Etfs: Best Investment Options For Your Portfolio

Exchange-traded funds (ETFs) are a great way to invest in a range of assets without having to pick individual stocks. They are a good choice for beginners as they are less volatile than individual stocks and provide exposure to a broad range of opportunities. ETFs are also cheaper than mutual funds and are passively managed, making them a good option for long-term investors looking to build wealth.

- SPDR S&P 500 ETF Trust (SPY): One of the most well-known and oldest US-listed ETFs with a large asset under management (AUM) and trading volume. It tracks the popular S&P 500 index.

- Vanguard FTSE Developed Markets ETF (VEA): Provides targeted exposure to international publicly traded companies, including small-cap and Canadian stocks.

- iShares MSCI Japan (EWJ): Allows investors to gain exposure to the Japanese market, which is a good choice for those who want to participate in Asia's economic growth without investing in China.

- iShares MSCI Frontier 100 ETF (FM): Provides access to frontier markets, which are in the early stages of economic development and offer faster rates of economic growth.

- Energy Select Sector SPDR Fund (XLE): Offers exposure to the energy sector, including oil, gas, and energy equipment and services companies.

- Invesco PHLX Semiconductor ETF (PHLX): Provides exposure to the semiconductor industry, an indispensable component of modern electronic devices.

- S&P 500 Dividend Aristocrats ETF (NOBL): Focuses on companies that have increased their dividends for at least 25 consecutive years, making it attractive for income-seeking investors.

- iShares 20+ Year Treasury Bond ETF (TLT): Provides exposure to long-term bonds with maturities of 20 years or more, making it sensitive to long-term interest rate movements.

- iShares 1-3 Year Treasury Bond ETF (SHY): Offers exposure to short-term bonds with maturities of up to a few years, making it a low-risk option.

- iShares Core U.S. Aggregate Bond ETF (AGG): Provides exposure to a wide range of bonds, including government and corporate bonds, making it a good option for diversifying a stock-heavy portfolio.

- iShares Core Aggressive Allocation ETF (AOA): A balanced ETF that targets 80% exposure to stocks and 20% to fixed income, making it suitable for investors seeking long-term returns with reduced risk.

- SPDR Gold Shares (GLD): Allows investors to invest directly in physical gold, providing portfolio diversification and a store of value.

- Currency Shares Euro Trust (FXE): Provides exposure to the Euro by holding physical Euros, making it a simple way to track the Euro/US Dollar exchange rate.

- Vanguard Real Estate ETF (VNQ): Focuses on real estate investment trusts (REITs), which offer substantial dividend yields and are popular among income-seeking investors.

- ProShares UltraPro QQQ (TQQQ): A leveraged ETF that provides 3x exposure to the NASDAQ-100 index, making it suitable for short-term traders seeking higher returns.

- ProShares UltraPro Short QQQ (SQQQ): An inverse ETF that provides -3x exposure to the NASDAQ-100 index, allowing investors to profit from short-term declines in the index.

- Proshares Bitcoin ETF (BITO): Provides exposure to Bitcoin returns by investing in Bitcoin futures contracts, making it a convenient way to invest in cryptocurrencies without directly owning them.

Top US market-cap index ETFs

When it comes to investing in the top US market-cap index ETFs, there are several options to consider. Here are some detailed descriptions of some of the top US market-cap index ETFs:

Vanguard S&P 500 ETF

The Vanguard S&P 500 ETF is one of the most popular and largest ETFs, offering investors a low-cost and diversified option to invest in the broader US market. With an expense ratio of just 0.03%, it is significantly cheaper than similar funds, resulting in lower fees for investors. The ETF has a strong track record of delivering returns, making it a favourite among those seeking long-term investments.

Invesco QQQ Trust

This ETF is an excellent choice for investors seeking exposure to large US tech stocks. It tracks the Nasdaq-100 index, which includes 100 of the largest non-financial companies on the Nasdaq. With top stocks like Apple, Microsoft, and Amazon, it has outperformed the S&P 500 with its returns. As of late 2024, the Invesco QQQ Trust generated a total return of around 420% over the previous decade.

IShares Core S&P 500 ETF

As of September 10, 2024, iShares Core S&P 500 was the highest-valued ETF globally, with a market capitalization of over $521 billion. It is also the second-largest ETF by assets under management. This ETF provides investors with a diversified portfolio of large-cap US stocks, similar to the Vanguard S&P 500 ETF.

