Although benchmark indices have again found themselves trading at all-time highs, it’s difficult not to wonder if you risk holding the bag. For one thing, volatility between July 14 through July 19 gave everyone a reminder that anything could happen. Thus, the narrative for exchange-traded funds or ETFs is only brightening. Providing broad exposure to given sectors, the best ETFs to buy now offer a relatively safer look for your portfolio.
As it relates to our present circumstances, investors have many news items to digest. In an email to InvestorPlace, Jesus Salas of LeHigh University stated that “The near future is full of uncertainties related to inflation, interest rates, and earnings. Price-earnings ratios (P/E) are relatively high. Investors are anticipating high earnings in the future and I am not sure if companies will deliver.” This ambiguity is a perfect backdrop for the best ETFs to buy now.
Primarily, the main advantage of electing funds over betting on individual names is that you can spread out your risk profile across several investments. By going long a specific company, you’re giving yourself maximum profitability potential. At the same time, if the target equity unit crumbles, you could be on the hook for deep losses. The best ETFs to buy now provide greater confidence. If one holding goes down, others may pick up the slack.
Also, in the long run, investors may end up being rewarded with ETFs over gambling on the flavors of the week. According to Salas’ research, “traditional investments into the whole market are outperforming growth/risky technology companies” so far in 2021. Therefore, rather than swinging for the fences, you may want to consider the best ETFs to buy now.
As well, none of us know how the novel coronavirus pandemic will play out. While seemingly everyone’s talking about inflation, a worsening public health crisis could easily send a deflationary shock to the system. After all, I doubt that the federal government can afford another round of stimulus checks. Thus, the narrative for these best ETFs to buy now is even more powerful.
- Vanguard Dividend Appreciation Index Fund ETF (NYSEARCA:VIG)
- ProShares S&P 500 Dividend Aristocrats ETF (BATS:NOBL)
- Vanguard Utilities Index Fund ETF (NYSEARCA:VPU)
- First Trust NASDAQ Clean Edge Green Energy Index Fund ETF (NASDAQ:QCLN)
- Invesco Water Resources ETF (NASDAQ:PHO)
- ARK Innovation ETF (NYSEARCA:ARKK)
- iShares ESG Aware MSCI EM ETF (NASDAQ:ESGE)
While sector funds are generally speaking safer than individual bets, don’t get lulled into complacency. While the best ETFs to buy now offer the spreading of risk across several names, that also means potential upside is limited. As with any other investment class, please perform your due diligence.
Best ETFs To Buy Now: Vanguard Dividend Appreciation Index Fund ETF (VIG)
If safety is your biggest concern, then a tried-and-true idea is to consider blue-chip dividend stocks. Not only do you get the stability and predictable revenue stream of the world’s biggest companies, you can also bank on their passive income potential. But if you’re having trouble choosing individual names, you should consider the best ETFs to buy now which specialize in yield-friendly corporations.
Fortunately, Vanguard Dividend Appreciation Index Fund ETF offers just the right solution. For one thing, the VIG fund has a very low expense ratio or the percentage of your investment that will deducted annually as fees. In this case, we’re talking a ratio of 0.06%, which is well below the category average of 0.45%.
In addition, the top holdings are names you can trust. Coming in first at time of writing is software and consumer technology giant Microsoft (NASDAQ:MSFT), followed by JPMorgan Chase (NYSE:JPM) and Johnson & Johnson (NYSE:JNJ).
Better yet, if circumstances get squirrely in the market, the VIG ETF provides defensive powerhouses, such as Walmart (NYSE:WMT) and Home Depot (NYSE:HD). If you anticipate trouble ahead, VIG is one of the best ETFs to buy now.
ProShares S&P 500 Dividend Aristocrats ETF (NOBL)
If you’re really concerned about the stability of the domestic and global economy, then the ProShares S&P 500 Dividend Aristocrats ETF may be right up your alley. As the “brand” name suggests, NOBL — which I might also add is an appropriate ticker symbol — focuses on dividend aristocrats or companies that build their reputation on supporting their shareholders.
A dividend aristocrat isn’t just an organization that consistently pays their stakeholders; they consistently increase their payouts for at least the past 25 years. Naturally, since it takes a quarter of a century at minimum to earn this lofty status, companies in this rarefied category are not quick to lose it. That’s why NOBL is one of the best ETFs to buy now for safety.
As with anything in life, though, you often pay a premium for distinguished products or services. In the case of the NOBL ETF, investors are looking at an expense ratio of 0.35%, which isn’t that much lower than the category average of 0.39%.
The plus side? NOBL is up 16.3% year-to-date, which implies other investors also regard it as one of the best ETFs to buy now.
Best ETFs To Buy Now: Vanguard Utilities Index Fund ETF (VPU)
If you’ve followed my work at InvestorPlace over the last several months, you’ll know that I’m mostly concerned about deflation over the long run. Part of the reason is that it appears the mainstream media focuses heavily on inflation risk, with internet searches revealing a host of op-eds and journalistic reports about rising prices.
Less frequently discussed — and I would say by a wide margin — is deflationary risks. Such stories are out there but you’ll have to dig for them much more so than inflation-based articles. But let’s just say for argument’s sake that deflation does hit us down the road. What investment class should people consider, if they even want to invest at all in the equities sector?
