If you’re new to the world of investing, you might be wondering, what’s an ETF? Exchange traded funds (ETFs) are a basket of investments that you purchase under a single investment. ETFs usually lower expense ratios, allowing you to buy and sell at any time during the day, as opposed to mutual funds, which only settle at the end of the day. There are many stock-based ETFs, but there are also ETFs that invest in bonds, real estate, commodities and other types of assets.
Here are 15 ETFs that can strengthen your portfolio for the long haul:
1. Vanguard S&P 500 ETF
If you want to start investing with a diversified U.S. equities portfolio but don’t have a lot of money, consider the Vanguard S&P 500 ETF. This ETF tracks the S&P 500 – which is comprised of the 500 largest American companies. The expense ratio for this Vanguard ETF is just 0.04 percent, which is lower than 96 percent of funds with similar holdings and has returned almost 15 percent per year since inception.
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2. Schwab US Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF mirrors the Dow Jones U.S. Dividend 100 Index, which provides an opportunity for both capital growth as well as dividend income from your portfolio. The fund has no investment minimum and has posted an average return of about 14 percent per year since inception.
3. PowerShares DB US Dollar Index Bullish Fund
The PowerShares DB U.S. Dollar Index Bullish Fund adds international currency exposure to your portfolio. The fund tracks the value of the American dollar compared to the euro, yen, pound, Canadian dollar, krona and franc. Though the fund has basically broken even since inception, investors may consider adding this ETF to hedge against a rising dollar and because the value of the dollar has not historically correlated strongly with the U.S. stock market.
4. First Trust NYSE Arca Biotechnology Index Fund (FBT)
For investors looking to add exposure to the biotechnology industry, consider the First Trust NYSE Arca Biotechnology Index Fund (FBT). The fund mimics the NYSE Arca Biotechnology Index, investing in companies that use biological processes like DNA technology and genetic engineering. It has returned 17.85 percent since inception and has a four-star overall rating from MorningStar.
5. Validea Market Legends ETF
If you’re looking for more active management within an ETF, consider the Validea Market Legends EFT. The fund has created software to mimic the investment strategy of Wall Street legends. It does have a higher expense ratio at 0.79 percent because it is actively managed, but it has averaged 9.7 percent annual returns since its inception.
6. Vanguard Utilities ETF
You can add a mix of utility companies to your portfolio by purchasing the Vanguard Utilities ETF. The fund invests in companies generating power or distributing electricity, gas or water. Since its inception, it has returned just over 10 percent per year and has a minimal 0.1 percent expense ratio.
7. Schwab US Aggregate Bond ETF
The Schwab U.S. Aggregate Bond ETF tracks the Bloomberg Barclays U.S. Aggregate Bond Index to give you exposure to the U.S. investment-grade, taxable bond market. The fund is conservative, with almost 75 percent of the holdings with a triple-A rating. This ETF has returned about 2.8 percent per year since inception.
8. WisdomTree Emerging Markets Local Debt Fund
If international market bonds are more your style, check out the WisdomTree Emerging Markets Local Debt Fund, an actively managed bond fund. The fund seeks out debt in the currencies of emerging markets, including Brazil, Chile, Colombia, Russia, China, India and Indonesia. The fund has returned just over 0.7 percent per year since it was created in 2010.
9. Technology Select Sector SPDR Fund
The Technology Select Sector SPDR Fund follows the Technology Sector Select Index to add exposure to tech companies to your portfolio. Typical companies produce software, hardware, data storage, semiconductors and electrical equipment. The fund has returned over 4.8 percent since its inception, but over 10 percent per year over the last decade.
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10. Fidelity MSCI Real Estate Index ETF
The Fidelity MSCI Real Estate Index EFT invests primarily in American real estate companies. The fund is relatively new, having started in February 2015. It has returned over 4 percent per year over the life of the fund, with an expense ratio of just 0.084 percent. Most of that income is distributed via dividends, with a distribution yield of 3.49 percent.
11. Vanguard Global ex-US Real Estate ETF
If you’re looking to add some international real estate exposure to your portfolio, consider the Vanguard Global ex-U.S. Real Estate ETF. The ETF invests in international real estate stocks, giving you exposure to over 30 different countries. As of August 2017, about 20 percent was invested in emerging markets, 25 percent in Europe and 50 percent in the Pacific. The fund has averaged over 5.8 percent per year since inception.
12. Consumer Discretionary Select Sector SPDR Fund
The Consumer Discretionary Select Sector SPDR Fund tracks the Consumer Discretionary Select Sector Index, which includes companies in media, retail, tourism, restaurants and auto. The fund has returned almost 8.5 percent per year since inception and — with just a 0.14 percent expense ratio — allows a more targeted investment than a marketwide ETF.
13. PowerShares Golden Dragon China Portfolio
If you’re optimistic about growth in China, consider adding the PowerShares Golden Dragon China Portfolio to your portfolio. The fund invests at least 90 percent of its money in companies that derive most of their revenues from China. The fund is up over 50 percent in the past year but has historically averaged just over 10 percent per year.
14. ARK Investment Management 3D Printing EFT
If you are bullish on the future of 3D printing, consider the 3D printing ETF offered by ARK Investment Management. The fund is relatively new and looks to take advantage of impending growth of 3D printing equipment and technology. Since opening for trading, this ETF has seen a 21 percent growth.
15. SPDR Gold Shares
SPDR Gold Shares are an ETF that tracks the value of gold, which allows you to add the precious commodity to your portfolio without having to buy a vault to hold your gold bars. The fund has received over $35 million in investments and has returned 6.25 percent per year over the last decade.