Vanguard Total Stock Market ETF

While the S&P 500 covers 500 large-cap US stocks, the Vanguard Total Stock Market ETF offers exposure to the entire US stock market. As of late 2024, the fund held over 3,600 stocks of various sizes, including large-cap, mid-cap, and small-cap companies. With a low expense ratio of 0.03%, it is an affordable way to invest in the entire US stock market.

SPDR S&P 500 ETF Trust

The SPDR S&P 500 ETF Trust is another popular choice for investors seeking to track the performance of the S&P 500 index. It is one of the largest ETFs by assets under management and offers diversified exposure to 500 large-cap US stocks.

These ETFs provide investors with a range of options to gain exposure to the US market and its various sectors. Each ETF has its unique characteristics, such as focusing on large-cap stocks or providing access to a broader range of companies, allowing investors to choose the ones that align with their investment goals and strategies.

Top international ETFs

International ETFs can provide targeted exposure to international publicly traded companies either broadly or by specific geographic areas, such as Asia, Europe, or emerging markets. Here are some of the top international ETFs to consider:

Vanguard FTSE Developed Markets ETF (VEA)

VEA is an international ETF that provides exposure to publicly traded companies in developed markets outside of the US. It tracks the FTSE Developed All Cap ex US Index, which includes large, mid, and small-cap stocks from over 25 countries.

IShares Core MSCI EAFE ETF (IEFA)

IEFA is another popular international ETF that focuses on developed markets. It tracks the MSCI EAFE Index, which covers stocks from Europe, Australasia, and the Far East. The fund has a large number of holdings, providing diversification across countries and sectors.

Vanguard FTSE Emerging Markets ETF (VWO)

For investors interested in emerging markets, VWO is a solid choice. It provides exposure to small, mid, and large-cap stocks of companies based in emerging markets, such as China, Brazil, and India. The fund tracks the FTSE Emerging Markets All Cap China A Inclusion Index.

Vanguard Total International Stock ETF (VXUS)

VXUS offers a broad range of international stocks, including both developed and emerging markets. With thousands of holdings, it provides extensive diversification and is designed as a core portfolio holding for investors seeking international exposure.

IShares Core MSCI Total International Stock ETF

This ETF provides diversified international exposure by investing in thousands of stocks from various countries and sectors. Japan and the United Kingdom are the top two geographic regions represented in the fund, followed by other developed and emerging markets.

When considering these or any other international ETFs, it is important to assess your investment goals, time horizon, and risk tolerance. International ETFs can provide access to global markets and help diversify your portfolio, but they also come with additional risks, such as currency fluctuations and geopolitical events.

Dividend ETFs

Vanguard Dividend Appreciation ETF (VIG)

This ETF tracks the performance of the NASDAQ US Dividend Achievers Select Index, focusing on companies that have consistently increased dividend payments for at least a decade. It has a dividend yield of 1.7%, with Microsoft, Apple, and Broadcom among its top holdings. The expense ratio is 0.06%, and it manages around $86.6 billion in assets.

Vanguard High Dividend Yield ETF (VYM)

VYM follows the FTSE High Dividend Yield Index, selecting high-yield dividend-paying companies based in the US, excluding REITs. It offers a dividend yield of 2.8%, with Exxon Mobil, JPMorgan Chase, and Johnson & Johnson as its top holdings. The expense ratio matches VIG at 0.06%, and it manages approximately $59.4 billion in assets.

Schwab US Dividend Equity ETF (SCHD)

SCHD tracks the Dow Jones US Dividend 100 Index, which includes companies with strong financial performance and sustainable dividends. With a dividend yield of 3.5%The Home Depot, BlackRock, and Cisco System. The expense ratio is 0.06%, and it manages about $63.4 billion in assets.

SPDR S&P Dividend ETF (SDY)

SDY follows the S&P High Yield Dividend Aristocrats Index, screening for companies that have consistently increased dividend payments for at least 20 consecutive years. It has a dividend yield of 2.3%, with Realty Income, Kenvue, and International Business Machines as its top holdings. The expense ratio is 0.35%, and it manages around $21.7 billion in assets.

IShares Select Dividend ETF (DVY)

DVY tracks the Dow Jones Select Dividend Index, selecting about 100 high-dividend yield companies based in the US. It offers a dividend yield of 3.5%, with Altria Group, AT&T, and Philip Morris International as its top holdings. The expense ratio is slightly higher at 0.38%, and it manages approximately $20.3 billion in assets.

ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

NOBL tracks the S&P 500 Dividend Aristocrats Index, focusing on multinational companies with a history of increasing dividends for at least 25 years. It has a dividend yield of 2.0%, and its top holdings include International Business Machines, Stanley Black & Decker, and Air Products & Chemicals. The expense ratio is 0.35%, and it manages about $12.7 billion in assets.

