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one of the best ETFs on planet Earth is
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QQQ which has a 10-year average return
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of
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17.38%
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vgt has a 10-year average return of
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19.6% and vti has a 10year average
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return of
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11.15% having those three together in a
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supercharged portfolio full of Heavy
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Hitters would be making you bank with
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returns like that on average between the
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three that's like a 15% return and if
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you were investing just $500 per month
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with a return like that in 25 years
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you'd have over
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$1.3
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million off of Just investing $500 per
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month to make returns like that you're
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going to want to make sure and cut down
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on any mistakes in ETF investing and in
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this video I'm going to go over three
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huge mistakes and how to fix them to be
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a very successful investor the first has
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to do with what I just started Ed with
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and that's looking at just Total return
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here's the thing about looking at just
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that total return though while each one
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of those ETFs at the beginning of this
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video were solid ETFs and each one of
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them had obviously an amazing return
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picking only the top ones with the
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highest returns for your portfolio total
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may be a huge mistake when we look at
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those first two ETFs the first one was
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QQQ and as you can see here it's huge in
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technology over 57% is all technology
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the top 10 Holdings are reputable names
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like apple Microsoft Amazon and Nvidia
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but when we look at that other ETF vgt
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we can see that it is full of all
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information technology so while QQQ was
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57% this 100% is information technology
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so you're getting the same thing in two
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different places and when we look at the
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types of companies that are within vgt
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we see apple Microsoft Nvidia again and
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specifically the percentage of the fund
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40 % of this is in apple and Microsoft
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so when we look at these two and we look
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at this overlap between the two you can
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see that 33% of qqq's Holdings are also
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in vgt as far as weight about 50% is
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weighted between the two so this means
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that you're basically buying the exact
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same thing or very very similar to the
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same thing just paying for it in two
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different places if you're buying QQQ
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and it has a high amount of apple and
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Microsoft and then you're buying into
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vgt who has a super high amount of apple
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and Microsoft you're kind of just buying
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the exact same thing but putting your
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money in two places like I said this
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isn't necessarily a huge wrong but it
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could be and the way some of you are
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doing it definitely is now yes there's
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going to obviously be a bunch of overlap
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between a fund whose big priority is
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technology which is QQQ and then one
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that's literally called a technology
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fund vgt so you can see the similarity
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there one that a lot of people kind of
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forget about is when you're having that
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foundational type ETF one like vti most
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people have either Vu or vti in their
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portfolio and then they add things to it
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so when we look at QQQ versus
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vti we're going to see that there's
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still a huge amount of overlap
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especially by weight here 93% of qqq's
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100 Holdings are already in vti so if
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you have vti and you're buying QQQ you
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already have 93% of that in your vti
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exposure you can also see down here that
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we have a bunch of overlap in
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specifically these companies Apple
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Microsoft Amazon Nvidia and Google but
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the mistake is not what some people
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would make you think there's a lot of
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people that think that fund overlap just
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by itself is the bad thing and that is
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incorrect just because you're buying
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something that you already have a little
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piece of over here doesn't make that bad
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especially if the company's good right
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like for me I really like apple and
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Microsoft and I want a bunch of that in
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my portfolio those are the two biggest
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companies that we have and two of the
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strongest and longterm I see them having
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competitive Advantage so I want a lot of
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exposure there so it's not fund overlap
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that's the problem the problem comes
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when you don't understand what the
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overlap means and how it actually
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affects your portfolio overall main
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takeaway from this point number one is
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that you need to understand that you do
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have fund overlap if you have it and
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then how much of it you actually have so
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in the example that I've gone through so
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far we looked at QQQ vgt and vti as long
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as you understand all of the Holdings
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within all of them and then how much of
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a percentage you actually own and which
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ones are higher weighted than others
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that's going to be important for you
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moving forward because you should
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understand that in each one of them
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you're buying into Apple in each one of
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them you're buying into Microsoft and
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Nvidia so then if you're looking to
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invest in individual company and you
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want to add stock to that ETF portfolio
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it's probably not the most beneficial
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idea for you to add another share of
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Apple or another share of Microsoft
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because you're already so heavily
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weighted with what you already have but
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if you do your research and you just
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really really like that company and you
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are totally fine having of your total
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portfolio 50% be apple that's not the
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craziest thing in the world as long as
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you understand that that does have a
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little bit higher of risk but the best
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investor to do it does have a portfolio
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with a very high amount of just Apple so
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understand what's in your portfolio
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understand what fund overlap is and then
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make your decision off of that the next
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mistake and number two has to do with
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diversification as well but this is one
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of the biggest mistakes that I
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definitely see happen all the time it
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kind of piggybacks off the first one
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because traditionally the way to invest
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the most optimal way to invest was this
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idea that you should have very little to
