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- 1 ETFs to Invest in For Beginners
In this article, we discuss 10 ETFs to invest in for beginners. If you want to see more ETFs for those investors who are just beginning their trading journey, check out 5 ETFs to Invest in For Beginners.
Exchange traded funds present an attractive investment opportunity for investors who are just starting their trading journey and the volatile stock market seems intimidating to navigate on their own. ETFs are both actively and passively managed by professional financiers, in return for a management fee. Traders do not have to worry about monitoring the stock market constantly to protect their investments, which is why beginners often gravitate to passive means of investing.
ETFs also offer investors exposure to multiple sectors, and beginners can benefit from the portfolio diversification that they otherwise cannot usually afford. It is also an easier way to gain exposure to international markets, small, medium, and large-cap companies, and value and growth plays.
Some of the most notable stocks that are otherwise quite expensive for beginners but can be accessed by investing in ETFs include Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Tesla, Inc. (NASDAQ:TSLA).
We explored ETFs that offer exposure to multiple sectors in the economy, both value and growth plays, large and small-cap equities, and international stocks for a well-rounded outlook of some of the top funds listed on US exchanges. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. Each ETF is priced under $250 as of June 7.
Photo by Austin Distel on Unsplash
ETFs to Invest in For Beginners
10. SPDR Portfolio S&P 1500 Composite Stock Market ETF (NYSE:SPTM)
SPDR Portfolio S&P 1500 Composite Stock Market ETF (NYSE:SPTM) seeks to track the investment results of the S&P Composite 1500 Index, providing exposure to the US equity market across all market capitalizations. As of June 3, SPDR Portfolio S&P 1500 Composite Stock Market ETF (NYSE:SPTM) has a weighted average market capitalization of about $469 billion. The ETF offers an expense ratio of 0.03%, and it invests primarily in the information technology, healthcare, financials, consumer discretionary, industrials, and communications services sectors.
The biggest holding of SPDR Portfolio S&P 1500 Composite Stock Market ETF (NYSE:SPTM) is Apple Inc. (NASDAQ:AAPL), which reflects 5.93% of the total holdings. On June 3, Wedbush analyst Daniel Ives told investors that Apple Inc. (NASDAQ:AAPL) CEO Tim Cook will soon reveal “a number of” AR/VR technologies to developers that the company plans to commercialize. The analyst maintained an Outperform rating and a $200 price target, and said this strategy will lead to the debut of AR headset Apple Glasses before holiday season or by early 2023 based on the supply trajectory.
According to Insider Monkey’s database, 131 hedge funds were long Apple Inc. (NASDAQ:AAPL) at the end of Q1 2022, compared to 134 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the biggest stakeholder of the company, with almost 891 million shares worth $155.5 billion.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Tesla, Inc. (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL) is on the radar of elite investors.
Here is what Berkshire Hathaway has to say about Apple Inc. (NASDAQ:AAPL) in its Q4 2021 investor letter:
“Apple Inc. (NASDAQ:AAPL) – our runner-up Giant as measured by its year end market value – is a different sort of holding. Here, our ownership is a mere 5.55%, up from 5.39% a year earlier. That increase sounds like small potatoes. But consider that each 0.1% of Apple’s 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple’s repurchases did the job. It’s important to understand that only dividends from Apple are counted in the GAAP earnings Berkshire reports – and last year, Apple paid us $785 million of those. Yet our “share” of Apple’s earnings amounted to a staggering $5.6 billion. Much of what the company retained was used to repurchase Apple shares, an act we applaud. Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”
9. Vanguard Total Stock Market Index Fund (NYSE:VTI)
Vanguard Total Stock Market Index Fund (NYSE:VTI) tracks the performance of the CRSP US Total Market Index. The fund follows a passively managed, index-sampling strategy and remains fully invested. At the end of April, the ETF offers an expense ratio of 0.03%. The portfolio holds 4,112 stocks and total net assets equal $1.2 trillion. Technology is the primary sector that Vanguard Total Stock Market Index Fund (NYSE:VTI) invests in.
