With the tech sector experiencing some third-quarter (Q3) wobbliness, self-guided investors may wish to take more of a hands-off approach with their next big buy. Undoubtedly, it doesn’t get more hands-off than an exchange-traded fund (ETF). This is especially true with the passively managed ones that can help you ride out the bumps in the market. Thus, we came up with our list of ETFs to buy.
In this piece, we’ll explore a handful of passive investment vehicles for investors seeking to diversify away from tech. Indeed, all the “tech and AI bubble” commentary is making the latest pullback in tech just a bit scarier. Though not all tech stocks are overpriced, with valuation multiples on the historically high side, there’s no telling which tech plays will get caught up in the downdraft. This is especially true as investors start turning against tech.
In this piece, we’ll examine three intriguing exchange-traded fund (ETF) options for passive investors. This will benefit investors who want to invest in a less-choppy fashion without having to pick and choose their spots in a market that could penalize momentum chasers.
When you’re rotating funds from growth to value, sometimes it makes sense to just go with a value-rich ETF rather than spreading bets across a slew of less-loved individual names.
iShares Core S&P Mid-Cap ETF (IJH)
Last week’s surge in the mid-cap stocks was as explosive as it was unexpected. And though the broader basket of neglected mid-cap plays is now cooling off, with the iShares Core S&P Mid-Cap ETF (NYSEARCA:IJH) down 2.5% from its 52-week highs, those lacking in mid-cap exposure may have a chance to jump in.
Indeed, it’s never a good idea to chase huge upward moves. However, if you lack mid-cap exposure and think there’s more room for smaller firms to run, it makes sense to have the IJH on your buy watchlist. This is my favorite ETF to play the mid-cap universe.
The IJF ETF is a relatively low-cost ETF with an expense ratio of 0.05%. And with many interesting, up-and-coming stocks you’ve probably never even heard of, it’s certainly tempting to punch one’s ticket to the IJF as mid-caps brace for the relief of lower interest rates. This is easily one of the top ETFs to buy.
Vanguard Value ETF (VTV)
The Vanguard Value Index Fund ETF (NYSEARCA:VTV) stands out as a more intriguing way to play a broader rotation from tech and growth to value, especially compared to the S&P 500. Indeed, your run-of-the-mill S&P 500 index fund has become more heavily concentrated in those top tech names (most notably, the Magnificent Seven tech companies) in recent years.
Perhaps shifting into a value-focused passive index ETF could help you fare better in a second half that could see a whole new slate of winners.
Shares surged around 6% from their early-July lows to last week’s mid-July peak. There is so much cash sitting on the sidelines. As a result, it’s not hard to imagine more cash coming out of tech will need a place to go.
The VTV ETF is a fine one-stop shop for investors looking to play some of the cheaper, “boring” stocks. While less exciting, these stocks have very fair valuation multiples right here. Finally, the expense ratio of 0.04% is about as low as it gets. You can see why this made our list of ETFs to buy.
ARK Autonomous Technology & Robotics ETF (ARKQ)
If you’re not looking to bet on the mid-cap stock surge or a move back into value stocks, perhaps a less-appreciated AI-focused thematic ETF is more your style. Cathie Wood’s Ark funds—like the ARK Autonomous Technology & Robotics ETF (NYSEARCA:ARKQ)—have been destroyers of wealth since they began rolling over in 2021.
In any case, I would not be surprised if the Ark funds—like the mid-cap stocks a few weeks ago—were to spike from out of nowhere at some point over the next year. It’s been a sleepy ETF for quite a while but may find itself wide awake as robotaxi and physical AI themes begin to accelerate.
Unsurprisingly, you’re getting a huge helping of Tesla (NASDAQ:TSLA) stock, which has a 14.4% weighting in the ARKQ. With Tesla, you’re getting some high-end autonomous driving exposure. Additionally, you’ll also get autonomous farming exposure via Deere (NYSE:DE) stock, which comprises 3.2% of the ARKQ.
Robotaxis, “robofarms,” and other automation plays make for a rather intriguing thematic ETF that could be tough to stop. If you are looking for ETFs to buy, start here.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Joey Frenette held a long position in Deere. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
