Friday, 1 January 2021

9 Best ETFs For Younger Investors


The best ETFs for young investors are often much different than those that suit the needs of older individuals. People in their 20s and 30s have much more time to build wealth and any temporary losses that their portfolio might sustain won't have an effect on their everyday lives. Taking on more risk early on in life can provide the opportunity to reach retirement goals sooner rather than being too conservative and having to wait until the golden years. Purchasing higher growth funds can provide much better returns and some alternatives, making a huge difference in your portfolio over time.


These are some of the best funds for those who prefer to take on more risk in exchange for potentially higher returns. 




1. QQQ

The Invesco qqq focus on large international and u.s companies in the technology, healthcare, industrial, and tech communication sectors. The large-cap tech stocks make up a large percentage of more than half of this fund. meaning. it can give you a great idea of how the overall tech sector is performing. The top holdings include Apple, Microsoft, Amazon, and Facebook.


The international exposure is a welcome addition to those who have the entirety of their portfolio focused on u.s stocks only. Invesco charges an expense ratio of 0.2% and the dividend yield is around 0.5%




1. VGT

Vanguard information technology ETF is similar to qqq, but provides broader access to companies that aren't necessarily included in the Nasdaq. Vgt holds more small and micro-cap as well as large and mid-cap stocks than most similar tech funds, this size diversification provides the stability of large companies while also taking part in the growth of the smaller ones. However, this fund won't provide any international exposure for those seeking that.

 

There are currently 328 u.s holdings which include companies such as Nvidia, Intel, Microsoft, MasterCard, and adobe. The dividend yield is less than 1%, and the expense ratio is 0.1%




3. IJT

Ijt is ishares S&P small-cap 600 growth ETF, which provides exposure to the technology, industrial, financial, and consumer cyclical sectors. The holdings are all fast-growing small u.s companies which will help diversify a portfolio consisting mainly of large-cap stocks. Many common ETFs carry all or mostly large-cap stocks, so putting some money in this fund will help balance that out.


However, small companies do tend to carry more risks than large-cap alternatives, among the largest holdings are lithia motors, Wingstop, Kinsale capital group, and Simpson manufacturing. The expense ratio is 0.25% and the dividend yield is less than 1%




4. DGRW

Wisdom trade u.s quality dividend growth fund holds a variety of large-cap dividend stocks that have growth characteristics. This means the stocks are likely to experience significant capital appreciation in addition to paying regular and growing dividend payments combining the best of both investing strategies. A fund such as this provides the benefit of stable mature companies that distribute income in addition to high growth, and it does this by focusing on companies that are likely to increase their dividends in the future.


The sectors held are about one-quarter technology followed by industrials, healthcare, and non-cyclical which are all fairly stable. Apple, Verizon, Altria, and Procter and gamble are some of the largest holdings. This is a great choice combining the popularity of dividend investing with the upward potential of growth investing. The dividend yield is about 2% and the expense ratio is 0.28%




5. OGIG

This is o'share's global internet giants ETF that focuses on large-cap internet stocks from developed markets. The fund holds 73 carefully selected international companies that generate most of their revenue from the internet and e-commerce sectors that exhibit quality and growth potential. This is primarily made up of u.s companies but also provides significant exposure to Chinese, German, and Canadian stocks.


Amazon, Alibaba, and Shopify are some of the largest positions allowing investors to join in on the fast-growing area of the economy. The expense ratio is 0.48% and the fund doesn't pay a dividend 




6. VNQ

This is a vanguard fund comprised of real estate investment trusts which own office buildings, hotels, apartment buildings, other income-producing properties as well as mortgage-backed securities. Vnq holds almost 200 different us-based real estate-related stocks including American tower corporation, Simon property group, and equity residential.


Investors looking to take part in real estate without owning tangible property can enjoy the benefits REITs have to offer. Real estate has historically performed well and that's likely due to the fact that it's a tangible asset that will always be needed. While the future growth of sectors such as financials or consumer discretionaries is sometimes questionable. The vnq fund has a healthy dividend yield of around 4% with an expense ratio of 0.12%




7. VXUS

The vanguard total international stock ETF tracks an index of companies that are located outside of the united states. With well over 7,000 holdings, the fund has exposure to 99 of the world's global markets outside of the u.s. Vxus holds small through large-cap stocks giving investors a wide range of diversification and exposure. Financials, technology, industrials, and consumer cyclical are the largest sectors held


This can be used in addition to primarily or solely use-based funds to help create a well-rounded portfolio. The top holdings include companies such as Samsung, Alibaba, nestle, and Toyota. The dividend yields almost 2.5% and the expense ratio is .08%




8. VIT

Vti is the vanguard total stock market ETF, meaning, it holds companies across the entire u.s stock market. With over 3,500 different stocks held, you'll have exposure to a variety of small-medium, and large companies. Once again, technology is its largest sector, but not by much. It makes up about one-fourth of the fund which is closely followed by financials, consumer services, healthcare, and industrials.


The usual large tech names are some of the largest holdings in addition to Berkshire Hathaway, johnson and johnson, and UnitedHealth group. So it's not overly concentrated. You'll also have the benefit of owning companies of all different sizes. The expense ratio is 0.03%, and the dividend is about 1.75%




9. VUG

Vanguard Growth ETF or vug holds around 270 different stocks. The fund carries large-cap fast-growing companies like apple, amazon, Facebook, and Google, so you can expect that the tech sector would make up nearly half of the holdings. 


The fund isn't just focused on the technology though, it also carries more traditional companies such as Costco, home depot, and McDonald's, who all have a foot on the ground surfaces with brick and mortar locations. It's hard to go wrong with these high-growth blue-chip companies that provide stability while also providing remarkable capital appreciation. With technology being its largest sector followed by consumer services and industrials this is a well-balanced large-cap fund for just about any younger investor.


This is what makes vug perhaps the best all-around growth fund in my personal favorite. The dividend is around 1% and the expense ratio just points .04%






Conclusion

If you start with nothing and invest $500 per month over 30 years at an 8% annual rate of return, you'll have less than half the amount of money than if you average a 12% rate of return. As you can see, ignoring the rate of return can be very costly because they play a huge part in the success of your investments

 

While it's important to consider expense ratios and even dividend yields, what's most critical is to be well educated in the products in which you're investing. Why they align with your strategy and your goals is important to know as well as matching up with your risk tolerance and having a proper amount of diversification. Those who are many years away from retiring could benefit greatly by taking on additional risks that these funds offer. The higher returns that could result from that increased risk will make an incredible difference in your portfolio value over time.


The faster growth could provide you with many more options than if you had invested too conservatively. These high growth funds can be volatile during times but patients will be rewarded. Consider adding them to your portfolio and conduct further research if necessary  

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