One of the biggest holdings in Vanguard Total Stock Market Index Fund (NYSE:VTI)’s portfolio is Microsoft Corporation (NASDAQ:MSFT), one of the biggest tech firms in the world. The company operates through Productivity and Business Processes, Cloud, and More Personal Computing segments.
On April 26, Microsoft Corporation (NASDAQ:MSFT) reported its Q1 results, announcing earnings per share of $2.22, beating market estimates by $0.02. The revenue of $49.36 billion grew 18.35% year-over-year, outperforming analysts’ predictions by $311.18 million.
According to Insider Monkey’s data, 259 hedge funds were long Microsoft Corporation (NASDAQ:MSFT) at the end of the first quarter of 2022, compared to 262 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the leading stakeholder of the company, with 27.8 million shares worth approximately $8.6 billion.
Here is what Baron Opportunity Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2021 investor letter:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter, following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft’s results continued to be strong across the board, with total revenue growing 20% in constant currency, beating Street estimates by 3%; an acceleration in Commercial Cloud revenue to 34% constant-currency growth; operating margins expanding to just under 45%; earnings growth of 23%; and free cash flow growth of 30%. We believe the company is positioned to deliver 13% to 15% organic growth over the next three years, underpinned by total addressable market expansion and continued market share gains across its disruptive cloud product portfolio.”
iShares Select Dividend ETF (NASDAQ:DVY) tracks the investment results of Dow Jones U.S. Select Dividend IndexSM, exposing investors to companies with at least 5-year records of dividend payouts. The fund offers an expense ratio of 0.38%. iShares Select Dividend ETF (NASDAQ:DVY) has net assets equaling $23.4 billion, 99 holdings, and 30-day SEC yield of 3.42%.
The biggest company in iShares Select Dividend ETF (NASDAQ:DVY)’s portfolio is Altria Group, Inc. (NYSE:MO), a Virginia-based manufacturer of smokeable and oral tobacco products in the United States. On April 29, Deutsche Bank analyst Steve Powers raised the price target on Altria Group, Inc. (NYSE:MO) to $60 from $54 and reiterated a Buy rating on the shares following the Q1 results.
According to Insider Monkey’s database, elite hedge funds poured into Altria Group, Inc. (NYSE:MO). In Q1 2022, 47 hedge funds were bullish on Altria Group, Inc. (NYSE:MO), up from 39 funds in the earlier quarter. Rajiv Jain’s GQG Partners is the biggest position holder in the company, with 18.30 million shares worth $956.2 million.
Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
7. WisdomTree U.S. Efficient Core Fund (NYSE:NTSX)
WisdomTree U.S. Efficient Core Fund (NYSE:NTSX) seeks total returns by investing in large-cap U.S. securities and Treasury futures contracts. The diversification by adding bond futures to potentially lower volatility in a portfolio. With total net assets of $769.4 million, WisdomTree U.S. Efficient Core Fund (NYSE:NTSX) offers an expense ratio of 0.2% and a distribution yield of 1.00%. About 60% of the portfolio consists of futures contracts.
One of the top equity holdings of WisdomTree U.S. Efficient Core Fund (NYSE:NTSX) is Amazon.com, Inc. (NASDAQ:AMZN), one of the Big Five American technology firms. On June 6, Stifel analyst Scott Devitt adjusted the price target on Amazon.com, Inc. (NASDAQ:AMZN) to $190 from $3,800 to reflect the company’s 20-for-1 stock split and maintained a Buy rating on the shares. His EPS estimates were changed resultantly after the updated share count, but the remainder of his estimates remain constant, the analyst noted.
Among the hedge funds tracked by Insider Monkey, Amazon.com, Inc. (NASDAQ:AMZN) was part of 271 public hedge fund portfolios, compared to 279 funds in the preceding quarter. Jaime Sterne’s Skye Global Management is one of the leading stakeholders of the company, with 740,500 shares worth $2.4 billion.
