Are you wondering what the best ETFs to buy are given all the market volatility we’ve been facing in recent weeks?
The tech sector has been hit especially hard: The Technology Select Sector Index is down 11.5% over the past three months — almost double the loss of the S&P 500. But most of the largest companies — and biggest growth companies — in the market are tech stocks. So what should investors do?
They should try to buy the whole market. According to the Index Industry Association, the trade group for the index industry, there were 3.7 million published indices globally as of June 30, 2018, 13% higher than a year earlier. Many of those indices are tracked by ETFs. They cover virtually every subject imaginable.
It’s both incredibly easy and difficult for regular investors to capture vast swaths of the global economy. Easy because with the click of a button you can own some of China’s biggest companies; difficult because the choices available have become far too great for anyone with a day job.
Here are the best ETFs to buy for exposure to tech while avoiding some, if not all, of the bloodbath.
SPDR Portfolio Total Stock Market ETF (SPTM)
If you’re an Apple (NASDAQ:AAPL) fan, the SPDR Portfolio Total Stock Market ETF (NYSEARCA:SPTM) is the best ETF for you. SPTM has the iPhone maker as its number one holding with a weighting of 3.25% as of November 26.
The ETF, which charges just 0.03%, tracks the SSGA Total Stock Market Index, which captures 98% of the investable U.S. equity market.
There are currently 2,659 holdings in SPTM. The weighted average market cap of those holdings is $171.4 billion.
As for tech stocks — if you include the newly created communication services sector — they account for 27.9% of the ETF’s overall portfolio. If you exclude communication services, which also consists of some media stocks, the weighting is a more palatable 20.9%.
A popular ETF with $2.5 billion in net assets, it was launched on October 4, 2000. Since inception, SPTM has delivered an annualized return of 5.92% through October 31.
Vanguard S&P 500 ETF (VOO)
If Warren Buffett were recommending an ETF to buy, it would surely be the Vanguard S&P 500 ETF (NYSEARCA:VOO), the ETF version of the mutual fund he often suggests when asked what regular investors should buy.
VOO is Vanguard’s version of the S&P 500, probably the world’s best-known stock index. Charging just 0.04% annually, VOO gives you 509 of America’s finest companies including Apple. The top ten holdings account for 23% of the ETFs $99.4 billion in total assets.
Like SPTM, VOO has a reasonably large exposure to tech, accounting for 30.8% overall if you include communication services.
But VOO’s performed significantly better than SPTM — up 14.1% on an annualized basis through October 31 — because it didn’t get its start until September 7, 2010, almost ten full years later, when equities were on the rise.
You can’t go wrong listening to Warren Buffett; VOO is one of the best ETFs to buy now.
iShares Russell Top 200 Growth ETF (IWY)
When you think about tech investing, growth stocks generally come to mind.
The iShares Russell Top 200 Growth ETF (NYSEARCA:IWY) is one of the best ETFs to buy for growth. As the name implies, IWY has a significant portion of its $1.2 billion in net assets invested in tech and communication services stocks.
So, if you’re trying to avoid tech stocks, IWY probably isn’t the best ETF to own.
However, if you’re willing to look past the 32.6% weighting in technology and 12.2% weighting in communication services, it’s a decent investment.
Well, even though IWY holds a large number of tech stocks, some of those tech names, especially in the top ten holdings, use technology to complement their businesses rather than to make them.
Mastercard (NYSE:MA) and Visa (NYSE:V) are two prime examples of companies that use technology to provide financial services. Most people would view them more as consumer brands and less as technology innovators.
Don’t tell the CEOs of Mastercard and Visa, but you get where I’m coming from.
Oh, and it only charges 0.20% for exposure to stocks that are expected to grow earnings faster than large caps as a whole.
Invesco S&P 500 Top 50 ETF (XLG)
The Invesco S&P 500 Top 50 ETF (NYSEARCA:XLG) tracks the performance of the S&P 500 Top 50 Index, which is the 50 largest market caps in the S&P 500, weighted using a float-adjusted market cap.
Naturally, XLG also has a significant component of tech stocks, but they’re huge companies with an average market cap of $391 billion; they aren’t going out of business unless the world as we know it ends.
Together, tech and communication services stocks, account for 43.7% of the ETF’s $762 million in net assets. The top ten holdings have a 42.1% weighting with Microsoft (NASDAQ:MSFT) knocking Apple — it’s the second-largest holding — out of the top spot for a change.
As of September 30, an investment of $10,000 a decade ago in XLG, is today worth $29,288 after its annual fee of 0.20%. Clearly this is one of the best ETFs around.
Fidelity NASDAQ Composite Index (ONEQ)
You might not have noticed, but I’ve limited my best ETF picks to one per provider so that you get a diversified group of products and not just Vanguard or iShares’ best options.
The Fidelity NASDAQ Composite Index Tracking Stock (NASDAQ:ONEQ) has been around for more than 15 years. It’s intended to track the performance of the Nasdaq Composite Index although the ETF has just 999 holdings compared to the more than 3,000 stocks trading on Nasdaq.
