ETF Series: Top 10 ETFs Beginners Can Buy
December 7, 2021
The rise of Exchange-Traded Funds (ETFs) has made it easier and cheaper to build a diversified portfolio on your own.
Previously, I’ve shared what ETFs are and how you can invest in them. If you are wondering what types of ETFs are in the market, you can read about another piece I’ve written where I explore the various types of ETFs as well as their characteristics.
Additionally, we should also be aware of exactly why you should consider ETFs for your portfolio.
So, now that you’re already familiar with the ABCs of ETFs, I thought it would be suitable for you as I share ten of the most popular ETFs that beginners can buy and hold for the long term.
1) SPDR S&P 500 ETF Trust
The SPDR S&P 500 ETF Trust (NYSE: SPY) has been one of the most popular ETFs and will likely remain on that list.
It’s one of the largest ETFs with total assets of US$407.9 billion. It aims to track the S&P 500 Index, which comprises 500 large and mid-cap stocks in the US. The SPDR S&P 500 ETF has a return of 22.2% year-to-date.
2) iShares Core S&P Total US Stock Market ETF
While the S&P 500 Index covers the top 500 companies on the US stock market, the iShares Core S&P Total US Stock Market ETF (NYSE: ITOT) gives you exposure to a massive portfolio.
It has more than 3,000 stocks that represent about 90% of the listed companies on US stock exchanges. The fee is also very low at an expense ratio of just 0.03%, which is about US$3 annually for every US$1,000 invested.
Year-to-date, the iShares Core S&P Total US Stock Market ETF has gained 21.4%.
3) Vanguard Total World Stock Index ETF
If you want to look beyond the US, the Vanguard Total World Stock Index ETF (NYSE: VT) provides you with global exposure for your portfolio.
It is still dominated by the US stock market with about 60% exposure. However, this ETF helps you to gain exposure in Europe and in Emerging Markets as well.
The expense ratio is also very attractive at only 0.08% while the return of the index is at 16.6% year-to-date.
4) ARK Innovation ETF
ARK Innovation ETF (NYSE: ARKK) is run by Cathie Wood, who is well-known for building a string of ETFs that invest in disruptive innovation.
Ark Innovation’s objective is to seek long-term growth of capital by investing in companies that are relevant to “disruptive innovation”.
Here are some of the holdings within the portfolio: Tesla Inc (NASDAQ: TSLA), Teladoc Health (NYSE: TDOC), Coinbase Global Inc (NASDAQ: COIN), and Roku Inc (NASDAQ: ROKU).
While performance in 2021 trails behind the S&P 500 Index, those of you who want to gain exposure to disruptive technology companies will find the Ark Innovation ETF a good option.
5) Invesco QQQ Trust Series 1
The Invesco QQQ Trust Series 1 (NASDAQ: QQQ) tracks the Nasdaq-100, an index of the 100 largest non-financial members of the Nasdaq stock market.
The focus of the Nasdaq-100 makes it less diversified as it is dominated by technology companies.
It has so far been a lucrative bias, especially during the Big Tech era but with the rising interest rate environment, you might be taking a bit more risk with this ETF.
However, if you believe in the long-term prospects of technology-related companies, this ETF might give you the right exposure with an expense ratio of only 0.2%.
6) Vanguard Growth ETF
If you are investor who is more passionate about growth stocks, the Vanguard Growth ETF (NYSE: VUG) will be suitable for you.
The growth-focused ETF from Vanguard focuses on large-cap, US-based growth stocks. While the Vanguard Growth ETF might have about 280 different stocks, one-third of the portfolio is dominated by the Big Tech stocks.
The expense ratio is also very cheap at 0.04% for the exposure that it provides investors. This ETF tracks the CRSP US Large Cap Growth Index, which follows stocks that have established strong earnings per share (EPS) growth.
7) iShares Select Dividend ETF
Investors who are more interested in dividend counters can opt for the iShares Select Dividend ETF (NASDAQ: DVY), which tracks the investment results of an index composed of relatively high dividend-paying US equities.
This gives exposure to broad-cap US companies with a consistent history of dividends and access to 100 US stocks with at least a five-year record of paying dividends. Year-to-date, the return of the ETF is 28.5%.
8) Vanguard Small Cap ETF
While it is vital to have exposure to large-cap stocks in your portfolio, it doesn’t mean that small-cap stocks are bad.
In fact, they could complement you if already own some of the biggest large-cap stocks. Small companies also deliver much more growth than large, established companies.
The problem with investing in small-cap stocks is of course risk but with the Vanguard Small Cap ETF (NYSE: VB), it helps to protect investors from single-stock risk as it is diversified across a portfolio of companies.
Year-to-date, the Vanguard Small Cap ETF has gained 18.8%.
9) iShares MSCI China A ETF
Investors who are interested in gaining exposure in China-listed stocks could buy the iShares MSCI China A ETF (NYSE: CNYA).
This will help, especially given the difficulty to gaining access to the China A-shares market directly.
Aside from that, the expense ratio is also quite affordable at 0.6%. While year-to-date return is only at 2.5%, investors who are bullish on the long-term prospects of China’s economy will find the iShares MSCI China A ETF to be a suitable choice.
10) Invesco China Technology ETF
The Invesco China Technology ETF (NYSE: CQQQ) is another ETF that offers another exposure to China’s stock market.
Among some of the top ten holdings are Tencent Holdings Ltd (SEHK: 700), Meituan Dianping (SEHK: 3690) and Baidu Inc (NASDAQ: BIDU).
While there have been some uncertainties due to the crackdown on China’s technology giants, investors who have a positive view of China’s long-term prospects will find the Invesco China Technology ETF to be quite interesting.
While the fund is down 12.2% so far in 2021, it has delivered an impressive 11.1% annualised return over the past decade.
It should be noted that it has a slightly higher expense ratio of 0.7% versus traditional low-cost ETFs that access more liquid markets such as the US.
Plentiful investment choices
These are ten of the most popular ETFs that we think would be a good start for beginners. This will make it easier to build a portfolio for investors who are just starting to get to grips with investing.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.