ETFs are one of the investment types that should generally provide reasonably stable and high returns, with less risk.
They are diversified, pooled securities containing many individual investments. The best ETFs are those that meet a specific goal set by the investor.
As an example, if you want to safely invest in the oil industry, you could invest in an oil ETF. If one oil company falls, you are fine. But if the oil industry is struggling, then you are in trouble too.
As such, ETFs have their individual strategies. Let’s go over some examples of the best ETFs for the most common ETF strategies.
These are the ETFs to invest in for long-term financial goals.
People will normally find them or be directed to them when trying to save for retirement or other long-term goals.
As the name suggests, this ETF tracks the S&P 500 index.
The S&P 500 index is itself an index for the S&P 500. Those are the 500 largest publicly traded American companies.
The strategy of the Vanguard S&P 500 ETF is simple. It follows the index’s returns, borrowing the reputation and stability of the benchmark, which is seen to serve as the benchmark for the overall US stock markets.
This ETF should be considered if you’re trying to find a long-term ETF investment with average results and low risk.
It’s nothing fancy; you can expect to track the market with it, not beat it. But if you were trying to beat the market, you would not be considering these long-term ETFs and you would likely be considering different securities altogether.
This ETF enables you to invest in a large variety of sectors.
Like the S&P 500 ETF, it has a massive value of assets under management ($271 billion) and covers many domestic stocks. “Total stock market” refers to the coverage of stocks in every US market, offering huge diversification to investors.
Unlike the S&P 500 ETF, this one comes with a mix of small-cap, mid-cap, and blue chip stocks. It’s also especially efficient, with an expense ratio of just 0.03%.
This international stock's ETF exposes investors to companies across Europe, Asia, and Australia.
As a long-term investment, this offers you more diversification via developed markets abroad. With over 3,000 stocks, it’s also especially diverse and great as a long-term option.
The largest sectors represented are the financial (16.8%) and industrial (16.5%) sectors. Several markets are represented, with Japan’s being the source of the largest share of 23%.
While diverse, iShares Core MSCI EAFE ETF leans on its top 10 holdings, which account for over 10% of all its net assets.
This real estate ETF is a diverse pooled security for anyone looking to invest in the US real estate industry.
Vanguard Real Estate ETF focuses on REITs. The REIT portfolio leans on the commercial real estate sector, including office buildings, apartments, warehouses, and industrial properties.
While Vanguard does not concentrate much of its assets into few holdings normally, the top 10 holdings in this ETF make up more than 40% of all assets. For a real estate ETF of its size, Vanguard Real Estate ETF carries vary reasonable fees too.
These are not necessarily the best long-term ETFs. They are simply ETFs that produce high dividends at a sustainable rate with a reasonable risk profile.
SPDR offers several ETFs producing very high dividends. The Energy Select Sector SPDR Fund is one of them, granting a 6.27% dividend yield in 2021.
The ETF contains many energy companies that have been identified by the GICS. It focuses on companies producing consumable fuels, oil, and gas. There are also many holdings that offer energy services and equipment.
The Schwab US Dividend Equity ETF has recently produced dividends exceeding 3% per quarter. The fund contains a wide variety of holdings in many industries. The largest industries by far are financial services, industrials, and tech, together making up half of its assets.
This Vanguard ETF tracks a benchmark index measuring investment returns of stocks from companies in Canada, Europe, and the Pacific. It’s a good option for diversification, with a dividend yield last measured at 3.44%.
As of November 9th, 2022, the SPDR S&P Global Dividend ETF (WDIV) had a standardized (SEC) yield of 4.89%.
As with most similar ETFs, financial services are the most represented. But energy, utilities, and other companies from the US, Canada, Japan, and many other markets are represented. This high yield-producing ETF is one of the most diverse.
If you’re a beginner, it pays to play it safe.
Most financial advisors advise even well-educated individuals to not try to beat the market. When it comes to ETFs, you are simply choosing a fund, normally with a well-established strategy tracking a specific index.
To start, the Vanguard S&P 500 can produce results that track the largest (large-cap) publicly traded companies. You can learn by monitoring its results.
The best ETFs to buy and hold are those that produce reasonable results through a diverse range of individual assets.
We’ve gone over some of the best ETFs for 2023. As you’ll notice, there’s a simplicity to the ETFs that have proven themselves in the market.
While many of them are down right now, as the market is currently less stable, the industries covered are both diverse and necessary for most consumers and businesses in the US and around the world.
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