The ETFs top ten holdings account for 45.4% of the portfolio.
So, why did I pick ONEQ when technology and communication services account for 45.8% of its $1.8 billion in net assets?
One word: Performance.
Over the past ten years, ONEQ achieved an annual total return of 16.7% through October 31, easily one of the best-performing ETFs of the past decade.
Long term, the 0.21% expense ratio is worth it.
WisdomTree US Total Earnings ETF (EXT)
The WisdomTree US Total Earnings ETF (NYSEARCA:EXT) has just $88.6 million in net assets making it the smallest of the ETFs on my list. That said, EXT has some interesting characteristics worth considering.
For example, EXT tracks the WisdomTree U.S. Earnings Index, which uses fundamental earnings to weight the holdings. Companies included in the index have generated positive earnings over four consecutive quarters at the time of the index’s annual rebalancing in December.
The weighting of each stock is based on the sum of the four consecutive quarters of earnings divided by the total earnings of the entire portfolio. The higher they are, the higher the weighting.
No individual holding can represent more than 20% of the entire index. No sector — and this one’s important vis-à-vis technology — will be weighted at more than 25%.
As of September 30, technology accounted for 23.3% of the ETF’s portfolio. Although tech is the sector with the highest weighting, it’s still much lower than some of the other ETFs mentioned in this article.
Charging 0.28%, I think it’s a reasonable price to pay for one of the best ETFs to buy now: a diversified portfolio of profitable U.S. stocks with limited tech exposure.
JPMorgan U.S. Quality Factor ETF (JQUA)
Although JPMorgan is the second-smallest of the ETF providers in this article with $17.7 billion in assets under management as of November 26, it’s got some interesting ETFs.
JPMorgan U.S. Quality Factor ETF (NYSEARCA:JQUA) is one of them. Who wouldn’t want “quality” to be a part of an ETF investment strategy?
The day someone launches a fund with the word “crappy” in the title is the day we know there are no more good ETF investing ideas.
Seriously, JQUA tracks the JP Morgan US Quality Factor Index, that takes the sector weightings of the Russell 1000 — the largest 1,000 investable U.S. companies — and then quantifies each of the companies in the Russell 1000 based on profitability, quality of earnings, and solvency.
Currently, JQUA has $36.7 million in net assets, spread among230 holdings. Technology stocks account for just 20.0% of the ETF portfolio, making it one of the best ETFs to buy a large selection of stocks while limiting your tech exposure.
The top ten holdings account for just 18.4% of the portfolio and Apple isn’t anywhere near the top. It’s in 8th spot (hey that’s low for AAPL!) behind Cisco (NASDAQ:CSCO) and ahead of Home Depot (NYSE:HD) and Merck (NYSE:MRK).
More importantly, it charges just 0.12% annually, a reasonable price for a reasonable ETF.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
1. Vanguard S&P 500 ETF (VOO -0.54%)What is the most successful ETF? ›
|XLK||Technology Select Sector SPDR Fund||20.37%|
|QCLN||First Trust NASDAQ Clean Edge Green Energy Index Fund||19.87%|
|VGT||Vanguard Information Technology ETF||19.47%|
|IYW||iShares U.S. Technology ETF||19.02%|
|Vanguard S&P 500 ETF||(NYSEMKT:VOO)||0.03%|
|Invesco QQQ Trust||(NASDAQ:QQQ)||0.2%|
|Vanguard Growth ETF||(NYSEMKT:VUG)||0.04%|
|iShares Core S&P Small-Cap ETF||(NYSEMKT:IJR)||0.06%|
- SPDR® S&P Software & Services ETF.
- SPDR® NYSE Technology ETF.
- Vanguard Information Technology ETF.
- Fidelity® MSCI Information Tech ETF.
- Technology Select Sector SPDR® ETF.
- iShares Expanded Tech Sector ETF.
- SPDR® S&P Semiconductor ETF.
The single biggest risk in ETFs is market risk.
