Exchange-Traded Funds, popularly known as ETFs, are one of the most popular investment vehicles available in the world today. This personal finance technique allows one to invest the money for short-term and long-term horizons using the ETFs. Thanks to their capability of instant buying and selling, these are the preferred choice of investors looking for a highly liquid investment option. Unlike traditional mutual funds, popular ETFs can be bought and sold at any time, which further adds to the flexibility for investors.
It is essential to keep in mind some key considerations while investing in popular ETF funds to improve your personal finance state. Remember, while buying an Exchange-Traded Fund or an ETF, you are not directly purchasing a company’s stocks but pooling the money that will be utilized to buy a basket of bonds and stocks of various organizations. This also means that you must remain mindful of the assets as your fund is being utilized to buy ETFs. Choose companies that offer better returns, such as organizations in the real estate sector, IT sector, or other upcoming industries.
There are several popular ETFs in the market. We have closely examined these ETFs and come up with a list of credible options that are quite popular among investing agencies to meet their investment goals.
Vanguard S&P 500 ETF
Vanguard is considered one of the largest companies in the mutual funds’ segment, and its ETF is quite popular among investors. It tracks the S&P 500 and features an expense ratio that is as low as 0.3%, making it quite a low cost, economical, and popular ETF on the pocket too. Its credibility can be estimated because one of the brightest minds in the investing world, Warren Buffett himself, has recommended this ETF by its name to investors. You can rely on your investment as the ETF tracks the biggest 500 companies in the United States and has a good track record on returns.
SPDR S&P 500 ETF (SPY)
The importance of S&P is easily discernible from the fact that the most popular ETFs track this index, and for a good reason. The SPDR S P from State Street is one of the most heavily traded ETFs in the market. This ETF’s distinctive competence lies in the fact that this tracks the performance of the S&P 500 on a real-time basis, which means that the investors can use a single trade to make their transactions. Another advantage of the SPY is its highly liquid nature, and although its expense ratio is higher at 0.0945%, investors are happy to choose it.
Fidelity ZERO Total Market Index Fund
If you are looking for a low-cost option among ETFs where you will incur no fee, this is the one to go for among the list of popular ETFs. This is indeed an excellent opportunity for individual investors wanting to start investing in ETFs. This index tracks the returns achieved by the overall stock market of the United States, which means it is quite broader in its perspective and horizon. The examination of the fund’s performance reveals that the fund has performed slightly better than the funds coming under the category of the large-blend segment.
iShares Russell 2000 ETF
Specifically targeted at stocks coming under small capitalization, the Russell 2000 is a popular ETFs index that tracks the performance of 2000 stocks falling under the small-cap category in the US stock market. This index is a great one if you want to track the performance of the economy of the US as a whole. This ETF’s expense ratio is quite high at 0.19%, but that hasn’t deterred the investors from making a bet on this index. Specifically, if you want to buy a chunk of US companies without the hassle of multiple transactions, this is the ETF that would make a lot of sense.
Schwab U.S. Dividend Equity ETF
This is another interesting option among the list of popular ETFs for prospective investors wanting to invest in ETFs without burning a hole in their pocket. This ETF is also a preferred choice for investors who wish to have a steady cash flow in their accounts to obtain dividends from large organizations. The fund’s focus is clear – it concentrates on large US companies that have a history of providing a stable dividend to investors. Its expense ratio is quite competitive, i.e., 0.060%, and with its focused approach on large and high-performing companies, one can rest assured about the dividend in terms of return on investment.
This fund tracks the popular NASDAQ 100 index’s performance, and given that the NASDAQ Stock Exchange is home to many technology companies, you can rest assured about the returns on your investment. One important point to note here is that this index only concentrates on the NASDAQ 100 companies’ stocks. Unlike the S&P 500, which covers the organizations’ performances on both US Stock Exchanges, this one is primarily focused on NASDAQ. This also means that the index’s performance will be heavily influenced by any new development taking place in the technology sector but won’t get affected by changing scenarios in other industries, such as manufacturing, services, agriculture, etc. Therefore, it is important to know that the width and polarity of this ETF are majorly concentrated on the technology domain, and one should decide to make an investment in this ETF accordingly.
While selecting the ETF, you should pay close attention to which particular industry you will get exposure to through your investment. The rising sectors, which have more growth potential, should be on your priority list as chances of getting a decent return will be more in the sunrise sectors, such as real estate, IT, etc.
While deciding to invest in ETFs, you should be clear in your mind about the aim and objective that you want to achieve through the investment. ETFs are very useful instrument vehicles, and if one desirably utilizes them, they can significantly enhance your financial prowess.