Here is what Miller Value Partners Opportunity Equity has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2022 investor letter:
“For frame of reference, Amazon (NASDAQ:AMZN) bottomed at the same valuation in the financial crisis (side note: Amazon bottomed at 4x EV/GP after the tech bubble burst)! So there’s historical precedent for the lows being in. We will see whether that holds true this time. Regardless, we think there’s significant upside over a 5-year time horizon. The one other topic I want to briefly address is our volatility. We hope to write something about the topic in more depth in the future, but we want our clients and prospective investors to understand our views on it. We think that volatility is significantly misunderstood. We believe it creates opportunities from which we can profit.”
6. Schwab International Equity ETF (NYSE:SCHF)
Schwab International Equity ETF (NYSE:SCHF) tracks the total return of the FTSE Developed ex US Index, offering a diversified portfolio of large and mid-cap stocks from developed countries outside the United States, such as South Korea and Canada. As of March 31, Schwab International Equity ETF (NYSE:SCHF) has a weighted average market capitalization of $78.92 billion and an expense ratio of 0.06%. The net assets total $27.6 billion and the fund invests in 1,537 stocks.
Nestlé S.A. (OTC:NSRGY) is the largest holding in Schwab International Equity ETF (NYSE:SCHF)’s portfolio. Nestlé S.A. (OTC:NSRGY) is a Swiss multinational food and beverage company that sells multiple products including coffee, bottled water, breakfast cereals, infant foods, healthcare nutrition, seasonings, frozen foods, and pet food.
On April 21, Nestlé S.A. (OTC:NSRGY) posted a Q1 revenue of CHF 22.24 billion, up 5.4% year-over-year. The company’s organic growth reached 7.6%. In 2022, the full-year organic growth is expected to be 5% and underlying trading operating profit margin between 17.0% and 17.5%. The EPS in constant currency and capital efficiency are forecasted to increase compared to the estimated growth of 4.63% year-over-year.
According to Insider Monkey’s records, Tom Russo’s Gardner Russo & Gardner is the biggest position holder in Nestlé S.A. (OTC:NSRGY), with approximately 9 million shares worth $1.15 billion. Overall, 4 hedge funds were long Nestlé S.A. (OTC:NSRGY) at the end of Q1 2022.
Like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Tesla, Inc. (NASDAQ:TSLA), exchange traded funds offer exposure to companies like Nestlé S.A. (OTC:NSRGY).
Here is what Semper Vic Partners has to say about Nestlé S.A. (OTC:NSRGY) in its Q2 2021 investor letter:
“I believe that Nestlé shares are well-positioned in our portfolios based on its global growth potential. Nestlé’s global growth potential is a dividend from their trusted consumer brands’ 100-year command presence in over 100 countries. Over these years, Nestlé has developed trusted and cherished iconic brands. For instance, Nestlé has over 30 brands that have over $1 billion of annual turnover. Nestlé benefits from a vast Total Addressable Market (TAM)
available through developing and emerging market consumers shifting from subsistence economies to the introduction of market-based economies. Nestlé benefits from its market leadership in two key categories that evidence extremely high brand loyalty – global pet food/care and global premium coffee (led by Nestlé’s globally leading Nespresso).
More importantly, Nestlé has a culture of long-term investing. Nestlé has long excelled at securing new markets and rolling out new products, often adjacent to long-standing brands. They also have a history of internal innovation (e.g., behind launch of new brand’s single-serve coffee platform, as a result of external acquisition of companies whose brands, technology, patent, manufacturing, route-to-market, adjacent category presence, etc., offer powerful long-term returns on incremental investments deployed to meet demands of growing consumers and growing affordability for those consumers of Western-style goods and services). (Click here to read full text)
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Disclosure: None. 10 ETFs to Invest in For Beginners is originally published on Insider Monkey.