There are more than 1,700 ETFs in the U.S. today. These are the best of the best.
ETFs are funds that hold a group of assets such as stocks, bonds or others
They are one of the easiest ways to invest in the stock market if you have limited experience or knowledge
Playing the stock market can be daunting, especially if you’re new to investing. Luckily, ETFs make it a little bit easier. When you buy a share of an ETF, you’re investing in a portfolio that holds a number of different stocks. That means they’re a safer bet than just straight-up playing the market, plus, it’s usually pretty cheap to get started.
Still, with so many ETF choices, how can investors (especially newbies) know which ones to buy? The answer depends on your personal goals and timeline — though experts agree that most investors should buy for the long-term. We’ve put together a list of five ETFs that you can confidently buy right now for worry-free, long-term investing.
Vanguard Value ETF (VTV)
Warren Buffett didn’t make his money speculating on “hot” stocks and trendy names. He sought out good companies trading well below market value. Take a page out of his playbook and buy an ETF that allows diversifications and exposure to different groups of stocks, even if those groups aren’t the most glamorous.VTV, for example, doesn’t include many big-name companies — but it does automate the process of finding investment bargains. VTV tracks the CRSP U.S. Large Cap Value index, which screens for cheap stocks of good companies by analyzing factors like price-book, dividend yield, price-sales and forward price-earnings compared to historical P/E. The estimated one-year return is an impressive 13.6%.
Vanguard High Dividend Yield ETF (VYM)
Founded in 2006, VYM is made up of over 400 holdings — mostly U.S. stocks with the highest dividend yields. As a passive index fund, the managers aren’t trying to guess individual winners in the stock market, but instead track an entire group of investments. That means more money for you.
VYM currently charges just $6 for every $10,000 invested, so the fees don’t cut into your profits as much as some others. In addition, VYM currently has around $23 billion under management, making it highly liquid. With a portfolio of big-name corporations (like Johnson & Johnson and Intel) and an annual return of 10%, you can’t go wrong.
Fidelity Quality Factor ETF (FQAL)
With a one-year return of 17.7%, this one is a biggie! FQAL invests at least 80% of assets in the Fidelity U.S. Quality Factor IndexSM, which is designed to reflect the performance of stocks of large and mid-capitalization U.S. companies with a higher quality profile than the broader market.
When you buy a share of an ETF, you’re investing in a portfolio that holds a number of different stocks.
The top 1,000 stocks are scored upon free cash flow margin, cash flow stability, and return on invested capital — and only the highest scoring stocks are included in this index. FQAL is perfect for investors that want to reduce risk and volatility and gain more security in their investments.
Vanguard Health Care ETF (VHT)
Vanguard funds have dominated the list thus far, and now they are making another appearance — this time in the healthcare sector. Regardless of your opinions on the future of healthcare, it is one of the only markets that has shown consistent growth over the last few decades. While this means that your money is consistently getting taken, it also means that you can consistently get money back.
The Health Care Index Fund charges a reasonable $10 for every $10,000 invested and has a healthy liquidity. Investors get exposure to over 300 stocks from companies involved across the broad healthcare sector, protecting them from the negative performance of any one company. The annual return for VHT is a whopping 20%, so get it while it’s hot!
Vanguard S&P 500 ETF (VOO)
Most financial experts would advise you to pick out an ETF that tracks the S&P 500 index, as this widely regarded as the best gauge of large-cap U.S. equities. This means it’s even more useful than the Dow Jones industrial average and Nasdaq, which both have more narrow company focuses. If you’re new to the investing game, VOO is one stock option you should seriously explore.
Vanguard’s S&P 500 ETF is one of the best options out there with a rock-bottom expense ratio of just 0.04 percent (or $4 annually for every $10,000 invested). With a massive asset base and millions of shares changing hands most days, the VOO is very large, liquid, and SAFE. With a 17.9% one-year return, this is a solid investment choice.
A deeper dive — Related reading from the 101:
–How to get started in stock market investing | Finance101
There are ways for the average person to invest in the stock market without a background in finance.
–How to start investing today with less than $100 | Finance101
Gone are the days when trading, investing and making smart money moves were luxuries of the rich.