in the US and is considered the gold standard among ETFs.
Why It's So Successful
- Long track record of doing really well
- Outperforms 95% of funds out there
- Has the seal of approval from Warren Buffett himself
Self-Cleansing Mechanism
The S&P 500 has strict criteria:
- Companies must be profitable over the last few quarters to join
- Companies that underperform for too long get kicked out
- You're always investing in the top-performing companies at any given time
Top Holdings
- Nvidia
- Microsoft
- Apple
- Amazon
- META
- And more familiar names
Sector Breakdown
- Information Technology: 32%
- Financials: 14%
- Consumer Discretionary: 10%
- Other sectors make up the rest
Historical Returns
The S&P 500 has delivered an average annual return of around 10% — but there's a big caveat.
5-Year Investment Period (1995-2025):
- Returns ranged from -6% to +24% annually
- High volatility risk
15-Year Investment Period:
- Returns ranged from 4% to 15% annually
- Much narrower range
Key takeaway: The longer you stay invested, the closer you'll get to the average 10% return.
Recommended ETFs
CSPX (iShares Core S&P 500 UCITS ETF)
- Expense Ratio: 0.07%
- For every $1,000 invested, you pay only $0.70 in fees
- Accumulating — Reinvests dividends for compounding
- Ireland-domiciled — Only 15% dividend withholding tax (vs 30% for US-domiciled ETFs like VOO, SPY, or S27)
SPYL (SPDR S&P 500 UCITS ETF)
- Expense Ratio: 0.03% (even lower)
- May require extra steps to buy on some brokers like Interactive Brokers
- Could incur higher commission if bought via normal method
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Best ETFs For First Time Investors
All World ETF — Global Diversification
Even though the S&P 500 is a strong index, the world is a very big place full of investment opportunities beyond just the US.
Why Go Global?
- Country concentration risk — If the US economy faces challenges, your portfolio could take a hit
- There have been many periods when international markets outperformed the US
- Cast a wider net by investing in top companies from around the globe
Recommended ETFs
VWRA (Vanguard FTSE All-World UCITS ETF)
- Expense Ratio: 0.22%
- Holdings: Over 3,600 companies
FWRA (Invesco FTSE All-World UCITS ETF)
- Expense Ratio: 0.15% (slightly lower)
- Holdings: 2,422 companies
Both ETFs deliver similar returns — you won't go wrong with either choice.
Geographic Breakdown
- US: 62%
- Japan: 6%
- UK: 3.6%
- Other countries make up the rest
Top Holdings
- Apple
- Microsoft
- Nvidia
- And thousands more companies globally
Historical Returns
- All World ETF: ~9% annualised return
- S&P 500: ~10.7% annualised return
Even though this ETF is much more diversified globally, its long-term return isn't far behind the S&P 500.
Who Should Consider This
If you want to diversify beyond the US while still capturing growth from top companies worldwide, this is a smart choice.
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US Growth ETF — Higher Potential Returns
For investors who want higher potential returns and have a bigger risk appetite.
QQQ (Invesco QQQ Trust)
The most well-known option, tracking the Nasdaq-100 index.
What's in the Nasdaq-100:
- Top 100 non-financial companies
- Many tech giants driving innovation and growth
- Also includes non-tech companies like Costco, PepsiCo, and Starbucks
Sector Breakdown:
- Technology: ~57%
- Consumer Discretionary: ~19.7% (includes Amazon, Tesla, Netflix)
Risk Warning
Many names in this ETF are fast-growing companies with potential for higher returns. However, they also come with higher volatility.
- During tough times, QQQ can fall a lot more than other ETFs
- You need to be mentally prepared for big swings — both up and down
Alternative Growth ETFs
QQQM (Invesco Nasdaq-100 ETF)
- Expense Ratio: 0.15% (lower than QQQ)
- Same Nasdaq-100 exposure
- More cost-efficient for long-term investors
SCHG (Schwab U.S. Large-Cap Growth ETF)
- Expense Ratio: 0.04% (ultra-low)
- Holdings: Over 200 companies
- Tracks large-cap growth stocks across both Nasdaq and NYSE
- Includes companies not in Nasdaq-100: Visa, Eli Lilly, Home Depot
SCHG Selection Criteria:
- Projected P/E ratio
- Projected earnings growth
- Price-to-book value
- Dividend yield
- Trailing revenue and earnings growth
Even though SCHG holds more companies, its performance has historically been quite comparable to QQQ.
