If you make frequent, small purchases, you'll want a mutual fund rather than an exchange-traded fund. The latter tends to offer slightly lower management fees, but you pay a small fee every time you buy shares. I'd generally recommend the mutual fund.
Now on to diversification: you want to diversify across countries and may want to diversify across asset classes. I know many think the latter is mandatory, I'm not so sure.
You should have about 50% in US stocks and 50% in international stocks. This reflects the share of the global economy that is US and international, respectively. Some tend to buy more US stocks because those have done better in the past... personally, I think on balance 50/50 is smarter. Keep in mind that your labor income is already tied to the US economy, so your investments should probably tip to international rather than US stocks. 50/50 is easy enough.
In terms of asset classes, I'm not a big fan of all the rules of thumbs that have emerged. 100% stocks seems to outperform everything in the long run. The idea behind having some bonds is that when stock prices go down, you can sell them and buy stocks. But I'm not sure if that isn't really just market timing (with the timing depending how frequently you rebalance - monthly, quarterly, annually). Moreover, when stocks appreciate, you'd keep buying more bonds to keep the allocation right - which during a recovery would lead you to underinvest in stocks and overinvest in bonds. Personally, I'm 100% stocks just because I don't need the money anytime soon.
So here's my allocation - as simple as can be:
50% VTSMX (Vanguard Total Stock Market ETF)
50% VXUS (Vanguard International Stock ETF)
Year to date performance: +15.2% (vs. DJIA +7.7% and S&P500 +12.8%)
Can't complain, really. Consider that this is despite all the troubles of the European economy.
So if you're just looking to add an international ETF, I'd recomment VXUS - or, if you have a Vanguard account (which you should have), the corresponding mutual fund.
I'd have the mutual funds, too, but Vanguard won't open accounts for non-permanent residents. So I'm stuck with the ETFs.
Pops_sl said:
Companies like Coke, MacDonalds in it, blue chips paying dividends for decades, that increase them.
Dividends are the devil in taxable accounts. If a stock price is $1.10 and the company pays out 10c in dividends per share, the stock price will drop to $1. It's essentially a forced sell. You then pay taxes on those 10c and buy shares again with whatever is left after taxes. I'd much rather have no dividends and keep the share price at $1.10. You may own a larger number of shares after you reinvest dividends, but your actual investment will be worth less due to taxes.