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Investors seeking long-term growth and diversification often turn to Exchange-Traded Funds (ETFs) as a reliable investment option. With their unique advantages, ETFs have gained popularity among both seasoned investors and those new to the market.
In this article, we highlight three top-ranked ETFs, (VIG - Free Report) (Zacks ETF Rank #1), (XLV - Free Report) (Zacks ETF Rank #1), and QQQJ (Zacks ETF Rank #2). These ETFs offer a range of benefits, from stability and consistent income to exposure to innovative companies and sectors, making them compelling choices for investors aiming to build a robust and enduring portfolio.
Advantages of Buying ETFs
Diversification: ETFs provide instant diversification by pooling together a basket of securities across various sectors, industries, or asset classes. By investing in a single ETF, investors gain exposure to a broad range of stocks, reducing the risk associated with investing in individual companies.
Stability and Consistent Income: ETFs tracking established indices, such as VIG, offer stability and the potential for consistent income. These ETFs typically focus on high-quality, dividend-paying companies that have a history of delivering steady returns, making them attractive options for income-oriented investors.
Exposure to Innovative Sectors: ETFs like XLV provide exposure to specific sectors, such as healthcare, which are poised for growth and innovation. Investing in such ETFs allows investors to tap into the potential of emerging technologies, breakthrough treatments, and demographic trends, providing an opportunity to benefit from the long-term growth prospects of these sectors.
Access to Emerging Companies: ETFs like QQQJ focus on smaller and mid-cap companies that show promise for future growth. These ETFs offer exposure to dynamic and innovative companies that may not be included in traditional market indices. Investors looking for exposure to disruptive technologies or emerging market leaders can find opportunities within these ETFs.
The Vanguard Dividend Appreciation ETF aims to track the performance of the S&P U.S. Dividend Growers Index and is thus a passive fund that remains fully invested at all times. VIG has an expense ratio of just 0.06% and a minimum investment of $1.
VIG has a very strong 10-year performance record. Over that time, it has returned an average of 10.7% annually, and has a YTD return of 1.4%. Additionally, although it has underperformed the S&P 500 YTD and has slightly lower annual returns it is also less volatile than the index.
SPY, an ETF that reflects the S&P 500 has had a max drawdown of -24% vs. VIG, which had a max drawdown of -20%. Additionally, SPY’s worst year in the last ten years was -18%, while VIG’s worst year was -9.8%.
This lower volatility can be attributed to the fact that VIG invests in stocks that have a history of growing their dividend payments. Companies that do so have historically been steadier stocks with less volatile ups and downs. Some of the top names in VIG include Microsoft (MSFT - Free Report) , Exxon Mobil (XOM - Free Report) , and Home Depot (HD - Free Report) .
The Health Care Select Sector SPDR Fund is an ETF that aims to mirror the performance of the S&P 500 health care sector. With an expense ratio of 0.12% and a minimum investment requirement of $1, XLV offers an attractive option for investors seeking exposure to the healthcare sector.
XLV has displayed a solid performance record over the past decade. It has delivered an average annual return of 12.2% during that period, which is better than the S&P 500. Like VIG, XLV also has superior risk adjusted returns than the S&P 500.
In the last ten years XLV’s best year was +41%, while its worst year was -5%, and a max drawdown of -13%. SPY’s best year was 32%, its worst year was -18%, and its max drawdown was -24%.
The three largest holdings in the ETF are United Health Group (UNH - Free Report) , Johnson and Johnson (JNJ - Free Report) , and Eli Lilly (LLY - Free Report) , which together make up 25% of the fund.
Invesco NASDAQ Next Gen 100 ETF (QQQJ)
The Invesco NASDAQ Next Gen 100 ETF is an exchange-traded fund that aims to track the performance of the NASDAQ Next Generation 100 Index. QQQJ provides investors with exposure to a diversified portfolio of smaller and mid-cap companies listed on the NASDAQ stock exchange, focusing on innovative and growth-oriented sectors. QQQJ has a slightly higher expense ratio of 0.15%.
Unlike the others, QQQJ has experienced mediocre returns since inception. That being said, the ETF was introduced to the market at the end of 2020, which was the frothiest market in more than a decade. It didn’t help that QQQJ was loaded with many high growth, high multiple technology companies that experienced sharp drawdowns in the following 2022 correction.
However, it looks like the bear market is over, and if that is the case QQQJ may become a powerful addition to any portfolio looking for high returns.
Small and mid-cap stocks are generally accepted to offer higher returns over their large-cap counterparts, in the long run. Of course, that comes with additional risk, but investors who can afford that risk may be interested in adding QQQJ to their portfolio.
QQQJ has a slightly different portfolio allocation strategy, with the largest holdings making up a significantly smaller portion of the fund. ON Semiconductor (ON - Free Report) is the largest holding and just 2.6% of the total fund. Other prominent companies include MongoDB (MDB - Free Report) , SolarEdge Technologies (SEDG - Free Report) , and Check Point Software Technologies (CHKP - Free Report) .
