Exchange-traded funds, or ETFs, can be an excellent entry point for new investors and those looking to diversify their portfolios for long-term growth.
Like bonds, ETFs can hold multiple securities and provide exposure to a wide range of shares or bonds within one investment offering.
Since they're relatively cheap and carry lower risk than individual stocks, ETFs may be the right vehicle for investors who favor the buy-and-hold strategy.
Unlike bonds and mutual funds, ETFs trade on an exchange like a stock, making them very easy to sell and buy with generally low internal expenses.
While there are quite literally thousands of ETFs to choose from, here are some of the top ones that cover various market segments:
Fundamentals:
Diversification:
ETFs provide exposure to multiple stocks or asset classes, reducing risk efficiently. This broad reach is more complex and more costly to achieve by buying individual assets.
Trades Like a Stock:
ETFs, with their flexibility, trade throughout the day, unlike mutual funds, which have end-of-day pricing. They also allow for margin buying, short selling, and options trading, giving investors more control over their investments.
Lower Fees:
Due to passive management, ETFs usually have lower fees, unlike actively managed mutual funds, which incur higher costs. ETFs have an annual management fee, usually factored into the unit price (the market price per fund unit). This fee covers the essential expenses of managing the ETF, so investors must consider these fees when evaluating their options.
Limited Capital Gains Tax:
ETFs are more tax-efficient since they generate fewer capital gains. Mutual funds must distribute gains, often creating tax events for shareholders.
1. INVESCO QQQ TRUST (ISIN IE00B53SZB19)
QQQ, one of the most widely traded ETFs globally, holds 101 stocks and ranks seventh in trading volume over a three-month average. It mirrors the Nasdaq 100 index, focusing on market-cap-weighted, large-cap technology companies while excluding financials.
5 Top Holdings
Microsoft Corporation (MSFT)
NVIDIA Corporation (NVDA)
Broadcom Inc. (AVGO)
Tesla, Inc. (TSLA)
Costco Wholesale Corporation (COST)
Based on total return over the past 15 years, the exchange-traded fund is rated the best-performing large-cap growth fund (1 of 317). In the U.S., it is also the 2nd most traded based on the average daily volume traded as of 30th September 2024. With a single investment, you'll gain access to blue-chip companies, including Apple, Amazon, Microsoft, Tesla, and many more.
2. THE VANGUARD S&P 500 ETF (ISIN IE00B3XXRP09)
The Vanguard S&P 500 ETF aims to match the performance of the S&P 500, an index of 500 leading U.S. companies chosen by Standard & Poor’s.
5 Top Holdings
Apple Inc. (AAPL)
Amazon.com, Inc. (AMZN)
Meta Platforms, Inc. (META)
Alphabet Inc. (GOOGL)
Eli Lily and Co. (LLY)
Since investors cannot invest in an index, the goal of the Vanguard S&P 500 ETF (VOO) is to track and mirror the returns of the S&P 500 index. The fund appeals to investors because it is well-diversified and made up of equities of 500 of the largest U.S. publicly traded companies.
With a solid track record of profitability compared to smaller companies, these stocks tend to be more stable and offer investors a high potential for investment growth. The Vanguard Group is among the world's largest equity and fixed income managers.
3. iSHARES CORE MSCI EAFE ETF (ISIN IE00B4L5Y983)
IEFA delivers exposure to developed-market stocks in Europe and Asia, excluding the U.S. and Canadian equities, covering about 98% of global equity markets outside of North America.
The fund is the cheaper, younger variation of BlackRock's flagship iShares MSCI EAFE ETF (EFA), which debuted in 2012 as part of an ultra-low-cost, iShares Core series, designed to attract buy-and-hold investors.
Vďaka nízkemu nákladovému pomeru 0,07 % môžu investori profitovať z tohto ETF, pretože ponúka lacný spôsob, ako pridať do portfólia určitú medzinárodnú expozíciu a profitovať z dlhodobého rastu globálnej ekonomiky.
5 Top Holdings
ASML Holding NV (ASML)
Nestlé SA (NESN)
SAP SE (SAP)
Roche Holding AG (ROG)
Toyota Motor Corporation (TM)
4. iShares STOXX Europe 600 UCITS (ISIN DE0002635307)
The iShares STOXX Europe 600 ETF (DE), ticker: EXSA. includes the 600 largest publicly traded companies across 17 developed European countries.
5 Top Holdings
Novo Nordisk A/S (NOVO B)
AstraZeneca (AZN)
Novartis AG (NOVN)
Shell Plc (SHEL)
HSBC Holdings Plc (HSBA)
This ETF allows investors to capture both price appreciation and dividends by offering broad exposure to European markets, including the U.K., Switzerland, and Scandinavia. Often seen as Europe’s equivalent to the S&P 500, the STOXX Europe 600 provides a cost-efficient and transparent way to invest in Europe’s leading companies.
Insights:
Invesco QQQ Trust, Vanguard S&P 500 ETF (VOO), iShares Core MSCI EAFE ETF (IEFA), iShares STOXX Europe 600 UCITS are leading U.S.and EU -listed ETFs, each offering diverse market and sector exposure.
QQQ follows the Nasdaq-100, focusing on large-cap tech firms like Apple, Microsoft, and Tesla, while VOO tracks the S&P 500, providing a broad selection of top U.S. companies. IEFA targets developed markets outside North America, including Europe, Asia, and Australia, for international diversification. STOXX 600 emphasizes high-quality EU markets, for investors to invest in Europe’s prime companies.
Due to European regulations, however, these U.S. ETFs are not directly accessible to European investors.
MEXEM provides direct access to assets, including ETFs, through a single account. However, European regulations restrict retail clients from trading U.S.-listed ETFs. Instead, MEXEM offers European-listed ETF equivalents on exchanges like London, Dublin, Milan, Luxembourg, and Frankfurt. A complete list of available ETFs can be found in the client portal using the Mutual Fund Scanner under the Markets menu.
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Since the launch of the first ETF in 1993, the market has expanded, by 2002, 102 ETFs grew to nearly 1,000 by 2009. Barclays entered the ETF space in 1996, followed by Vanguard in 2001, driving further growth. As of 2024, there are now over 12,000 ETFs available globally, managed by approximately 600 fund companies. By 2024, major ETFs like SPDR S&P 500 (SPY) and iShares Core S&P 500 (IVV) dominate the market, with SPY managing $535 billion at around $534 per share and IVV holding $469 billion with high trading volume. For international exposure, iShares MSCI EAFE (EFA) leads with $54.9 billion, while Invesco QQQ (QQQ), tracking the Nasdaq-100, has $269 billion in assets. ETFs trade through both online and traditional brokers, while a brokerage account enables investors to trade shares of ETFs just as they would trade shares of stocks.
The information on mexem.com is for general informational purposes only. It should not be regarded as investment advice. Investing in stocks involves risk. A stock's past performance is not a reliable indicator of its future performance. Always consult a financial advisor or trusted sources before making any investment decisions.