Who Should Consider This
If you're looking for a growth-focused ETF with broader exposure and ultra-low fees — without sacrificing returns — SCHG is a compelling alternative for long-term investors.
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Dividend ETF — Passive Income Focus
For investors who want a steady stream of income coming in every few months.
Why Dividend ETFs?
- Invest in well-established companies with strong history of paying regular dividends
- Companies tend to be more mature and financially stable
- Lower risk compared to growth-focused ETFs
- Good for investors who want passive income and more stability
Recommended ETFs
SCHD (Schwab U.S. Dividend Equity ETF)
- Expense Ratio: 0.06%
- Holdings: Top 101 high-quality US dividend-paying companies
Selection Criteria:
- Dividend yield
- Dividend growth
- Financial strength metrics
Top Holdings:
- Coca-Cola
- Pfizer
- Verizon
- Companies known for steady cash flow and consistent payouts
Tax Warning: Because SCHD is domiciled in the US, non-US residents will be slapped with a 30% dividend withholding tax, which can significantly reduce overall returns.
VHYD (Vanguard FTSE All-World High Dividend Yield UCITS ETF)
- Expense Ratio: 0.29%
- Ireland-domiciled — Only 15% dividend withholding tax
- Holdings: 2,000+ large and mid-cap companies globally
Geographic Coverage:
- US
- Japan
- UK
- Switzerland
- Canada
- And more countries
VHYD is a great option if you want to earn dividends while reducing your geographic concentration risk.
Which ETF Should You Choose?
It depends on your investment objective and risk appetite.
For Beginners
Recommendation: All World ETFs (VWRA or FWRA)
- Greatest diversification
- Good balance between risk and reward
For Young Investors (20s-30s) With Higher Risk Appetite
Recommendation: Growth ETFs (QQQ, QQQM, or SCHG)
- Potential for higher returns
- Can handle more volatility over long time horizon
For Risk-Averse Investors
Recommendation: S&P 500 ETF (CSPX or SPYL)
- Still want decent potential returns
- Prefer lower volatility than growth ETFs
For Near-Retirement or Passive Income Seekers
Recommendation: Dividend ETFs (VHYD)
- Steady income stream
- More stable, mature companies
- Tax-efficient for non-US residents
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Summary
The 4 ETFs You'll Ever Need
1. S&P 500 ETF
- Best options: CSPX (0.07%) or SPYL (0.03%)
- Top 500 US companies
- ~10% average annual return
- Self-cleansing mechanism keeps only top performers
2. All World ETF
- Best options: VWRA (0.22%) or FWRA (0.15%)
- 2,400-3,600 companies globally
- ~9% average annual return
- Best diversification across countries
3. US Growth ETF
- Best options: SCHG (0.04%), QQQM (0.15%), or QQQ
- Tech-heavy, fast-growing companies
- Higher potential returns but more volatility
- Best for investors with higher risk appetite
4. Dividend ETF
- Best options: VHYD (0.29%) or SCHD (0.06%)
- Mature, stable companies with regular payouts
- VHYD is more tax-efficient for non-US residents
- Best for passive income seekers
Quick Reference by Investor Type
- Beginners: VWRA or FWRA (All World)
- Young investors with high risk appetite: QQQ, QQQM, or SCHG (Growth)
- Risk-averse investors: CSPX or SPYL (S&P 500)
- Near retirement / income seekers: VHYD (Dividend)
Key Tax Consideration
- Ireland-domiciled ETFs: 15% dividend withholding tax
- US-domiciled ETFs: 30% dividend withholding tax
For non-US residents, Ireland-domiciled ETFs are generally more tax-efficient.
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This is not financial advice and is for educational purposes only.