I am a young investor who is still in college. I recently started up a Roth IRA, and I am looking to make my yearly $2000 contribution. I have heard from several sources that Spiders (SPY) are a good choice for long term investing. I am planning on having the stock for around 40 years (since I'm only 20, and I can't touch it till I'm 59 1/2). I also know that there are fees associated with owning ETF's, but they seem to be minimal when compared to the long term profits gained when holding the stock. I have also invested in other companies, but I want more security in my retirement fund. I was also strongly considering Johnson & Johnson, and GE. I constantly read articles on how investors' portfolios and also mutual funds consistently underperform the S&P 500. Going with an if you can't beat em- join em attitude, would Spiders be a wise choice for a Roth IRA? Thanks
For someone who is young, moderately aggressive, and believes in the stock market, Spiders are an appropriate choice. Keep in mind that you will pay brokerage commissions each time you buy. Some brokers will automatically reinvest the dividends for free; others will make you wait until your next purchase.Very few brokers allow you to buy fractional shares with cash. You probably won't be able to put the whole $2000 (this year) to work.
A better way to do that would be to use the vangaurd s/p 500. you will avoid the transaction fee, you can buy fractional shares, and they will even make the transactions for you on a periodic basis to acheive dollar cost averaging. The etf transaction cost are to high to make repetitive puchases of a small amount.
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