Latest news with #indexFunds
Yahoo
16 hours ago
- Business
- Yahoo
Analog Devices' (NASDAQ:ADI) 16% CAGR outpaced the company's earnings growth over the same five-year period
Passive investing in index funds can generate returns that roughly match the overall market. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Analog Devices, Inc. (NASDAQ:ADI) share price is 95% higher than it was five years ago, which is more than the market average. Zooming in, the stock is up just 3.8% in the last year. On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). During five years of share price growth, Analog Devices achieved compound earnings per share (EPS) growth of 4.2% per year. This EPS growth is slower than the share price growth of 14% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 64.21. You can see how EPS has changed over time in the image below (click on the chart to see the exact values). Dive deeper into Analog Devices' key metrics by checking this interactive graph of Analog Devices's earnings, revenue and cash flow. It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Analog Devices, it has a TSR of 114% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return. Analog Devices shareholders gained a total return of 5.6% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 16% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Analog Devices better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Analog Devices you should be aware of. But note: Analog Devices may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast). Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
19 hours ago
- Business
- Yahoo
Analog Devices' (NASDAQ:ADI) 16% CAGR outpaced the company's earnings growth over the same five-year period
Passive investing in index funds can generate returns that roughly match the overall market. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Analog Devices, Inc. (NASDAQ:ADI) share price is 95% higher than it was five years ago, which is more than the market average. Zooming in, the stock is up just 3.8% in the last year. On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). During five years of share price growth, Analog Devices achieved compound earnings per share (EPS) growth of 4.2% per year. This EPS growth is slower than the share price growth of 14% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 64.21. You can see how EPS has changed over time in the image below (click on the chart to see the exact values). Dive deeper into Analog Devices' key metrics by checking this interactive graph of Analog Devices's earnings, revenue and cash flow. It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Analog Devices, it has a TSR of 114% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return. Analog Devices shareholders gained a total return of 5.6% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 16% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Analog Devices better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Analog Devices you should be aware of. But note: Analog Devices may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast). Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
New To Investing? Vincent Chan Says Low-Cost Index Funds Are the Easiest Way to Get Started
Investing is one of the common paths to long-term wealth, but it can feel complex if you are just getting started. Luckily, financial guru Vincent Chan recently revealed the simplest way to get started. Not only is it easy to start investing based on Chan's advice, but his strategy has a proven track record of multiplying your money in the long run. The Easiest Things To Invest In Are Low-Cost Index Funds' Chan explained in the video. It sounds basic, but that doesn't make it a bad suggestion. Here's why index funds remain one of the most popular ways for people to invest. Don't Miss: GoSun's breakthrough rooftop EV charger already has 2,000+ units reserved — become an investor in this $41.3M clean energy brand today. Invest early in CancerVax's breakthrough tech aiming to disrupt a $231B market. Back a bold new approach to cancer treatment with high-growth potential. Index funds offer investors exposure to a basket of companies. Some index funds contain a few dozen companies, while other index funds contain hundreds of publicly traded corporations. A couple of index funds even have well over 1,000 stocks, offering broad exposure to the market. You don't have to get the most diversified index fund to get good results. Some funds with 100 stocks perform better than funds with 500 stocks. The main strength of index funds is that they enable automatic portfolio diversification and streamline investing. You don't have to research a bunch of stocks, know what to look for in a good stock or follow the news every day. A portfolio manager can do all of those things for you as your money grows in an index fund. You can accumulate index funds in any investment account that lets you trade stocks. However, Chan suggests giving preference to tax-advantaged accounts like your 401(k), HSA, and Roth IRA when you make investments. These accounts let you reduce your tax bill as you grow your investments. Traditional retirement accounts let you reduce your taxes right now, while you won't have to pay any taxes on withdrawals from your Roth IRA. Trending: This Jeff Bezos-backed startup will allow you to become a landlord in just 10 minutes, with minimum investments as low as $100. Chan suggests investing any remaining money into a brokerage account once you have maxed out your tax-advantaged accounts. Investors should also monitor any changes the IRS makes to the maximum amount they can contribute to retirement accounts. You also get to make catch-up contributions to your retirement accounts the moment you turn 50. Chan recommends looking for index funds that have low expense ratios. This ratio reflects the cost of holding the fund and having an investment firm manage it on your behalf. Passively managed ETFs that mirror benchmarks like the S&P 500 typically have low expense ratios. It's realistic to find passively managed ETFs that have expense ratios below 0.10%. Investors can further explore index funds by analyzing their total returns. You can look at how much a fund has returned over the past five and ten years to gauge if it's consistent or volatile. It's also good to look at a fund's asset allocation to see if most of the stocks are in the tech sector or another industry. Some investors also look at a fund's yield to see how much cash flow they will receive just by holding on to shares. While most investors shouldn't prioritize a fund based on its yield, receiving passive income from investments becomes more valuable as you get closer to retirement. See Next: $100k in assets? Maximize your retirement and cut down on taxes: Schedule your free call with a financial advisor to start your financial journey – no cost, no obligation. Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." Here's how you can earn passive income with just $100. Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market. Get the latest stock analysis from Benzinga? APPLE (AAPL): Free Stock Analysis Report TESLA (TSLA): Free Stock Analysis Report This article New To Investing? Vincent Chan Says Low-Cost Index Funds Are the Easiest Way to Get Started originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved.