Investors looking to weather a recession can use exchange-traded funds (ETFs) as one way to reduce risk through diversification. ETFs that specialize in consumer staples and non-cyclicals outperformed the broader market during the Great Recession and are likely to persevere in future downturns.What are the best ETFs for recession 2023? ›
XLP, XLV, & XLU represent top recession ETFs in 2023 in my opinion. History suggests these sectors can outperform in bear markets. Healthy dividend yields and strong underlying businesses in the funds can mean ballast for a defensive portfolio.What is the number one traded ETF? ›
|Symbol||Name||Avg Daily Share Volume (3mo)|
|SPY||SPDR S&P 500 ETF Trust||88,737,086|
|SOXL||Direxion Daily Semiconductor Bull 3x Shares||73,550,492|
|BOIL||ProShares Ultra Bloomberg Natural Gas||67,208,797|
|UVXY||ProShares Ultra VIX Short-Term Futures ETF||62,798,313|
|ETF Symbol||ETF Name||Performance|
|QCLN||First Trust NASDAQ Clean Edge Green Energy Index Fund||228.47%|
|RTH||VanEck Retail ETF||224.84%|
|PPA||Invesco Aerospace & Defense ETF||221.25%|
|SPY||Performance Benchmark: SPDR S&P 500 ETF Trust||153.94%|
- Vanguard Total Stock Market ETF (VTI)
- Vanguard Total International Stock ETF (VXUS)
- Vanguard Information Technology ETF (VGT)
- Vanguard Total Bond Market ETF (BND)
- Vanguard Emerging Markets Government Bond ETF (VWOB)
- Vanguard ESG US Stock ETF (ESGV)
- Vanguard Russell 1000 Growth ETF (VONG)
What is an inverse ETF? An inverse ETF is set up so that its price rises (or falls) when the price of its target asset falls (or rises). This means the ETF performs inversely to the asset it's tracking. For example, an inverse ETF may be based on the S&P 500 index.What is the best day and time to buy ETFs? ›
So when is the ideal time? "Middle of the day is generally best, and if there are international (European) securities in the ETF, trading in the morning will ensure you get prices closest to fair value," Nadig explains. Now that you know what time of day is best, let's look at what kind of order you're planning on.What are the five best tech stocks to buy? ›
- Conduent Incorporated (NASDAQ:CNDT) Number of Hedge Fund Investors In Q4 2022: 20. ...
- PAR Technology Corporation (NYSE:PAR) Number of Hedge Fund Investors In Q4 2022: 20. ...
- Clearfield, Inc. (NASDAQ:CLFD) ...
- GoPro, Inc. (NASDAQ:GPRO) ...
- Benchmark Electronics, Inc. (NYSE:BHE)
- The Big Four or Five tech companies are often referred to by the following names or acronyms. ...
- Google (Alphabet), Amazon, Facebook (Meta), and Apple are commonly referred to as the Big Four or GAMA.
|Symbol||Company Name||Price Performance (1 Yr)|
|CDNS||Cadence Design Systems Inc.||31.72%|
In a nutshell: Yes, ETFs alone are enough to make you rich. With just one investment, you can capture the growth of the overall stock market or a certain segment of it. For example, you can find ETFs that focus on pretty much any industry, investment theme, or region of the globe.Which is better VTI or VOO? ›
VTI vs VOO: The Verdict
If you like the name-brand recognition of the S&P 500 and want to stick to large-caps, then VOO might be the better option. If you don't mind some mid and small-cap exposure, then VTI could be a good pick. Investors can potentially also use both as tax-loss harvesting pairs.
ETFs cannot be a bubble. It is an investment tool that only invests the shareholders' assets in various classes of securities, such as stocks, bonds or, as the case may be, derivatives. ETFs buy exactly the same securities as individual investors or professional managers of actively managed funds.What stock will go up the most in 2023? ›
|Company and ticker symbol||Performance in 2023|
|Meta Platforms (META)||99.7%|
|Align Technology (ALGN)||54.2%|
|West Pharmaceutical Systems (WST)||53.5%|
- The Best Recession Stocks of May 2023.
- Merck & Company, Inc. ( MRK)
- Becton, Dickinson and Company (BDX)
- CMS Energy Corporation (CMS)
- PepsiCo, Inc. ( PEP)
- Ameren Corporation (AEE)
- Xcel Energy Inc. ( XEL)
- Thermo Fisher Scientific Inc. ( TMO)
- Information Technology (IT)
- FMCG (Fast-moving consumer goods)
- Housing finance companies.
- Automobile Companies.
- Bonus: Pharmaceuticals Stocks.
|QQQ||Invesco QQQ Trust||$161.33B|
|VEA||Vanguard FTSE Developed Markets ETF||$108.44B|
|VTV||Vanguard Value ETF||$102.98B|
|IEFA||iShares Core MSCI EAFE ETF||$94.20B|
The Satrix 40 ETF tracks the performance of the FTSE/JSE Top 40 index which includes the 40 largest companies on the JSE, ranked by investable market cap. The ETF aims to accurately replicate the index by holding all constituents in the exact index weighting. Distributions are made quarterly.Is QQQ a good buy now? ›
QQQ's analyst rating consensus is a Moderate Buy. This is based on the ratings of 1719 Wall Streets Analysts.What are low risk ETFs? ›
ETFs are considered to be low-risk investments because they are low-cost and hold a basket of stocks or other securities, increasing diversification. For most individual investors, ETFs represent an ideal type of asset with which to build a diversified portfolio.Are ETFs the safest way to invest? ›
There is nothing inherently risky with ETFs in general. However, because they trade like individual stocks, a skilled investor can actually implement investment strategies with added diversification, and therefore decreased risk, when used correctly.Is there a downside to ETFs? ›
Lack of liquidity
refers to how easily or quickly an investor can buy or sell a security in a secondary market. An investor may have difficulties selling when the ETF is thinly traded, which means it trades at low volume and often high volatility.
Neither an ETF nor an index fund is safer than the other, as it depends on what the fund owns. Stocks will always be risker than bonds, but will usually yield higher returns on investment.