If I Were Building an Investment Portfolio From Scratch Today, I'd Start With These 2 ETFs | The Motley Fool

The stock market remains one of the most effective avenues for wealth accumulation, with the S&P 500 index achieving an impressive total return of 1,760% over the past three decades. An investment of $10,000 made 30 years ago would now be valued at over $186,000.

For those new to investing, the landscape can seem daunting. Many may feel overwhelmed by the wealth of information available and the continuous influx of news. Furthermore, the sheer number of stocks to choose from can add to the confusion.

This is where exchange-traded funds (ETFs) become particularly advantageous, especially for beginners. ETFs consist of a collection of stocks that mirror various indexes, sectors, or investment strategies. They can be traded like individual stocks and do not necessitate large amounts of capital to invest.

If I were to create an investment portfolio from the ground up today, I would begin with two specific ETFs, intending to hold them for at least a decade.

The first ETF on my list would be the Vanguard S&P 500 ETF (VOO). If starting with a hypothetical capital of $10,000, I would allocate 80% of that amount to this ETF.

The cost structure is particularly appealing, as this ETF boasts an expense ratio of just 0.03%. For an $8,000 investment, that translates to a minimal fee of $2.40, allowing more of your money to remain invested.

In terms of performance, the Vanguard S&P 500 ETF has delivered an impressive total return of 318% over the last decade, surpassing the results of many actively managed funds.

This ETF tracks the S&P 500, which includes approximately 500 large, profitable companies in the U.S., providing investors with substantial exposure to the American economy. Historically, investing in the growth and innovation of the country has proven to be a lucrative endeavor.

While this fund encompasses a wide array of companies, it is essential to note the concentration of holdings. Stocks are weighted according to their market capitalization, meaning larger companies have a more significant impact on overall returns. The top 10 companies account for 39.1% of the ETF, with the information technology sector representing 39.7% of the portfolio.

Warren Buffett has endorsed the Vanguard S&P 500 ETF as an optimal choice for most investors, a testament to its credibility and reliability.

The second ETF I would incorporate into my portfolio is the Vanguard Total International Stock ETF (VXUS), which would account for the remaining 20% of the initial $10,000 investment.

This ETF also features an attractive fee structure, with an expense ratio of 0.05%. This low fee provides investors access to international companies without the high costs typically associated with mutual funds and hedge funds.

Importantly, none of the nearly 9,000 stocks in this ETF overlap with those in the S&P 500, ensuring a distinct diversification of holdings. This fund focuses on shares from non-U.S. companies, enhancing international exposure and allowing investors to benefit from the performance of these firms, which is often overlooked.

The top three countries represented in this ETF are Japan, Taiwan, and the United Kingdom, collectively comprising 33.5% of the fund's assets. Significant positions include Taiwan Semiconductor Manufacturing, Samsung Electronics, and SK Hynix, which together make up 7.9% of the ETF. These firms are well-positioned to capitalize on the ongoing artificial intelligence boom, further solidifying their potential for growth.

With a focus on starting from scratch, the Vanguard Total International Stock ETF would serve as a crucial component to complete my investment portfolio.