Bond ETFs

When considering the top ETFs to invest in, it's important to remember that exchange-traded funds (ETFs) are an appealing alternative to owning individual stocks. With ETFs, investors can own an asset that trades like a stock but provides exposure to a broad range of stocks or other assets.

Now, if you're looking for Bond ETFs specifically, here are some options that have been recommended by experts:

Vanguard Total Bond Market ETF (BND)

BND is Vanguard's largest bond ETF, with over $117 billion in assets. It offers a low expense ratio of 0.03%, meaning investors pay just $3 annually for every $10,000 invested. BND tracks more than 11,000 investment-grade bonds, providing diversified exposure to the domestic bond market.

IShares 20+ Year Treasury Bond ETF (TLT)

This iShares ETF focuses solely on U.S. Treasury bonds with durations of 20 years or longer. While this doesn't offer much variety, U.S. Treasuries are considered one of the most stable assets globally and are viewed as almost as safe as cash. However, the long duration of its assets makes this ETF sensitive to interest rate changes.

IShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)

LQD takes a different approach by excluding government bonds and instead investing in corporate bonds from companies with strong credit ratings, such as JPMorgan Chase & Co and Verizon Communications. While these companies are not at risk of imminent failure, their operations are still riskier than the federal government, resulting in a higher yield.

Vanguard Total International Bond ETF (BNDX)

BNDX is a sister fund to BND, providing international exposure by investing in assets from around the world except the U.S. Over 57% of its assets are in Europe, with Asia-Pacific making up around 20%. It also includes about 7% in emerging-market debt, adding variety and potential for higher performance.

Vanguard Short-Term Bond ETF (BSV)

BSV is a short-term bond ETF with an average effective maturity of 2.8 years, significantly lower than the average duration of long-term bond ETFs. This makes it easier to predict economic trends and reduces exposure to interest rate volatility. Despite the higher rate environment, short-term yields have also increased, so you don't sacrifice income potential with this ETF.

IShares iBoxx $ High Yield Corporate Bond ETF (HYG)

HYG focuses on high-yield or junk bonds from distressed borrowers, such as companies in the troubled telecom sector. This higher-risk profile results in a much higher yield than the S&P 500. However, investors should be aware of the increased volatility associated with this type of bond ETF.

These Bond ETFs can provide investors with exposure to the bond market, offering diversification and potential income. Remember to consider your investment goals, risk tolerance, and conduct further research before investing.

Real estate ETFs

REITs were created by Congress in 1960 to encourage real estate development and allow all investors to access the benefits of owning rental property. They are required to distribute at least 90% of their taxable net income to shareholders as dividends.

Vanguard Real Estate ETF

The Vanguard Real Estate ETF is one of the largest and most popular REIT ETFs. It has over $36.8 billion in assets under management and holds more than 150 REITs. Its top holdings include Prologis Inc., American Tower Corp., and Equinix Inc. The ETF has a low expense ratio of 0.13% and offers a dividend yield of around 3.4% to 3.6%.

IShares U.S. Real Estate ETF

The iShares U.S. Real Estate ETF is managed by BlackRock and invests in domestic real estate stocks and REITs. It had about 70 stock holdings as of mid-2024, with American Tower and Digital Realty Trust as its top two holdings. The ETF has an expense ratio of 0.40% and offers a dividend yield of around 3.1%.

Schwab U.S. REIT ETF

The Schwab U.S. REIT ETF is another large REIT ETF with net assets of $7.3 billion. It is based on the Dow Jones Equity All REIT Capped Index and is well-diversified geographically and in terms of real estate class. Its largest holding is Prologis Inc., which represents about 9% of the fund's assets. The ETF has a low expense ratio of 0.07% and offers a dividend yield of 3.1%.

Real Estate Select Sector SPDR Fund

The Real Estate Select Sector SPDR Fund is designed to replicate the performance of the S&P Real Estate Sector Index. It invests exclusively in equity REITs that are components of the S&P 500. The fund has a low expense ratio of 0.09% and offers a dividend yield of around 3.3%.

IShares Cohen & Steers REIT ETF

The iShares Cohen & Steers REIT ETF is managed by BlackRock and focuses on large real estate companies that are dominant in their respective property categories. It has a concentrated portfolio of 30 REITs, including American Tower and Simon Property Group. The ETF has an expense ratio of 0.33% and offers a dividend yield of 2.7%.

These are just a few examples of the many real estate ETFs available. Each has its own unique characteristics, so be sure to do your research and choose the one that best fits your investment goals and risk tolerance.

Frequently asked questions