3 ETFs to Buy Now: Q2 Edition


  • These ETFs have a history of outperforming the S&P 500.
  • Invesco S&P 500 Top 50 ETF (XLG): Why invest in 500 companies when you can focus on the Top 50 instead?
  • Vanguard Growth Index Fund ETF (VUG): The ETF is filled with tech stocks and has outperformed the stock market.
  • iShares Semiconductor ETF (SOXX): If you like AI and semiconductor stocks, you’ll enjoy this ETF.
ETFs to buy now - 3 ETFs to Buy Now: Q2 Edition

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You don’t have to pick individual stocks to get closer to your financial goals. ETFs can do the job just fine as they offer portfolio diversification. However, some funds are better than others, and it’s possible for a fund to be over-diversified.

The best funds strike a proper balance of diversification and prioritizing promising stocks. They also align with the fund’s objectives. A growth fund will have more companies with high valuations and meaningful upside potential. Income funds play it safe and focus on dividend-paying stocks. 

Investors looking for some of the top ETFs may want to consider these top picks.

Invesco S&P 500 Top 50 ETF (XLG)

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The Invesco S&P 500 Top 50 ETF (NYSEARCA:XLG) is a testament that too much portfolio diversification can be a bad thing. This fund only holds the top 50 stocks within the larger S&P 500, and it has outperformed its larger counterpart. XLG is up by 96% over the past five years while the S&P 500 is up by only 74% during the same amount of time.

Since XLG spreads its capital across fewer stocks, it has larger concentrations within the Magnificent Seven stocks. More than 40% of the fund’s assets are in the information technology sector. The fund’s top three stocks are Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Nvidia (NASDAQ:NVDA). These positions make up 12.65%, 10.34% and 8.79% of the fund’s total assets, respectively. The other Magnificent Seven stocks are close behind.

The fund has a 0.89% SEC 30-day yield and a 0.20% expense ratio. It’s already off to a good start and is up by 11% year-to-date (YTD). Unsurprisingly, that’s better than the S&P 500’s 8% YTD gain.

Vanguard Growth Index Fund ETF (VUG)

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The Vanguard Growth Index Fund ETF (NYSEARCA:VUG) is another top-performing fund that has more than doubled over the past five years. It has also outperformed the S&P 500 with a 12% YTD gain.

More than half of the fund’s total assets are allocated toward tech stocks. The top three stocks for VUG and XLG are identical, and other Magnificent Seven stocks are close behind. The fund offers a 0.46% 30-day SEC yield and a reasonable 0.04% expense ratio. Low expense ratios are a signature component of Vanguard ETFs. 

Most of the fund’s assets are large-cap growth stocks. Vanguard rates the fund as a 4/5 on the risk/reward scale. The fund has been around for more than 20 years and had its inception date on January 26, 2004. You’ll only need a $1 minimum investment to get started. The fund is rated as a strong buy with a projected 13% upside.

iShares Semiconductor ETF (SOXX)

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The iShares Semiconductor ETF (NASDAQ:SOXX) has more than tripled over the past five years and is up by 18% YTD. The fund invests in companies that benefit from the rising demand for semiconductor chips. Many of the stocks in SOXX have benefitted from artificial intelligence (AI) which explains the 55% gain over the past year.

Nvidia is in the driver’s seat and takes up 8.88% of the fund’s total assetsBroadcom (NASDAQ:AVGO) is a close second that makes up 8.24% of the fund’s total assets. This fund will continue to thrive as long as AI continues to gain momentum. Semiconductor stocks can still grow even without AI since the technology is used in many devices, appliances and other products.

The fund has a 0.35% expense ratio and doesn’t offer complete portfolio diversification. It gives investors outsized exposure to semiconductors and AI. Investors seeking portfolio diversification should buy a fund alongside this one instead of putting all of their capital into SOXX shares. So far, the results have been pretty good.

On this date of publication, Marc Guberti held a long position in VUG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/3-etfs-to-buy-now-q2-edition/.

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