The 4 rules
Broad exposure
Total-market or S&P 500; global if you want extra diversification.
Good Examples:
- • VTI (Total US Stock Market)
- • VT (Total World Stock Market)
- • VEQT (Global All-Equity)
Low fees
Expense ratio matters—under 0.20% is a good rule of thumb.
Fee Comparison:
- • Great: 0.03-0.05% (VTI, VOO)
- • Good: 0.05-0.20% (Most index ETFs)
- • Avoid: 0.50%+ (Active funds)
Liquidity
Higher assets/volume = tighter spreads.
Look For:
- • Assets: $1B+ preferred
- • Volume: 100k+ shares/day
- • Spread: <0.05% bid-ask
Simplicity
Fewer funds, clearer strategy.
Start Simple:
- • 1 fund: Total market
- • 3 funds: US/Intl/Bonds
- • Avoid: 10+ thematic ETFs
Beginner-friendly ETF examples
| ETF | Expense Ratio | What It Holds | Best For |
|---|---|---|---|
| VTI | 0.03% | Total US stock market | US-focused beginners |
| VOO | 0.03% | S&P 500 companies | Large-cap focus |
| VT | 0.08% | Global stocks (US+Intl) | Global diversification |
| VEQT (CA) | 0.24% | Global equity allocation | Canadian one-ticket |
| VFV (CA) | 0.09% | S&P 500 in CAD | Canadian S&P exposure |
Red flags to avoid
Complex/Risky ETFs for Beginners
❌ Leveraged/Inverse ETFs
- • 2x/3x daily leverage
- • Complex decay over time
- • Examples: TQQQ, SQQQ
- • For day traders, not investors
❌ Niche Thematic ETFs
- • Single industry/trend focus
- • High fees (0.50-0.95%)
- • Examples: Cannabis, robotics
- • Speculation, not core holdings
How to research an ETF
Quick Research Checklist
- 1. Check the expense ratio – Find on fund company website or broker
- 2. Look at the holdings – What companies/sectors are in it?
- 3. Review total assets – Prefer $500M+ in assets
- 4. Read the fact sheet – One-page summary of strategy
- 5. Compare alternatives – Similar ETFs from other providers
Building your first ETF portfolio
Ultra Simple (1 Fund)
VTI or VT or VEQT
Total market exposure in one fund
Simple Balanced (3 Funds)
US Stocks
VTI/VOO
Intl Stocks
VTIAX
Bonds
BND
Frequently Asked Questions
How many ETFs do I need?
1–3 for most beginners. One broad market fund gives you thousands of stocks. More funds = more complexity without much benefit.
Dividends or accumulation ETFs?
Either works—focus on total return. In taxable accounts, accumulating (reinvesting) can be more tax-efficient.
Should I pick ETFs based on past performance?
No. Past performance doesn't predict future returns. Focus on low fees, broad exposure, and consistency with your plan.
What's the difference between ETFs and index funds?
Both track an index, but ETFs trade like stocks (intraday) while mutual funds price once daily. ETFs often have lower minimums.