Introduction

If you’re just starting out with ETFs, it’s smart to begin with straightforward strategies and gradually explore more complex ones as you gain confidence and knowledge. Here are three well-known ETF investment strategies designed for novices, ranging from the easiest to more complex methods, including suggested ETF options to help you begin. I also added my first personal investment story and the main thoughts I had behind it. You can find the first part of the series here. The third and last article of this three-part series looks into often-overlooked topics like tax implications, risk management, portfolio upkeep.

Topics:

• Strategy 1: Dollar-Cost Averaging

• Strategy 2: Buy-and-Hold

• Strategy 3: Core-Satellite

• My Personal Experience with ETFs

• Top Mistakes Beginners Make

Strategy 1: Buy-and-Hold with Broad Market ETFs — Building a Core Portfolio

This strategy involves selecting one or a few broadly diversified ETFs and holding them for the long term, ignoring short-term market noise. It’s based on the principle that markets tend to grow over time.

Why it works:

• Minimizes trading costs and tax events.

• Simplifies portfolio management.

• Suitable for long-term goals like retirement.

How to implement:
Choose ETFs that track major indices such as the S&P 500, MSCI World, or FTSE All-World and invest lump sums or via DCA. Periodically review but avoid frequent trading.

Recommended ETF:

• Vanguard FTSE All-World ETF (VEVE) — Provides diversified exposure to developed and emerging markets globally.

• SPDR S&P 500 ETF Trust (SPY) — Tracks the S&P 500, representing large U.S. companies.

Strategy 2: Dollar-Cost Averaging (DCA) — The Simplest and Most Disciplined Strategy

Dollar-cost averaging means investing a fixed amount of money regularly (e.g., monthly or quarterly) into ETFs, regardless of market price fluctuations. This approach reduces the risk of investing a lump sum at the wrong time and smooths out your average purchase price over time.

Why it works for beginners:

• Encourages discipline and consistent investing habits.

• Shields you from emotional decisions tied to market volatility.

• Allows you to start investing with small amounts.

How to implement:
Set up automatic monthly purchases of a broad-market ETF through your brokerage or investment platform.

Recommended ETF:

• Vanguard Total Stock Market ETF (VTI) - Offers exposure to the entire U.S. stock market with a low expense ratio (~0.03%).

• iShares Core MSCI World ETF (IWDA) - For global developed markets exposure.

Strategy 3: Core-Satellite Strategy — Adding Targeted Exposure

This approach combines a "core" portfolio of broad market ETFs with smaller "satellite" positions in specialized ETFs focused on sectors, regions, or themes you believe have growth potential.

Why it works:

• Balances diversification with the opportunity to overweight specific areas.

• Allows you to tailor risk and return more actively.

• Promotes education on various commercial niches.

Implementation Tips:
The "core-and-satellite" technique is a useful strategy for building a balanced investment portfolio. By employing this strategy, you would normally allocate diversified, broad exchange-traded funds (ETFs) as the main constituents of your portfolio, making up between 70% and 90% of it.

Core ETF Option:

• iShares Core MSCI World ETF (IWDA): Offers access to a variety of international corporations.

Satellite ETF Examples:

• Vanguard Dividend Appreciation ETF (VIG): Favors stocks with strong dividend increases.

• ARK Innovation ETF (ARKK): Exposes investors to cutting-edge technology companies.

• iShares MSCI Emerging Markets ETF (EEM): Facilitates investment in emerging nations.

My Initial Investment Strategy

After years of studying financial instruments, I began investing in my late adolescence. I've been investing in mutual funds for a long time, but after reading research and comments, I've decided that it's difficult to beat the market over the long term. Among other things, this fact convinced me to choose ETFs.

When I was ready, I started a dollar-cost averaging (DCA) strategy, investing small amounts regularly through a fee-free broker. Since All-World ETFs weren’t available yet, I chose an MSCI World ETF, but felt it was too US-heavy, so I balanced this and added a EURO STOXX 600 ETF for more European exposure. To add growth potential and diversify risk, I included an MSCI Emerging Markets ETF and a small allocation to a Commodity ETF excluding agricultural products. This mix helped me build a diversified portfolio I could steadily grow over time.

Final Tips for Beginners

• Start simple with dollar-cost averaging or buy-and-hold into broad market ETFs.

• Avoid trying to time the market or chase "hot" sectors early on.

• Select ETFs with low expense ratios to minimize fees.

• Review your portfolio annually and rebalance if needed.

• Use tax-advantaged accounts if available to maximize returns.

Common Mistakes

• Assuming all ETFs are equally tax-efficient: Understand that tax treatment varies by ETF type and holding period and country; consult tax professionals when needed.

• Ignoring trading costs and liquidity: Before making an investment, especially in niche ETFs, look at bid-ask spreads and average daily volume.

• Neglecting portfolio rebalancing: Schedule regular reviews and rebalance to maintain your risk profile.

• Letting emotions drive investment decisions: Develop a disciplined plan and stick to it through market cycles.

Conclusion

With a solid strategy and awareness of common mistakes, you’re well on your way to becoming a confident ETF investor. Yet, investing goes beyond merely selecting funds; it also requires smart portfolio management and understanding the nuances that could affect your returns. In our next post, we'll delve deeper than the basics to address vital topics such as taxation, risks, portfolio management, and the psychological side of investing. Don't let it slip away!

Disclaimer

This post should not be interpreted as financial advice; it is merely informational. Researching is important and investors should also ask financial experts before deciding on a specific investment. Should you wish, I can help you find the right ETFs or assist you in effectively looking after your portfolio. Just ask!