Exchange-traded funds have become extremely popular among investors as they allow one to own a diversified set of securities at an affordable rate. Additionally, they enable you to gain exposure to a wide range of different assets without having to hold multiple positions.
ETFs are the easiest way to invest in the stock market if you do not have enough experience or knowledge about the market. Although the future remains uncertain, there are several ETFs that you can definitely set on your watch list. They may not necessarily be the best, but they offer an impressive start to investing in ETFs.
Invesco QQQ ETFThe Invesco QQQ Trust ETF is a tech-heavy fund that has big names that you are already familiar with. The top-three standouts include Apple, Microsoft, and Amazon. Collectively, they make up almost 30% of the portfolio.
Additionally, ETF is one of the largest around, so it is incredibly liquid. It is not expensive either. Funds cost $20 annually for every $10,000 invested. Invesco QQQ ETF is tied to the NASDAQ 100 index, which rallied a tremendous 45% in 2020. This solid performance last year reflects the wider market of tech giants that soared.ETF is among the best Large-Cap growth ETFs available in the market today.
1. Vanguard Information Technology ETF
Technology-based ETFs seem to perform extremely well. Therefore, if you have an interest in technology investments, then ETF presents an excellent opportunity for you. It is benchmarked only by a list of companies that are in the tech sector.
Large technology giants are increasing profits in sales year after year. Therefore, tech-focused funds are typically found among the best growth ETFs such as the Vanguard Information Technology ETF. ETF holds over 340 stocks with plenty of heavyweights. Heavyweight players such as Apple, Microsoft, Visa, NVIDIA, and PayPal make up to 57% of the assets.
2. Vanguard Small-Cap ETF
If you prefer smaller stocks with growth potential, then consider the Vanguard Small-Cap ETF. With over 1,400 positions, this ETF offers an attractive place to invest. It’s highly diversified and has the lowest expense ratios. It costs only $5 annually for every $10,000 invested.
Some top holdings in this ETF include home solar energy company Enphase Energy (ENPH) and database provide Mongo (MDB). Additionally, it’s heavy on tech startups with about 22% of this being tech-focused. A quarter of the portfolio represents healthcare stocks. Therefore, you are getting wide diversification across hundreds of stocks.
3. Vanguard S&P 500 ETF
ETF tracks the S&P 500, therefore, providing a broad-based and highly diversified portfolio of the largest American companies. Additionally, it is sponsored by Vanguard, which is a leader in low-cost ETF investments. The fund itself has hundreds of billions in assets.
It has an annual cost of $3 for every $10,000 invested. The Vanguard S&P 500 ETF’s performance in 2020 was great and is expected to perform even better in 2021. This makes it the best ETF to purchase in 2021.
4. Schwab U.S. Small Cap ETF
Again, if you prefer going small, then the Schwab U.S. Small-Cap ETF is perfect for you. It is a simple, efficient, and diversified way of investing across several Small-Caps. It has a portfolio of over 1,800 stocks. The majority of these are not recognizable, as they do not contain large corporations that often dominate other index funds.
Although most of these stocks are Small-Caps, there is a decent amount of Mid-Caps in it, as well. These stocks are heavily tied to the domestic U.S. economy. Top holdings include companies such as NovoCure (NVCR) and LED light manufacture Cree. This ETF comes with a low annual expense of $4 for every $10,000 invested.
5. Invesco WilderHill Clean Energy ETF
If you are supportive of renewable energy, then you might want to go with an ETF that is highly focused on green energy stocks. Invesco WilderHill Clean Energy ETF was very impressive in 2020 as it returned 162% through mid-December 2020. This makes it an excellent ETF to purchase in 2021.
This fund invests in over 50 top alternative green energy stocks spread out in fields such as solar energy companies, electric-vehicle manufacturers, and lithium miners. Top players include ReneSola, FuelCell Energy, and Arcimoto. By 2021, there will be more focus on sustainability; most funds will be focused on green energy. This makes the Invesco WilderHill Clean Energy ETF a potential growth ETF that you should buy in 2021.
6. ARK Fintech Innovation ETF
One of the hottest and most promising growth areas of technology right now is the emerging Fintech subsector. This sector comprises firms with new products or services that have the potential to change the way the world functions.
Pulling in about $6.4 billion year-to-date through November, the ARK ETF has become the most popular active ETF in 2020. It currently occupies the 18th position of most popular U.S. listed ETFs. It holds from 35 to 55 stocks. Top holdings include almost 10% stake in Tesla, 7% in Roku, and 6.24% stake in NVIDIA.
The Covid-19 pandemic has proved that traditional brick-and-mortar banks have been replaced with high-tech alternatives. This trend is set to continue in 2021 and beyond.
Exchange-traded funds present one of the easiest and safest ways for investors to get into the stock market. They offer great diversification regardless of how much money you invest into them. The above list of ETFs does not necessarily provide an exhaustive list of the best ETFs to buy in 2021. However, they should make a brilliant start for anyone who wishes to start.