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no fund overlap whatsoever ever and so
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diversification is very very important
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and so if you're investing in two things
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they need to be totally separate things
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or at least that's what they used to say
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and this was the idea of that old three
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fund portfolio that did work for a while
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but nowadays we have an update but
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anyway everyone agrees that a portion of
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your portfolio should be us equities or
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US stocks and that would be a broad
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Index Fund like the S&P 500 or the total
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US Stock Market that's the first part of
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the three fund portfolio then in the old
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three fund portfolio they wanted
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something that was also stocks but
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totally opposite from that first part so
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if the first part is US Stocks the
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second portion needs to be non US Stocks
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so just International exposure then the
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third part of that fund is totally
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different than the first two because the
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first two were stocks so this third one
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is not stocks and it's bonds now
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obviously the problem with this old
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three fund portfolio is the fact that
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we've seen the data over the last 20
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years and it's not so hot for those last
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two pieces vxus would be that
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International ETF and over the last 10
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years the return has been about
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3.7% and as far as the bond Returns the
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BN ETF return has been
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1.3% per year those are awful so my goal
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just like wise investors and
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specifically Warren Buffett is not to be
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the most Diversified investor of all
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time you don't get a prize for the most
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diversification we think diversification
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is as practice generally makes very
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little sense for anyone that knows what
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they're doing diversification is a
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protection against ignorance I mean if
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you want to make sure that nothing bad
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happens to you relative to the market
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you own everything there's nothing wrong
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with that I mean that that is a
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perfectly sound approach for somebody
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who who does not feel they know how to
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analyze businesses if you know how to
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analyze businesses and value businesses
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it's crazy to own 50 stocks or 40 stocks
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or 30 stocks probably uh because there
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aren't that many wonderful businesses at
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that are understandable to a single
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human being in all likelihood and it and
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to have some super wonderful business
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and then put money in number 30 or 35 on
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your list of attractiveness and and
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forego putting more money into number
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one just strikes Charle in me as as as
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Madness you know do I do I need to own
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28 stocks in order you know have proper
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diversification you know uh be nonsense
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and the goal should be the best return
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with the best long-term safety as well
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the goal should be consistency and
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sustainability my new three fund
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portfolio is the updated version of that
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old three fund portfolio and has been
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absolutely crushing it and will continue
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to for the foreseeable future in my
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opinion I'll link to this video below
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and also cue this video up at the end of
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this current video so you can watch it
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right away but this last common mistake
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is by far the biggest
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I just told you about fund overlap and
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to look out for that and watch your
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portfolio to make sure you don't have
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too much or to at least understand what
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and how much of what you are actually
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invested in I also just said that you
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should stop worrying about having the
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most optimally Diversified portfolio in
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the whole entire world and more so be
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concerned with long-term results so the
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common mistake I see here is that people
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start to realize that maybe their
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portfolio is wrong or it's not the most
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optimal possible and so they keep
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changing it up and they keep changing up
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every month or every couple months based
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off of something new that they just
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learned the change is not the issue but
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the method is now just keep in mind I
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don't know what else you're invested in
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I don't know your overall goals for
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investing or at least your goals for
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investing in this particular portfolio I
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can't sit here and tell you you should
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have this ETF or you shouldn't have this
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one because each one of you has a
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different investing outlook for example
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REITs are are amazing especially for
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dividend investing and bringing in Crazy
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cash flow and passive income they bring
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far more than good solid dividend stocks
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like Johnson and Johnson or even the
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best dividend ETF in CHD but I choose
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those safe boring dividend companies or
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shd over reats for me personally so if I
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were to make a video on my five favorite
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dividend Investments these types of
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reats probably wouldn't make it into
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that video specific specifically but
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it's not because the reats aren't a good
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investment and that you shouldn't invest
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in them I just leave them out because I
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already invest a fair amount of my
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portfolio in real estate I have two
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actual rental properties and that makes
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up about half of my total portfolio as
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far as money invested so if I were to
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add reats or more real estate in that
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form that would just overload and
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increase my risk to be having so much in
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one sector the biggest mistake anyone
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could make in this investing world is
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just to take somebody else's word for
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their Investments or look at their
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investments just copy it without doing
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any extra research yourself and not
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understand what it is that you're
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investing in you need to understand not
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only the investment itself but also what
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your total goal is with your portfolio
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my three fund portfolio is the best
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place to start because especially if
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you're new to investing or you need to
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revamp your Investment Portfolio and get
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it rebalanced these three is where 90%
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of my stock and ETF portfolio lies and
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gives you all the great things that I
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talked about in this video especially a
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monster long-term return with
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consistency and safety check out this
00:11:38
video now for a more in-depth
00:11:42
explanation
