2 ETFs I’d buy with my first £1,000

ETFs are a cost-effective way to get exposure to the stock market. Here’s a look at two ETFs suited to beginners.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When starting an investment portfolio, it makes sense from a risk perspective to invest in a fund. If you only have £1,000 or so to invest, it’s not really economical to buy a whole portfolio of shares. Trading commissions will take a huge chunk of your capital. Buying a fund is an efficient and cost-effective way to spread your capital out over many different companies, reducing the risk to your portfolio.

In a recent article, I examined three types of funds that are popular among both beginner investors and experienced investors alike. These included mutual funds, investment trusts and exchange-traded funds (ETFs).

Today, I’m looking at two ETFs that I would definitely consider buying if I was investing my first £1,000 now.

Vanguard FTSE 100 Index Unit Trust

A portfolio of blue-chip companies is a good foundation for any portfolio. With that in mind, if I was investing my first £1,000 today I would consider investing in the Vanguard FTSE 100 Index Unit Trust (LSE: VUKE). This ETF can be bought and sold just like a regular stock under the VUKE ticker.

Vanguard is a highly regarded ETF provider. This particular fund attempts to track the performance of the FTSE 100 index, the UK’s main stock index. That means an investor will gain exposure to the some of the largest companies listed in Britain, many of which are well known across the world. The top 10 holdings of the index are shown below:

Source: Vanguard, data as of 29 December 2017

Fees are low, with the ongoing charge just 0.06%. I would probably invest £500 of my first £1,000 in this fund to gain exposure to the largest companies listed on the London Stock Exchange.

Vanguard FTSE 250 UCITS ETF

Once I had my core holding of blue-chip shares sorted with the FTSE 100 ETF listed above, I’d also be interested in getting some exposure to mid-cap stocks. These are companies that are slightly smaller companies, yet are often growing at a faster pace. This means that they may offer the potential for larger investment returns.

To get exposure to mid-caps, the FTSE 250 index is a good place to start. This index contains the largest 250 stocks in the UK after the largest 100 companies. It’s performed very well over the long term. For example, for the five years to the end of 2017, the FTSE 250 provided a total return 92%. This easily eclipsed the 57% return of the FTSE 100.

Vanguard also has an ETF tracking this index. It’s the Vanguard FTSE 250 UCITS ETF (LSE: VMID). The top 10 holdings are listed below. It includes household names such as Royal Mail, Rightmove and Travis Perkins.

Source: Vanguard, data as of 29 December 2017

The ongoing charge here is just 0.1%. I’d invest the remaining £500 of my £1,000 in this ETF to add a little more growth exposure to my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Will it be too late to buy Nvidia stock in March?

NVIDIA stock is up more than 60% since the start of 2024. Our writer considers whether it might still be…

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

Why did Direct Line shares just soar 27%?

Direct Line shares have jumped more than a quarter in the course of today's trading session. Our writer explains why…

Read more »

Close-up of British bank notes
Investing Articles

These 2 shares are Dividend Aristocrats. Which should I buy this March?

Our writer likes the business model of this pair of FTSE 100 Dividend Aristocrats. So why would he only consider…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

I bought 49 Unilever shares in June. Here’s what they’re worth today

Harvey Jones bought a modest amount of Unilever shares last summer hoping the stock would soon recover. He's having to…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

I reckon these shares, potentially 20% undervalued, are Warren Buffett’s type of investment

Oliver Rodzianko thinks Games Workshop is an absolutely stellar investment. As it's potentially undervalued, he reckons Warren Buffett would agree.

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Great investing habits that can boost my Stocks and Shares ISA

Forget complicated calculations and financial jargon! Our writer uses a few simple habits to build wealth inside his Stocks and…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Why has the St. James’s Place share price crashed 30%, after FY results?

The St. James's Place share price has just fallen off a cliff. What could have gone wrong in 2023 that's…

Read more »

Family in protective face masks in airport
Investing Articles

Here’s how much I’d have if I’d bought 1,000 Rolls-Royce shares 10 years ago

Rolls-Royce shares may be flying high this year but that wasn't always the case. I'm calculating how much I'd have…

Read more »