My First ETFs Bought in TD Ameritrade!
Last week I wrote a post on how to open up an account in TD Ameritrade. I hope others managed to set up their own account by following that post. If your documents are complete and there was no issue in your application, TD Ameritrade should have already sent you an E-Mail containing your credential. Now you have your own account, what to do next? Start purchasing an asset! I will be sharing with you two ETFs that I got and share my reasoning.
But before that, I need to put up a disclaimer to cover myself.
This article is strictly my opinion and knowledge about investment. This article is not meant to be taken as a financial advice. I’m not a professional so please get your financial advice from professional. Investment is risky and you may lose your money or even lose all of your money. Take this article with a pinch of a salt and take your due diligence before you are committing to invest your hard earned money.
Now if you are wondering what ETF is, I have slightly covered the definition of ETF in one of my posts. To give you a brief definition, ETF is just a paper asset containing a collection of other assets such as stocks, bonds, REITs, and so on. It kind of similar like Unit Trust / Mutual Fund, the only difference that I am aware of ETF can be traded like stock which means you can buy and sell them within the day and its price changes throughout the day (9 p.m. — 4 a.m. Brunei time) whereas Mutual Fund you can only buy and sell them by the end of the day and its price changes once per day.
Now that’s out of the way, here’s are the two ETFs that I bought:
- Vanguard Information Technology Index Fund ETF Shares (VGT)
- Vanguard High Dividend Yield Index Fund ETF Shares (VYM)
I bought both of them on 28th May 2020, on that day, VGT costed me USD 259.49 while VYM costed me USD 80.49. So I spent around USD 339.98 for both of these ETFs which is roughly BND 480.
Vanguard Information Technology Index Fund ETF Shares (VGT)
As a technology savvy myself, I’m a little bit bias towards technology companies. We also familiar with a lot of technology companies in U.S. such as Apple, Microsoft, Intel, and so on. This ETF tracks the performance of stocks large, mid-size, and small U.S. Companies within the information technology sector, which is a perfect choice for tech nerd like me.
Not only it tracks great tech companies, it also have a proven track record for the past 10 years. On average, the market return of VGT for the past 10 years is 16.79% . Last year in 2019 it has a market return of 48.61%, which means, if you have invest USD 10,000 into VGT on 1 January 2019, by 31 December, your investment could worth around USD 14,861, not bad.
And as a bonus, this ETF also pays an annual dividend of 1.35%, so if you invested USD 10,000, you would have earned USD 135. The management fee is also ridiculously low for a fund with this kind of performance, which is around 0.1% annually.
This particular ETF’s risk is also rated below average and its return is above average. It is also diversified enough as the money invested into this ETF is allocated to large, mid-size, and small caps companies. The only thing that might turn people off is that this ETF only heavily invested in one sector which is the technology sector. But it’s the trade off I’m willing to make for an extra 2–3% annual return.
Vanguard High Dividend Yield Index Fund ETF Shares (VYM)
After I purchased VGT, I had an extra 80 USD in my account, so on that time the other ETF that I can afford to buy one unit was VYM. Is it the only reason?Obviously not. This ETF tracks the performance of common stocks of companies which pays higher than average dividend to their investors, which is around 4.18%, which translates to USD 418 dividend if you invested USD 10,000.
Also if you enroll your ETFs into a Dividend ReInvestment Plan (DRIP), dividend earned from your ETF can be reinvested to purchase another units of ETF. So a 4% dividend from VYM allows you to purchase additional 4% of a unit of VYM every year for free (technically). This is a good thing because the additional shares you bought using your dividend can also be used to earn more dividend! (Compounding Growth)
Its market return annually is also not bad which is around 10.18% annually on average for the past 10 years.
What’s really nice about this ETF is that, not only it has almost similar to VGT when it comes to market cap allocation, the ETF also highly diversified as the money invested into this ETF will be allocated across a lot of market sectors as opposed to VGT which is heavily invested in technology sector.
Just to remind everyone, the market’s (in this case the ETFs’) past performance does not always reflect to its actual performance in the future. Past performance is just a tool to analyse the assets’ track records. In my case, I just trust ‘blindly’ the ETFs’ past records and made my investment decision based on that data. If you have better approach to analyse the assets, better use your approach.
Portfolio Update (As of 3rd June 2020)
It has been 6 days after I purchased both ETFs, just would like to share with everyone how much my portfolio has grown. At the time of this writing, my portfolio has grown from ~USD 340 to ~USD 348, which is around 2% growth. Of course this is just growth on paper and the profit is unrealised, not until I sell back the ETFs. And obviously, my portfolio value might drop in the future as from what I see, VGT’s price is very high in 52 weeks range.
Another ETFs in My Watchlist
I also would like to share with you ETFs that I’m eyeing to buy in the next months and give a brief overview of the ETF
- Vanguard S&P 500 ETF (VOO) — As the name suggested, this ETF mimics the performance of S&P 500 which has an average of annual return around 8%. It is considered on of the most important index because it tracks the largest 500 companies listed on stock exchanges in the U.S.
- Vanguard Total Stock Market Index Fund ETF Shares (VTI) — Probably the most diversified U.S fund out there. This fund tracks the performance of almost all companies which covers all market caps and across all sectors in the U.S.
What’s next?
My next plan is to continuously invest around BND 500 every 3 months or so into the market. I also recently read a blog post from Obviously Investor where they talked about how to build a widely diversified “Lazy Portfolio”. In this blog post, they listed down several portfolio builds proposed by experts and what are the ETFs one can buy to build such portfolio. I am especially drawn to Allan Roth’s portfolio build as his portfolio has a balance of being simple and slightly aggressive for those who look for a lot of growth in their portfolio.
Thank you for reading!