Yahoo
3 days ago
- Business
- Yahoo
ETFs vs. index funds: Key differences and similarities
Exchange-traded funds (ETFs) and index funds both offer a straightforward way to diversify your investment portfolio. Both fund types can have low fees, though index funds often charge less. You may own index mutual funds through your workplace retirement plan, while ETFs are more often purchased separately with a brokerage account. Index funds and exchange-traded funds (ETFs) are both great wealth-building tools that work well in many different investment scenarios. But it's important to note that index funds are often ETFs and ETFs are almost always index funds. Both index funds and ETFs are often low-cost and passively managed, meaning they can be a 'set-it-and-forget-it' solution. Plus, both investment vehicles can offer built-in diversification; these qualities and more make them ideal for the average investor. Here we'll compare these two types of investments to help you decide if either (or both) are right for you. Get started: Match with an advisor who can help you achieve your financial goals ETFs and index funds present a few differences that investors need to be aware of. If you invest in a 401(k) or 403(b) through your employer, there is a good chance you will have index mutual funds as an investment option, but not ETFs. If you want to buy ETFs, your best bet is usually to open an IRA, Roth IRA, or a taxable brokerage account. Depending on where you open these accounts, you will likely have access to a much broader range of funds, including a wide variety of mutual funds and ETFs. Ultimately, online brokers offer you the greatest number of options for buying index funds. The major brokers offer all of the common types of index funds. Investment minimums vary depending on the type of index fund. For example, mutual funds have investment minimums that can be a barrier for some investors. Vanguard's VTSAX had a minimum investment of $10,000 in the past. The minimum has since been reduced to $3,000, which is much better, but can still sideline some who don't readily have that much cash on hand. When you have an account with an online broker, you can often buy as little as one share of an ETF. Better still, several online brokers now offer trading in fractional shares. These fractional shares allow you to buy as little as 1/100,000th of one share in some cases, meaning you can invest exactly as much as you want. Trading fees work differently for mutual funds and ETFs. These days, trading commissions for stocks and ETFs are almost non-existent when you deal with major brokers. Index mutual funds generally don't have trading commissions when buying directly through the company that issues them. However, they may have load fees, which are a form of sales commission. ETFs have no load fees, either on the front end or the back end. The lesson here is to see the whole picture in terms of the fees, because even if a mutual fund has a lower expense ratio than an equivalent ETF, that can be offset by trading fees. If you buy and sell frequently, ETFs are the clear winner when it comes to taxes. When shares of an ETF are sold, only the seller pays capital gains taxes. That's different from index mutual funds because a fund manager is involved. If the fund manager then sells the underlying assets for a gain, those gains are spread among every investor who owns shares in the fund. Despite their differences, ETFs and index funds are quite similar, and they can serve a lot of the same roles for the investor. One of the biggest benefits of both index funds and ETFs is how easy they make it to diversify your portfolio. Total stock market funds, for example, track the performance of every publicly traded company in the United States, meaning at the moment, they track nearly 4,000 U.S. companies. Vanguard funds VTSAX and VTI track this same index, but the former is a mutual fund and the latter is an ETF — but they're both still index funds. The fees on both index funds and ETFs are low, especially when compared to actively managed funds. Many ETFs track an index, and this investment style keeps fees low. Since the fund changes based only on changes to the index — a passive approach — there are few labor costs associated with index funds. In 2023, the average expense ratio for index equity mutual funds was 0.05 percent, according to the Investment Company Institute's latest report. For equity ETFs, it was 0.15 percent. On the other hand, the average fee in 2023 for actively managed mutual funds and ETFs was 0.65 percent and 0.43 percent, respectively. Index funds and most ETFs simply try to replicate an index of stocks or other assets. They don't make active trading decisions and try to beat the market. Instead, they try to mimic the index and match its returns over time. And investors can use index funds and ETFs as a passive investment strategy. For instance, you may have an employer-sponsored retirement plan that allows you to invest using payroll deductions. If you invest a certain percent of your salary every pay period in index funds, your portfolio will need little to no ongoing maintenance. The same is true if you invest in ETFs or index funds in a brokerage account. When you buy S&P 500 index funds, for example, most brokers offer the option to invest automatically. Another benefit of both index funds and ETFs is strong long-term performance. An active fund manager or stock picker might make a few winning trades here and