Happy New Year!
Christmas and Hanukkah have come and gone, and the new year has begun. And with the advent of 2025, about half of us have already made resolutions.
According to a survey cited by Statista.com, respondents indicated that these were their top seven resolutions for 2025:
1. 21% of respondents say they want to save more money
2. 19% plan to eat healthier
3. 17% vow to exercise more
4. 15% swear they will lose weight
5. 14% desire more family time
6. 9% intend to quit smoking
7. 9% plan to decrease the amount of money they are spending on living expenses such as food and utilities
As most of us are aware, the majority of us don’t do very well at meeting these goals. In fact, Livemint.com says these are the top 10 resolutions most likely to be broken:
1. Daily Routine, such as vowing to get up earlier
2. Eat Healthier
3. Lose Weight (I’m shocked that this isn’t number 1)!
4. Save Money
5. Quit Smoking
6. Learn a New Skill
7. Travel More
8. Spend More Time with Family
9. Get Organized
10. Limit Screen Time
The sad truth is that according to a 2023 poll from Forbes Health, our resolutions just don’t endure: 8% last one month; 21.9%, two months; 22.2%, three months; 13.1%, four months; and just 1% survive for 11 months or a year. Apparently, fewer than 10% of us actually accomplish our goals.
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The biggest reason for the failure: We don’t turn our resolutions into habits. The National Institutes of Health says that it takes about 10 weeks for a habit to fully form. So, it’s obvious from the above stats that we don’t work on our resolutions long enough to make them habits.
Saving/Investing Is One of the Easiest Resolutions to Make—and Keep
Granted, some resolutions are easier to keep than others. As an expert on failed (and sometimes successful) resolutions, I can tell you that financial resolutions are some of the easiest habits to create and maintain, especially in this time of technology that allows you to make automatic deposits into 401(k)s, IRAs, or just about any other type of financial account.
As I constantly preach, investing early and regularly triggers a wonderful financial tool called compounding, which makes your money grow even faster, as you can see in the graph below.
Source: Coryanne Hicks and Nate Hellman
And an easy way to get in on that growth is through exchange-traded funds (ETFs). Most 401(k) plans offer scores of ETFs in their investment choices, so, if you are new to investing, that is a great way to start. You can find ETF ratings on Morninstar.com. And I offer additional education and recommendations in my Cabot Money Club Stock of the Month newsletter, where I include an entire section just on ETF investing.
ETFs provide paths to building a fantastic financial future for both new and experienced investors. By leveraging your risk across several investments (diversifying), you can gain exposure to companies, industries, and countries that you may not feel you have the expertise to enter via individual stocks. And since they trade like stocks (instead of once a day like mutual funds) you don’t have to worry about delayed orders to buy or sell.
But if you are a new investor, there are a few parameters that you may want to consider and compare before investing in ETFs.
5 ETF Factors to Consider Before Investing
Watch the expense ratio. The average expense ratio for ETFs is 0.22%. You may think that all ETFs in a particular industry would have similar expense ratios. But that is not true. Just know that the higher the ratio, the less your net return will be. On the other hand, it’s important to compare the returns and expense ratios because it may make sense to choose the ETF with the highest expense ratio if its net return is higher.
Turnover ratio. These calculations can range from 2% to well over 50%. Actively managed funds will, of course, have higher turnover ratios than passive funds. Turnover is just the commission costs of buying and selling. So, the more activity, the higher the turnover. But a high turnover (if it’s higher than other comparable funds) should also be reviewed along with the returns. If the turnover is high, but the returns are not, it may signal a problem.
Risk Tolerance. In their ratings, Morningstar also provides a risk rating. It’s imperative that you are aware of the amount of risk you can comfortably handle. If you can’t stomach the idea of losing 30% of your portfolio, you are probably not an aggressive investor, so should stay away from high-risk ETFs.
Market Exposure. Beginning investors may want to start with broad market ETFs, which will offer you exposure to a large number of stocks. For instance, ETFs are available for the stocks in the S&P 500, the Dow Jones 30, and the smaller-cap stocks in a variety of Russell Indexes.
Style/Ex-U.S. ETFs. ETFs are available for Growth and Value investors. Growth ETFs tend to have higher price-earnings ratios, so carry a bit more risk than Value. An ETF that focuses on companies that pay dividends will typically be more conservative. You may also decide to buy an ETF that offers exposure to international stocks; just remember that investing outside of the U.S. does generally incur additional risk.
3 ETFs for the New Year
If you are a new investor or just want to invest in some fairly broad market ETFs, you may find one of these to your liking:
| ETF/Symbol | Expense Ratio (%) | Risk Tolerance | 1-Yr. Return (%) | 5-Yr. Return (%) |
Vanguard S&P 500 ETF (VOO) | 0.03 | Average | 24.98 | 14.5 |
Schwab U.S. Small-Cap ETF (SCHA) | 0.04 | Above Average | 11.16 | 7.98 |
iShares Core S&P Total U.S. Stock Market ETF (ITOT) | 0.03 | Above Average | 23.80 | 13.79 |
Happy investing!
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