Best Etfs To Invest In This Year

Exchange-traded funds (ETFs) are a great way to invest in the stock market, especially for beginners. They are a collection of stocks or other assets, usually with low expenses, that trade on an exchange like stocks. With thousands of ETFs to choose from, it can be challenging to know where to start.

ETFs are a good investment choice because they offer benefits such as buying multiple assets in one fund, reducing risk through diversification, and generally having low management costs.

When choosing an ETF, it is important to consider factors such as the fund's expense ratio, which is the annual fee you pay to own the fund, and the fund's performance history. It is also essential to understand your investment goals, risk tolerance, and time horizon.

Some popular types of ETFs include:

- Index funds that track major indexes like the S&P 500 or Nasdaq Composite.

- Sector ETFs that focus on specific industries like technology or banking.

- International ETFs that provide exposure to companies in other countries or regions.

- Dividend ETFs that invest in companies with a history of paying dividends.

- Bond ETFs that provide exposure to a portfolio of bonds.

International ETFs

• Vanguard FTSE Developed Markets ETF (VEA)
• IShares Core MSCI Total International Stock ETF (IEFA)
• Vanguard FTSE Emerging Markets ETF (VWO)
• Vanguard Total International Stock ETF (VXUS)
• IShares Core MSCI EAFE ETF (IEFA)
• IShares National Muni Bond ETF (MUB)
• IShares Core MSCI Total International Stock ETF

Sector ETFs

Understanding Sector ETFs

Benefits of Sector ETFs

• Diversification: Sector ETFs provide exposure to a diverse range of companies within a specific sector, reducing the risk of investing in individual stocks.
• Focused Investment: They allow investors to focus their investments on sectors they believe will perform well or align with their interests.
• Simplicity: Sector ETFs offer a simple way to gain exposure to a particular sector without the need to research and select individual stocks.

Factors to Consider

When choosing a sector ETF, consider the following:

• Sector Performance: Evaluate the historical performance of the sector and its future prospects. Look at economic trends, market conditions, and the overall health of the sector.
• Risk and Volatility: Different sectors carry varying levels of risk and volatility. For example, sectors like healthcare and consumer staples are considered defensive and tend to be less volatile, while technology and financials can be more volatile.
• Expense Ratio: Compare the expense ratios of different sector ETFs. Lower expense ratios mean lower fees, resulting in higher returns over time.
• Holdings: Examine the holdings of the ETF to understand which companies it invests in and their weightings. Ensure that the ETF aligns with your investment goals and preferences.

Examples of Sector ETFs

• Vanguard Information Technology ETF (VGT): This ETF provides exposure to the technology sector, including companies like Apple and Microsoft.
• Financial Select Sector SPDR Fund (XLF): This ETF invests in the financial sector, covering areas such as banking, insurance, and real estate.
• Energy Select Sector SPDR Fund (XLE): This ETF focuses on the energy sector, including oil and gas companies.
• Industrial Select Sector SPDR Fund (XLI): This ETF covers the industrial sector, including companies in industries like aerospace, engineering, and transportation.
• IShares U.S. Healthcare ETF (IYH): This ETF provides exposure to a range of healthcare companies, including pharmaceutical, biotechnology, and healthcare equipment firms.
• Consumer Staples Select Sector SPDR Fund (XLP): This ETF invests in consumer staples companies, such as food producers, household goods, and personal care products.

Remember to conduct thorough research, assess your investment goals and risk tolerance, and consider seeking advice from a financial professional before making any investment decisions.

Dividend ETFs

Vanguard Dividend Appreciation ETF (VIG)

VIG has an expense ratio of 0.06% and tracks the performance of the NASDAQ US Dividend Achievers Select Index. The investment strategy focuses on dividend growth, selecting companies that have consistently increased dividend payments for at least a decade. Its top holdings include Microsoft, Apple, and Broadcom, and it has assets under management of around $86.6 billion.

Vanguard High Dividend Yield ETF (VYM)

This ETF tracks the performance of the FTSE High Dividend Yield Index, which selects high-yield dividend-paying companies based in the US. It has an expense ratio of 0.06% and a dividend yield of 2.8%. Its top holdings include Exxon Mobil, JPMorgan Chase, and Johnson & Johnson.

