One of the best ways to diversify your portfolio is with an ETF.
Not only do they give you exposure to a large number of stocks, they allow you to do so at a low cost. For example, let’s say I wanted to buy 100 shares of the Global X Lithium & Battery Tech ETF (LIT). That would cost me about $6,250. Doing so would give me exposure to 40 stock holdings. Or, I could buy just one of its holdings – let’s say Albemarle (ALB), which would cost me $22,300. I’d rather have the broad exposure.
Aside from the LIT ETF, another top ETF is the VanEck Morningstar Wide Moat ETF (MOAT), which continues to outperform the S&P 500. As noted by MarketWatch, “The Morningstar analysts assign an “intrinsic value per share” for each eligible company, using a long-term discounted cash flow model. Then those values are compared with current stock prices as the index and the fund’s portfolio are adjusted quarterly. The fund current holds 49 stocks.”
With an expense ratio of 0.46%, the MOAT ETF tracks the overall performance of attractively priced companies with sustainable competitive advantages. In fact, some of its holdings include Meta Platforms, Mercadolibre, Boeing, Salesforce.com, Terayne, Lam Research, and many more
It’s essentially finding stocks the way Warren Buffett does.
In fact, Buffett also looks to see if the company has a strong economic moat, which allows it to set itself apart from its peers. To determine a strong moat, Buffett wants to know if the company has a strong brand. Are switching costs too high for consumers to change what they currently use? Is there a network effect? For example, Apple has a network effect with its Mac computer. Buffett also wants to know if the stock he’s investing in offers product at a cheaper cost.
In addition to moat, Buffett is also looking for companies that are easy to understand; Companies with predictable and proven earnings; and companies that can be bought at a reasonable price.
Or, if you want to make life easier, you can just invest in the MOAT ETF, which appears to use a lot of the same methodology in finding opportunity.