As such, stocks can be a good way to grow your money over several decades.
|Time Period||Annual Real Returns for Stocks||Annual Real Returns for Gold||Annual Real Returns for Bonds|
But they are not without risk. Any single stock has the potential to fall to zero, leaving you with nothing. It's important to diversify across many investments, so the performance of a single stock doesn't unduly affect your net worth. That's why, at FutureAdvisor, we use Exchange-Traded Funds (ETFs), which are a low-cost way to purchase a large portfolio of stocks.
For example, the Vanguard S&P 500 Index contains 500 stocks within a single fund, and you can buy and sell it as if it were a single investment. So your fees are much lower than if you bought all 500 stocks individually. That diversification is preferable to owning a single stock. While a single stock can stumble, an index of stocks is usually more robust, with declines of 40% rare even in the hardest years. Even those declines can be offset by holding fixed income and other investments.
At FutureAdvisor, we go beyond recommending a single ETF. We recommend a portfolio of 12 types of assets, including stocks, fixed income (bonds) and real estate exposure. The ETFs we select are designed to work in concert to give you what we believe is a balanced portfolio for long-term growth, and we'll even rebalance your portfolio automatically if you use our Premium service.