Schwab US Dividend Equity ETF (SCHD)

With an expense ratio of 0.06%, SCHD seeks to track the performance of the Dow Jones US Dividend 100 Index, which includes companies with strong financial performance. Its dividend yield is 3.5% and its top holdings include The Home Depot, BlackRock, and Cisco System.

SPDR S&P Dividend ETF (SDY)

SDY tracks the performance of the S&P High Yield Dividend Aristocrats Index, which screens for companies that have consistently increased dividend payments for at least 20 consecutive years. It has an expense ratio of 0.35% and a dividend yield of 2.3%. Its top holdings include Realty Income, Kenvue, and International Business Machines.

IShares Select Dividend ETF (DVY)

DVY tracks the performance of the Dow Jones Select Dividend Index, selecting high-dividend yield companies based in the US. It has an expense ratio of 0.38% and a dividend yield of 3.5%. Its top holdings include Altria Group, AT&T, and Philip Morris International.

ProShares S&P 500 Dividend Aristocrats ETF (NOBL)

NOBL tracks the performance of the S&P 500 Dividend Aristocrats Index, selecting multinational household names with a history of increasing dividends for at least 25 years. It has an expense ratio of 0.35% and a dividend yield of 2.0%. Its top holdings include International Business Machines, Stanley Black & Decker, and Air Products & Chemicals.

IShares Core Dividend Growth ETF

This ETF provides exposure to US stocks with a history of growing their dividends per share and had over 410 dividend stocks as of late 2024. It has a low expense ratio of 0.08% and a trailing 12-month yield of 2.2%.

Vanguard Total Stock Market ETF

This ETF aims to track the CRSP US Total Stock Market index and held more than 3,600 stocks of all sizes as of late 2024. It has a very low expense ratio of 0.03%.

IShares Core MSCI Total International Stock ETF

This ETF offers diversified international exposure and held over 4,300 stocks of all sizes from around the world as of late 2024. It has an expense ratio of 0.07% and a dividend yield of 3.0%.

Market-cap index ETFs

The benefits of market-cap index ETFs include broad exposure to a wide range of stocks, low expenses, and the ability to buy a collection of stocks in just one fund. They are also traded on an exchange like stocks, making them easily accessible to investors.

Some examples of market-cap index ETFs include:

• Vanguard S&P 500 ETF (VOO)
• SPDR S&P 500 ETF Trust (SPY)
• IShares Core S&P 500 ETF (IVV)
• Invesco QQQ Trust (QQQ)

When considering investing in market-cap index ETFs, it is important to remember that they will never be the highest-performing investments due to their diversified nature. Additionally, they may not be as focused as they seem, as some ETFs that focus on a specific country or industry may include companies that derive a significant portion of their earnings from other regions or sectors.

ESG ETFs

Exchange-traded funds (ETFs) are a good investment option because they are relatively cheap, diversified, and carry lower risk than individual stocks.

ESG (environmental, social, and governance) ETFs are a type of fund that invests in companies with strong ESG practices. These companies aim to have a positive impact on the world, such as by reducing their carbon footprint or promoting diverse leadership.

• ESG funds are not individual stocks but rather a collection of multiple stocks grouped together, reducing risk.
• ESG ETFs are similar to index funds and other passively managed funds but can be traded throughout the day like stocks.
• ESG ETFs have become increasingly popular, with more funds available than ever, but they have faced regulatory scrutiny and pushback from investors in recent years.
• When choosing an ESG ETF, consider factors such as active vs. passive management, the fund's specific impact areas, and how it fits with your existing investments.

Best-Performing ESG ETFs:

• IShares ESG Advanced MSCI USA ETF
• JPMorgan Active Growth ETF
• American Century Mid Cap Growth Impact ETF
• IShares ESG Aware MSCI USA Growth ETF
• First Trust Multi-Manager Small Cap Opportunities ETF
• Harbor Human Capital Factor US Large Cap ETF
• Nuveen ESG Large-Cap Growth ETF

Cheapest ESG ETFs:

• TCW Transform 500 ETF
• Xtrackers MSCI USA Climate Action Equity ETF
• IShares ESG Screened S&P 500 ETF
• Vanguard ESG U.S. Stock ETF
• FlexShares ESG & Climate US Large Cap Core Index Fund
• NYLI Candriam U.S. Large Cap Equity ETF
• Xtrackers MSCI USA ESG Leaders Equity ETF

Frequently asked questions