there; few, though, can do so for a sustained period and beat the market. Over the long term, most active fund managers fail to beat or even meet their index funds and ETFs provide more consistent performance that wins in the long run. The S&P 500, for example, has historically returned about 10 percent per year, on average. This makes broadly diversified index funds and ETFs solid long-term investments. Determining whether an index fund or ETF is better is difficult because the answer depends on the specific funds being discussed and your goals as an investor. Many index funds are available in ETF form, which provides trading throughout the day and rock-bottom fees. If you're buying an index mutual fund, you'll likely run into investment minimums of a few thousand dollars, plus you'll only be able to buy and sell at the end of each trading day. But it's important to remember that mutual funds and ETFs aren't investments in and of themselves, they're just vehicles for investing in securities like stocks and bonds. If you're investing in a mutual fund and an ETF that both track the same index and therefore hold the same underlying securities, you're likely to end up with similar performance over longer periods of time as long as the fees for each fund are similar. Learn more: A guide to financial planning and how to get started Whether you invest in an ETF or an index fund, you are choosing to invest in your future. The differences between the two tend to be small; in fact, index funds and ETFs are often (but not always) the same thing. Thus, which one you choose is less important than the choice to start investing. In doing so, you take advantage of low fees and diversification, and an investment that will grow over time. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
24-05-2025
- Business
- Yahoo
£150k in savings? Here's how to unlock an £11,250 passive income overnight
Putting money to work in the stock market is a fantastic way to establish a passive income stream in the long run. But for prudent savers who've built a substantial pile of cash savings, unlocking a big second income can be done overnight. Obviously, having £150,000 sitting in the bank isn't a luxury everyone in Britain has. In fact, a recent survey by Finder discovered that the average savings account for 55+ year-olds is only £27,949. However, a study by Kantar Media has estimated that around 9% of adults in the UK (roughly 4.9m people) have savings in excess of £100,000. So let's explore how these six-figure savings can be transformed into £11,250 of passive income. Right now, the FTSE 100 sits at an average dividend yield of 3.5%. And thanks to the invention of low-cost index tracker funds, replicating this yield can be done in a single transaction. Apart from achieving instant diversification across Britain's 100 largest publicly-traded companies, a £150,000 investment would immediately start generating a £5,250 passive income. What's more, historically, the FTSE 100's proven to be a relatively stable index. When compared against the likes of the higher growth FTSE 250 or tech-heavy S&P 500, the UK's flagship companies have endured significantly lower levels of volatility as well as superior dividend stability. Needless to say, that's an attractive attribute for investors with lower levels of risk tolerance. Despite the advantages of index investing, it does have notable drawbacks, especially when it comes to opportunity cost. A 3.5% yield pales in comparison to some of the offerings from individual stocks within the index. For example, British American Tobacco's (LSE:BATS) currently yielding more than double at 7.5%. And at this rate, a £150,000 investment equates to a £11,250 instant passive income stream. We have to remember, of course, that it isn't guaranteed to always generate that amount. Ignoring any potential ESG concerns of investing in a tobacco business, there's a lot to like about this enterprise. Most notable is the firm's tremendous track record of hiking shareholder payouts for 27 years in a row. At the same time, the global presence of its brands helps generate a diversified revenue stream while commanding a loyal customer base. Of course, no business is risk-free. And in the case of British American Tobacco, there's the increasingly hostile regulatory environment to consider. Through a combination of increasingly stricter regulations paired with rising health awareness, the global smoking rate has been gradually falling. For reference, the World Health Organisation estimates 22.3% of the world's population smoke as of 2020 compared to 34.1% in 2000. And this downward trend has continued since. The tobacco industry isn't blind to this trend. Price hikes have helped offset the impact and maintain cash flows to expand and sustain dividends. But in the long run, companies like British American Tobacco are looking to healthier smoking-alternative products to secure their future. Whether these will be capable of replacing lost tobacco cash flows is a risk that investors must weigh carefully. But with a track record of defying expectations, this business might be worth a closer look by those seeking to transform their savings into a passive income stream. The post £150k in savings? Here's how to unlock an £11,250 passive income overnight appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco P.l.c. 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. Motley Fool UK 2025 Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