Conclusion
ETFs provide investors with a range of advantages, including diversification, stability, consistent income, exposure to innovative sectors, and access to emerging companies. By incorporating top-ranked ETFs like VIG, XLV, and QQQJ into their portfolios, investors can build a resilient and well-rounded investment strategy designed to deliver long-term growth.
However, it is crucial for investors to conduct thorough research, evaluate their risk tolerance, and consider their investment goals before making any investment decisions.
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Buy These 3 Top-Ranked ETFs and Never Sell
Investors seeking long-term growth and diversification often turn to Exchange-Traded Funds (ETFs) as a reliable investment option. With their unique advantages, ETFs have gained popularity among both seasoned investors and those new to the market.
In this article, we highlight three top-ranked ETFs, (VIG - Free Report) (Zacks ETF Rank #1), (XLV - Free Report) (Zacks ETF Rank #1), and QQQJ (Zacks ETF Rank #2). These ETFs offer a range of benefits, from stability and consistent income to exposure to innovative companies and sectors, making them compelling choices for investors aiming to build a robust and enduring portfolio.
Advantages of Buying ETFs
Vanguard Dividend Appreciation ETF (VIG - Free Report)
The Vanguard Dividend Appreciation ETF aims to track the performance of the S&P U.S. Dividend Growers Index and is thus a passive fund that remains fully invested at all times. VIG has an expense ratio of just 0.06% and a minimum investment of $1.
VIG has a very strong 10-year performance record. Over that time, it has returned an average of 10.7% annually, and has a YTD return of 1.4%. Additionally, although it has underperformed the S&P 500 YTD and has slightly lower annual returns it is also less volatile than the index.
SPY, an ETF that reflects the S&P 500 has had a max drawdown of -24% vs. VIG, which had a max drawdown of -20%. Additionally, SPY’s worst year in the last ten years was -18%, while VIG’s worst year was -9.8%.
This lower volatility can be attributed to the fact that VIG invests in stocks that have a history of growing their dividend payments. Companies that do so have historically been steadier stocks with less volatile ups and downs. Some of the top names in VIG include Microsoft (MSFT - Free Report) , Exxon Mobil (XOM - Free Report) , and Home Depot (HD - Free Report) .
Healthcare Select Sector SPDR ETF (XLV - Free Report)
The Health Care Select Sector SPDR Fund is an ETF that aims to mirror the performance of the S&P 500 health care sector. With an expense ratio of 0.12% and a minimum investment requirement of $1, XLV offers an attractive option for investors seeking exposure to the healthcare sector.
XLV has displayed a solid performance record over the past decade. It has delivered an average annual return of 12.2% during that period, which is better than the S&P 500. Like VIG, XLV also has superior risk adjusted returns than the S&P 500.
In the last ten years XLV’s best year was +41%, while its worst year was -5%, and a max drawdown of -13%. SPY’s best year was 32%, its worst year was -18%, and its max drawdown was -24%.
The three largest holdings in the ETF are United Health Group (UNH - Free Report) , Johnson and Johnson (JNJ - Free Report) , and Eli Lilly (LLY - Free Report) , which together make up 25% of the fund.
Invesco NASDAQ Next Gen 100 ETF (QQQJ)
The Invesco NASDAQ Next Gen 100 ETF is an exchange-traded fund that aims to track the performance of the NASDAQ Next Generation 100 Index. QQQJ provides investors with exposure to a diversified portfolio of smaller and mid-cap companies listed on the NASDAQ stock exchange, focusing on innovative and growth-oriented sectors. QQQJ has a slightly higher expense ratio of 0.15%.
Unlike the others, QQQJ has experienced mediocre returns since inception. That being said, the ETF was introduced to the market at the end of 2020, which was the frothiest market in more than a decade. It didn’t help that QQQJ was loaded with many high growth, high multiple technology companies that experienced sharp drawdowns in the following 2022 correction.
However, it looks like the bear market is over, and if that is the case QQQJ may become a powerful addition to any portfolio looking for high returns.
Small and mid-cap stocks are generally accepted to offer higher returns over their large-cap counterparts, in the long run. Of course, that comes with additional risk, but investors who can afford that risk may be interested in adding QQQJ to their portfolio.
QQQJ has a slightly different portfolio allocation strategy, with the largest holdings making up a significantly smaller portion of the fund. ON Semiconductor (ON - Free Report) is the largest holding and just 2.6% of the total fund. Other prominent companies include MongoDB (MDB - Free Report) , SolarEdge Technologies (SEDG - Free Report) , and Check Point Software Technologies (CHKP - Free Report) .
Conclusion
ETFs provide investors with a range of advantages, including diversification, stability, consistent income, exposure to innovative sectors, and access to emerging companies. By incorporating top-ranked ETFs like VIG, XLV, and QQQJ into their portfolios, investors can build a resilient and well-rounded investment strategy designed to deliver long-term growth.
However, it is crucial for investors to conduct thorough research, evaluate their risk tolerance, and consider their investment goals before making any investment decisions.