A 30-Year-Old Asks Where's The Best Place To Invest $5,000 Per Month: 'Finally In A Place Where I Can Steadily Invest'
The Nasdaq-100 also outpaces the S&P 500 year-to-date and over the past year. When the stock market rallies, funds that track the Nasdaq-100 tend to grow faster than funds that track the S&P 500.
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Focus On Low-Cost ETFs
While the S&P 500 and Nasdaq-100 are two popular benchmarks for ETF investors, Redditors emphasized the importance of investing in low-cost ETFs. While each investor has a different definition of a low-cost ETF, you'll be OK if you have an ETF with an expense ratio below 0.20%.
You'll get the lowest expense ratios if you invest in passively managed ETFs. These funds follow a predetermined benchmark instead of doing anything fancy like selling covered calls to increase the yield. You can find some passively-managed ETFs with expense ratios below 0.10%.
The expense ratio indicates how much money you must pay the fund manager to keep your money in the ETF. This expense happens automatically within the fund, so you'll never see the money directly leave your account. If you have $10,000 in a fund with a 0.10% expense ratio, you only have to pay a reasonable $10 to keep your money in the fund each year. However, if that same fund had a 1% expense ratio, you would have to pay $100 per year for that fund.
Investors are willing to pay extra for funds that significantly outperform the market, but most actively-managed funds don't hold up to the S&P 500. It's better to invest in low-cost ETFs than it is to try your luck with an actively-managed ETF with a high expense ratio.
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