What to Look for Before Buying Your First ETF

Exchange-traded funds (ETFs) are great investment vehicles for gaining instant exposure to different sectors at prices often lower than those of some of the ETF’s top stock holdings. For example, Space Exploration Technologies, or SpaceX, closed its first day of trading at just under $161. But the Tema Space Innovators ETF, which holds SpaceX and other space-related investments, is trading below $35 per share. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue » That said, with so many different options to choose from, there’s one key question to consider before adding the first ETF into any portfolio. Image source: Getty Images. The biggest question to ask yourself The question to answer before buying an ETF is, “What role is this ETF going to serve in my portfolio?” For example, an investor may want to generate more income. With that goal in mind, one investment to consider is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD), which tracks U.S. companies with high dividend yields. That ETF pays a dividend that yields above 3%. For investors seeking greater access to theme-based investing with higher price appreciation potential, there are ETFs focused on sectors like artificial intelligence (AI). When it comes to the very first ETF to add to a portfolio, however, the Vanguard Total Stock Market ETF (NYSEMKT: VTI) offers a strong starting point. Its investment philosophy is straightforward and has helped investors build long-term wealth. How the Vanguard Total Market ETF operates The Vanguard Total Stock Market ETF is designed to track the CRSP U.S. Market index, which represents 100% of the investable U.S. stock market. Its holdings include large-, mid-, and small-cap stocks, with those holdings totaling nearly 3,500. Nvidia is the top holding, with a portfolio weight of 6.6%. It’s a tech-heavy ETF, however, so this may not be a fit for investors who already have heavy exposure to tech stocks. Still, this ETF offers massive diversification, a history of steady returns, and a dividend payout. As of May 31, the Vanguard Total Stock Market ETF is up over 308% over the last 10 years, and its dividend yield is 1%, boosting that total return potential. Should you buy stock in Vanguard Total Stock Market ETF right now? Before you buy stock in Vanguard Total Stock Market ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Total Stock Market ETF wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $415,040!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,256,076!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of June 18, 2026. Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy. What to Look for Before Buying Your First ETF was originally published by The Motley Fool



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