Mutual funds and exchange-traded funds (ETFs) saw significant net inflows of capital in 2021. According to recent metrics released by the Investment Company Institute, “total estimated inflows to long-term mutual funds and exchange-traded funds (ETFs) were $16.30 billion for the week ended August 4, 2021.” Given investors’ interest, today’s article introduces seven funds to buy for growth and income in the coming months.
The current low-interest-rate environment has meant investors are looking for funds with stable dividends. As a result, funds that have high dividend payouts have seen increased capital inflows. And growth funds typically make up an important portion of many long-term portfolios as well.
So far in the year, broader markets have performed strongly, bringing record highs to the Dow Jones Industrial Average and the S&P 500 as well as the tech-heavy Nasdaq-100 index. As a result, funds that give exposure to these three U.S. indices have also had strong returns year-to-date (YTD). For example:
- SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA)—up 15.9% YTD;
- SPDR S&P 500 (NYSEARCA:SPY)—up 18.4% YTD; and
- Invesco QQQ Trust (NASDAQ:QQQ)— up 16.4% YTD.
Funds allow market participants to track the performance of not only these three indices, but also of many asset classes, sectors and popular investing themes. Such funds offer diversification, liquidity and ease of participating in the markets.
With that information, here are seven funds to buy in the final months of the year.
- Amplify High Income ETF (NYSEARCA:YYY)
- Dimensional U.S. Equity ETF (NYSEARCA:DFUS)
- Fidelity Large Cap Growth Index Fund (NASDDAQ:FSPGX)
- Invesco KBW Property & Casualty Insurance ETF (NASDAQ:KBWP)
- iShares Russell Mid-Cap Growth ETF (NYSEARCA:IWP)
- SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA:SPYD)
- VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG)
Funds to Buy: Amplify High Income ETF (YYY)
52-Week Range: $14.26 – $17.82
Distribution Yield: 8.9%
Expense Ratio: 2.45%, or $245 per $10,000 invested annually
Our first fund, the Amplify High Income ETF, is a fund of funds. It provides diversification by investing in closed end funds (CEFs) — other publicly traded investment companies. InvestorPlace.com readers should note that because YYY is a fund of funds, its total expense ratio is high.
The fund began trading in June 2013, and net assets stand at $489.9 million. YYY, which has 45 holdings, tracks the ISE High Income Index. The current allocation is 70% fixed income and 30% equities.
In terms of asset classes in YYY, high-yield bond funds make up the highest slice, with 21.7%, followed by loan participation funds (20.49%) and multi-sector bond funds (8.62%). Upon closer inspection, we note that a large slice of assets are within the high credit risk range. In other words, they carry high bankruptcy risk.
The fund’s leading 10 holdings account for about 30% of YYY. Several of the leading CEFs in the roster include the PIMCO Corporate & Income Opportunity (NYSE:PTY), Oxford Lane Capital Corp (NASDAQ:OXLC), the PIMCO Dynamic Income Fund (NYSE:PDI) and Liberty All Star Equity Closed Fund (NYSE:USA).
YTD, the fund has been up about 9.3%, and saw a multi-year high in June. For many investors, YYY could offer diversification. However, potential investors should remember the high expense ratio as well as the high level of exposure to high-yielding assets.
Funds to Buy: Dimensional US Equity ETF (DFUS)
52-Week Range: $45.75 – $49
Dividend Yield: 1%
Expense Ratio: 0.11%
Converting mutual funds to ETFs is a recent trend on Wall Street. Our next fund, the Dimensional U.S. Equity ETF, comes from Dimensional Fund Advisors. In June, this fund manager converted $29 billion of mutual funds into ETFs. As a result, it has listed four news ETFs on the Big Board.
DFUS tracks the performance of some of the most widely traded stocks across a range of industries. As a mutual fund, it started trading in September 2001. Then the conversion happened in June 2021. The ETF currently has around $5.8 billion in assets.
The fund, which has 2,080 stocks, tracks the Russell 3000 Index. In terms of the sub-sectors, the information technology, IT, sector comprises the biggest slice, with 28.47%; followed by health care and consumer discretionary sectors, with 13.36% and 12.63%, respectively.
The top 10 stocks account for around 27% of the fund. Among the leading names are the tech darlings Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG).
Since its inception, DFUS is up about 6%. However, if we extend the timeframe to the past 10 years, the average annual total returns are more than 15%. Readers might want to keep the new ETF on the radar.
Funds to Buy: Fidelity Large Cap Growth Index Fund (FSPGX)
52-week range: $20.53 – $28.08
Dividend Yield: 0.56%
Expense ratio: 0.035% per year
Our next choice is a low-cost mutual fund. The Fidelity Large Cap Growth Index Fund tracks the returns of the Russell 1000 Growth index, a market capitalization (cap) weighted index focusing on the large-cap growth segment of the U.S. equity market. The fund currently holds 496 stocks. Since its inception in 2016, net assets reached $8.2 billion.
Information technology (44%), consumer discretionary (18.46%), communication services (12.6%) and healthcare (9.04%) are the top four sectors in the fund. The leading 10 stocks constitute almost 45% of the mutual fund. Apple, Microsoft, Amazon and Facebook head the list in FSGPX as well.
This fund returned 33.6% in the past year, in part due to its exposure to leading tech names. If you are looking for a low-cost mutual fund that invests in large cap growth stocks, then this fund deserves your attention.