In my opinion, the answer is utilities. Simply, modern economies need energy resources to survive. Thus, this is theoretically the last sector to feel the pain. Regarding the best ETFs to buy now in the space, Vanguard Utilities Index Fund ETF will probably do you solid.
The VPU fund has a very low expense ratio of 0.10%, whereas the category average is 0.43%. The top holdings include some of the most well-known utilities, including NextEra Energy (NYSE:NEE), Duke Energy (NYSE:DUK) and Southern Company (NYSE:SO).
First Trust NASDAQ Clean Edge Green Energy Index Fund ETF (QCLN)
While we’re on the topic of energy needs, investors with a long outlook should consider the First Trust NASDAQ Clean Edge Green Energy Index Fund ETF. Yeah, it’s a mouthful but over the trailing year, the QCLN ETF has gained nearly 88%. That’s serious performance, suggesting that people anticipate a massive paradigm shift in personal transportation.
Unsurprisingly, QCLN features several electric vehicle manufacturers, including Nio (NYSE:NIO), Tesla (NASDAQ:TSLA) and XPeng (NYSE:XPEV). For full disclosure, I’ve had some concerns about EVs, especially since they will likely encounter profitability challenges as many attempt to price down their products to reach average household incomes.
But that’s not the only story with First Trust. Rather, the fund also features alternative energy providers, such as Enphase (NASDAQ:ENPH) and lithium producers like Albemarle (NYSE:ALB).
Furthermore, QCLN could end up becoming one of the best ETFs to buy now because it may be due for a swing higher in market value. In February, several clean-energy-related companies suffered from a PR crisis due to the Texas winter storm. Now that this politicized event is in the rearview mirrors, QCLN could make up for lost ground.
That said, prospective buyers will want to be aware that this fund features a high expense ratio of 0.60%, whereas the category average is 0.75%.
Best ETFs To Buy Now: Invesco Water Resources ETF (PHO)
For those that have eyes to see and ears to hear, the coronavirus pandemic was a wakeup call. First, it represents a huge consequence to globalization. At no other point in history has it been possible for so many people from so many parts of the world to travel around and potentially spread infectious diseases.
Second, we are living in incredible times and that’s the tragedy of this vitriol we have in our society. While we argue about whether or not to wear face masks or if former President Donald Trump really did lose the election, we have a massive water shortage crisis in the southwestern region of the U.S.
When former President Abraham Lincoln faced a history-altering predicament during the Civil War, he called for a day of national humiliation, fasting and prayer. Today, we’re much more concerned about who voted Democrat or Republican.
Priorities, I guess. Well, if you’re one of the investors that can see the bigger picture, then Invesco Water Resources ETF is among the best ETFs to buy now. With an emphasis on water resources and solutions, PHO is likely to increase in relevance no matter what happens to the underlying market or the economy.
On a YTD basis, the fund is up about 22% and recent trades suggest growing momentum, which isn’t that surprising. However, keep in mind you pay for this relevance as PHO has an expense ratio of 0.60%, above the category average of 0.50%.
ARK Innovation ETF (ARKK)
In my opinion, ARK Innovation ETF is easily the most controversial inclusion on this list of best ETFs to buy now. As you know, the Cathie Wood-led ARKK fund has been in the news frequently over the last few years and for good reason — it’s delivered the goods. Even now, the fund continues to support believers in Wood’s methodology, with a trailing-year performance of 53%.
However, since the beginning of this year, ARKK is in the red by 2%. I don’t think you can blame Wood for the underperformance entirely. As Jesus Salas mentioned earlier, traditional investments have been outperforming tech-centric names. Therefore, the common school of thought is that if you’re looking for safety, ARKK may not be the most appropriate choice.
Then again, the counterargument is that we live in a modern society. With rival countries competing in the tech and digitalization of everything space, ARKK may become the king of best ETFs to buy now. Frankly, it’s a tough choice but I’m including it on this list for completeness’ sake.
One thing that is clear is that ARKK has a very high expense ratio of 0.75%, well above the category average of 0.42%.
Best ETFs To Buy Now: iShares ESG Aware MSCI EM ETF (ESGE)
Nonstop, we are seemingly bombarded with news and editorials about how young people care about the environment and other issues regarding sustainability and responsibility. Indeed, trusted resources like the Pew Research Center confirmed millennials and generation Z’s focus on awareness.
However, does that actually translate to the investment market? Perhaps surprisingly to some, data from MagnifyMoney.com indicates that young social and environmental advocates put their money where their mouth is. For instance, MagnifyMoney’s survey revealed that “Nearly three-quarters of Gen Z investors (73%) have avoided sinking money into companies for moral or ethical reasons, compared with 56% of millennials, 48% of Gen Xers and 39% of baby boomers.”
Whether you agree or not, you just got to follow the trend. With environmental, social and governance (ESG) concerns becoming increasingly relevant, investors may want to consider iShares ESG Aware MSCI EM ETF. Focusing on companies that promote positive change through the three spheres of the ESG movement, you can profit off ESGE and feel good about doing so.
As if you needed another reason to consider ESGE, it has a low expense ratio of 0.25%, well below the category average of 0.48%. Now that’s what I call a two-fer!
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
