If you look at the 16% returns for S&P 500 listings last year, it’s likely that 2020 was kinder to your investments than it was to anything else. But if there’s one thing we’ve learned, volatility can strike at any point, so you should shift your strategy accordingly. Politically, things are different since the presidential election, and COVID-19 still lingers, though it will hopefully recede as more people receive vaccines.
It’s vital to give your objectives an unbiased assessment rather than staying nonchalant and keeping the same portfolio with all this in mind. If you’re considering a shift in your strategy or just want to strengthen your current one, check out US News My Money’s top choices for exchange-traded funds, or ETFs, in 2021.
SPDR S&P 500 ETF (SPY)
You can’t make a list of best ETFs without mentioning the largest and most sought-after fund in the world. With assets valued at nearly $330 billion and more than 80 million shares bought and sold daily, SPY is a formidable ETF.
Investors love SPY because it is listed on the Standard & Poor’s 500 index of the 500 most significant American companies. If you’re considering investing, but you’re uncertain what your first move should be, SPY is one of the best ways to diversify your portfolio.
Invesco QQQ ETF (QQQ)
The S&P 500 may have gained 16% in 2020, but the Nasdaq-100 index’s leading 100 American corporations benchmarked on the Nasdaq saw a staggering 45% return. With that kind of leverage, you might wonder why you would buy into SPY at all instead of going all-in on the QQQ.
This fund offered nearly triple the returns of the S&P because it has fewer stocks than its larger counterpart. As a result, it could concentrate on fewer businesses — and those that are listed performed exceedingly well.
Vanguard Information Technology ETF (VGT)
If jumping on the Big Tech bandwagon is your goal for this year, make sure you don’t miss out on the Vanguard fund. It features a wide variety of stocks, all of which belong to tech companies. Although the holdings include over 340 positions, there’s no pharmaceutical company, big-name bank, or retail chain.
Of course, this fund is one of the riskier ETFs because your returns hinge on the fate of Big Tech. However, VGT managed to give investors about 45% in returns in 2020. If it keeps up this pace in 2021, you won’t be disappointed.
Vanguard Growth ETF (VUG)
Not everyone wants to put all their eggs in one basket. You may want to give some of your attention to stocks with more chances for growth this year. If that’s the case, VUG is for you.
This fund is slightly more nuanced than the extensive SPY or QQQ ETFs. It focuses on focusing on firms predicted to see more revenues compared to their counterparts. With this fund, you can invest in a range of stocks (250+) from Apple to Home Depot to Union Pacific Corp. VUG is an excellent way to diversify your portfolio without holding multiple ETFs.
Schwab US Small-Cap ETF (SCHA)
This fund is a unique way to take advantage of growth potential without depending on a narrow list of stock options confined to a single industry. SCHA is small, but it gives you more than 1,800 stocks to choose from. You may not be aware of many companies, but that’s because it intentionally leaves out the stock market’s biggest names.
SCHA’s top performers include Cree, an LED light producer and NovoCure, a startup dedicated to eliminating cancer. Plus, this fund offers a very affordable annual expense ratio at just 0.04%, which is the equivalent to $4 for every $10,000 you invest.
iShares MSCI USA Min Vol Factor ETF (USMV)
Your trust in the stock market may be running thin after last year’s tear streak, which is understandable. If you feel like playing defense, then USMV is the ETF for you. The name might be a mouthful, but there’s not much to it. This fund features shares collected by MSCI, which is an index that’s like the S&P. However, it centers on “minimum volatility” equities that are less susceptible to the ups and downs of the markets.
This type of fund is intended to give you more returns versus standard index funds. It features names like pharmaceutical titan Merck & Co. and food and beverage giant Pepsico, so you can see why this fund enjoys more stability relative to its counterparts, even if the returns aren’t something to write home about.
- Reeves, Jeff. “10 Best ETFs to Buy for 2021.” U.S. News & World Report, U.S. News & World Report, 6 Jan. 2021, money.usnews.com/investing/funds/slideshows/best-etfs-to-buy.