Funds to Buy: Invesco KBW Property & Casualty Insurance ETF (KBWP)
52-week range: $54.72 – $81.52
Dividend Yield: 2%
Expense ratio: 0.35% per year
The Invesco KBW Property & Casualty Insurance ETF invests in property and casualty insurance companies. The fund started trading in December 2010.
KBWP, which has 25 holdings, tracks the KBW NASDAQ Property & Casualty index. The top ten names comprise about 75% of net assets of $86.1 million. In other words, it is top heavy. Insurance giants Chubb (NYSE:CB), Progressive (NYSE:PGR), American International Group (NYSE:AIG), Allstate (NYSE:ALL) and Travelers Companies (NYSE:TRV) lead the names in the roster.
YTD, the fund is up about 17% and hit a record high in May. The current price supports a dividend yield of 1.9%. Many insurers tend to deliver shareholder value through stock buybacks as well capital returns. Therefore, KBWP could be of interest to passive income seekers, too.
Trailing P/E and P/B ratios stand at 15.63 and 1.39. Put another way, despite the recent run-up in price, valuation levels are not overstretched. As part of portfolio diversification and passive income, I’d consider buying around $75 or even lower.
Funds to Buy: iShares Russell Mid-Cap Growth ETF (IWP)
52-Week Range: $81.44 – $116.02
Dividend Yield: 0.25%
Expense Ratio: 0.23% per year
The iShares Russell Mid-Cap Growth ETF invests in mid-cap U.S. firms with growing earnings. IWP, which has 386 holdings, tracks the results of the Russell Mid-Cap Growth Index. The fund began trading in July 2001, and net assets stand around $16.5 billion.
IT stocks have the highest weighting, with 34.15%. Next in line are health care (17.57%) and consumer discretionaries (16.14%). The leading 10 holdings make up about 12% of the fund. Put another way it is a diversified fund.
Among the top names in the roster are the animal veterinary products group Idexx Laboratories (NASDAQ:IDXX), DocuSign (NASDAQ:DOCU), well-known as the leading e-signature platform; television streaming platform Roku (NASDAQ:ROKU), which has benefited immensely from the pandemic lockdown; and restaurant group Chipotle Mexican Grill (NYSE:CMG).
The fund returned 34.4% in the past year and 11% so far in 2021. IWP also hit a record high in August A fund like IWP could be appropriate for readers who already have big tech and large-cap growth stocks and now want mid-caps in growth portfolios.
Funds to Buy: SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
52-Week Range: $26.15 – $42.64
Distribution Yield: 4.8%
Expense Ratio: 0.07% per year
The SPDR Portfolio S&P 500 High Dividend ETF invests in stocks that offer high dividends that could also see capital appreciation. The fund started trading in October 2015, and net assets stand at $4.7 billion.
SPYD, which has 78 holdings, tracks the returns of the S&P 500 High Dividend Index. The top 10 names comprise around 15% of the fund, and no name has a weighting of more than 1.8%.
In terms of sectoral breakdown, financials (22.66%) have the top spot. Next in line are real estate stocks (20.66%), followed by utilities (13.47%) and energy (12.89%).
Data storage companies Iron Mountain (NYSE:IRM) and Seagate Technology (NASDAQ:STX); real estate investment trusts (REITs) Simon Property (NYSE:SPG) and Regency Centers (NASDAQ:REG); and ConocoPhillips (NYSE:COP) lead the names in the roster.
So far this year, the fund has returned more than 22%, hitting a record high in early June. Trailing P/E and P/B ratios of 20.75% and 1.85%, as well as the current dividend yield, suggest the fund could see new highs in the months ahead.
Most dividend investors do not tend to sell robust dividend names even when markets decline. Thus, even if we were to see short-term profit-taking in the fund’s stocks, these stocks could potentially recover fast.
Funds to buy: VanEck Vectors Low Carbon Energy ETF (SMOG)
52-Week Range: $98.30 – $195.55
Dividend Yield: 0.07%
Expense Ratio: 0.62% per year
A recent report by the European Union (EU) highlights, “The use of renewable energy has many potential benefits, including a reduction in greenhouse gas emissions, the diversification of energy supplies and a reduced dependency on fossil fuel markets (in particular, oil and gas). The growth of renewable energy sources may also stimulate employment.”
Our final fund, the VanEck Vectors Low Carbon Energy ETF, gives access to businesses operating in the alternative energy space worldwide. SMOG, which has 71 holdings, follows the Ardour Global Extra Liquid Index. In terms of country allocation, the U.S. has the top spot (32%), followed by China (19.5%), Denmark (10%), and Spain 8.5%).
Among the leading sectors are utilities (34.1%), consumer discretionaries (25.5%) and industrials (21.9%). The leading 10 holdings make up about 55% of net assets of $304.5 million.
Electric vehicle heavyweights Tesla (NASDAQ:TSLA), Nio (NYSE:NIO), Li Auto (NASDAQ:LI) and Xpeng (NYSE:XPEV) make up over 20% of the fund. Therefore, short-term price moves in these manufacturers can affect the price of the ETF. Other well-known names in the fund include Nextera Energy (NYSE:NEE), Vestas Wind Systems (OTCMKTS:VWDRY), and Orsted (OTCMKTS:DNNGY).
YTD, the fund is down to over 3%. But it hit a record high in January and has returned 61% in the past 52 weeks. Readers who are following the important steps many companies take as the world transitions toward renewable energy could consider researching SMOG further.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.