If you are enthusiastic about investing in ETFs, there is good news for you. Because, we will guide you to the top 10 ETFs to buy in 2021, including a complete ETFs trading guide.
Exchange-Traded Funds (ETFs) have some features that may attract young investors who focus on portfolio diversification.
In ETF trading, investors can create a strong trading portfolio with a relatively low investment. Moreover, you can trade it on intraday, with a relatively low-cost environment. Overall, low investment requirement, availability of instruments, adequate liquidity and opportunity to build a strong portfolio make ETFs trading exciting among young investors.
What are ETFs?
Exchange-Traded Funds or ETF is a fund that traders can trade like a stock. In ETFs trading, you will get the chance to buy or sell a pool of assets without buying them individually. In ETFs, the fund provides designs with the fund and tracks the performance and sells shares in that fund to investors. Shareholders do not own the full fund but a portion of it.
Investors can track the value of an underlying asset or index through ETF trading. It works like a basket of stocks like Nasdaq 100 or S&P 500, instead of a single asset. These indexes are traded in the market, but its price action is different from the individual asset. Furthermore, the long term return from ETFs depends on the types of underlying assets.
How to Trade and Invest in ETFs?
Open a Trading Account
First, you have to open a trading account with a broker by clicking on the new account option. Later on, you have to fill up a form with your name, email address, address, experience, etc.
After opening the account, you can see a list of trading assets on the trading platform. Therefore, you can select ETFs from the list. Fund your account through the available deposit method and prepare for trading.
Place Your Trade
After getting the suitable ETF, it is time to make the trade. In ETF trading, you can take both buy and sell positions on an intraday basis. However, make sure to follow a trading strategy and a risk management system to continue trading.
Where Can I Trade ETFs?
In ETFs trading, you should open an account in a trading platform that supports ETFs. Many brokers allow ETFs trading for retail investors in the present world, but the challenging fact is to identify the reliable one.
What is the sign of a reliable broker?
The first sign of a good broker is transparency. A good broker always discloses its trading conditions and drawbacks so that investors can get a better trading decision.
Secondly, a good broker should support all regulatory frameworks to ensure a high-quality trading environment. Furthermore, a reasonable deposit and withdrawal method, education support, market analysis, good customer support, and information availability are signs of a good broker.
Based on our study and research, we recommend the top 3 brokers in the below section; where you can start ETFs trading:
Best ETFs to Buy Now
We have prepared the following list of the best 10 ETFs to trade because of their excellent liquidity, historical performance, and the strong team behind them:
- SPDR S&P 500 ETF (SPY)
- Invesco QQQ ETF (QQQ)
- Vanguard Information Technology ETF (VGT)
- Schwab U.S. Small-Cap ETF (SCHA)
- Vanguard Growth ETF (VUG)
- Roundhill Sports Betting & iGaming ETF (BETZ)
- Distillate U.S. Fundamental Stability & Value ETF (DSTL)
- Invesco WilderHill Clean Energy ETF (PBW)
- Global X FinTech ETF (FINX)
- iShares Evolved U.S. Healthcare Staples ETF (IEHS)
SPDR S&P 500 ETF (SPY)
SPDR S&P 500 is one of the world’s prominent funds with $330 billion in total assets and daily 80 million shares transactions.
It is famous among investors as it is benchmarked to the S&P 500 index where 500 most extensive US stocks are included. If you want to trade in the stock market but don’t know how to start, SPY might be the best option for you. In SPY trading, investors can quickly spread the cash from these top companies.
Invesco QQQ ETF (QQQ)
Invesco QQQ is an ETF that tracks the Nasdaq 100 index. In 2020, S&P 500 provided an impressive 16% growth while the Nasdaq stock exchange showed a 45% gain in the same period.
Therefore, if you want to invest in worlds to 100 non-financial Nasdaq companies with a $10B daily trading volume, QQQ ETF is the best option.
Vanguard Information Technology ETF (VGT)
Coming back from the Non- financial sector, Vanguard Information technology ETF focuses on technology investment for 2021. There are companies only from tech sectors with more than 340 positions in this fund, including megabank, pharma, and retailers.
VGT provided nearly 45% return in the last year, and there is a possibility of giving further growth in 2021. Therefore, you can enlist this instrument to your trading portfolio for 2021.
Schwab U.S. Small-Cap ETF (SCHA)
You can tap into growth potentialities without focusing on a specific sector. Since SCHA offers a list of 1800 stocks, many of these might be unfamiliar to you. This fund focuses on companies like cancer-fighting startup Novocure (NVCR) and LED light manufacturer CREE (CREE).
SCHA comes with an annual expense ratio of 0.04%, where you have to spend $4 forever $10,000 invested.
Vanguard Growth ETF (VUG)
Vanguard Growth ETF includes companies with higher growth possibilities in 2021. This fund focuses on a diversity in funds that includes stocks from Apple (AAPL) to retailers Home Depot (HD).
Therefore, if you want to focus on a sophisticated approach beyond the bread-based SPY or QQQ, this ETF would be the best option. VUG includes more than 250 stocks that made it a diversified way to benefit from the stock market growth from a single ETF.
Roundhill Sports Betting & iGaming ETF (BETZ)
Roundhill Sports Betting & iGaming ETF is a gambling fund with $177.6 million assets under management with an expense ratio of 0.75%.
Sports betting revenue increased over $2.3 billion in 2020 from $910 million in 2019, while BETZ gained almost 52%. The COVID-19 pandemic halted this massive growth, but it has room to rebound in 2021.
Distillate U.S. Fundamental Stability & Value ETF (DSTL)
Distillate U.S. Fundamental Stability & Value ETF is a large-cap fund with a dividend yield of 0.8%. Instead of a P/E or P/S ratio, DSTL focuses on free cash flow divided by its enterprise value to comply with the Generally Accepted Accounting Principles (GAAP).
DSTL starts with 500 of the largest US companies, where almost 25% are tech stocks. Moreover, other stocks like Industrials (19%) and health care (19%) may indicate a stable growth in 2021.
Invesco WilderHill Clean Energy ETF (PBW)
PBW did quite well in 2020 with a 162% return through mid- December 2020. As a result, it became one of the top 5 Equity ETFs in the market.
Invesco WilderHill Clean Energy ETF includes 46 green energy stocks with the market cap of $1.7 billion. Overall, this fund provides investors with a probability of future growth in 2021 as it includes potential companies like FuelCell Energy (FCEL), Nio (NIO), and Blink Charging (BLNK).
Global X FinTech ETF (FINX)
FINX is a financial technology ETF with a $930.9 million market value and an expense ratio of 0.68%.
This fund includes 33 fintech companies, including PayPal (PYPL), Square (SQ), and Intuit (INTU). It focuses on geographical diversification, where more than 40% of assets come from international companies.
After the coronavirus pandemic, fintech companies became very profitable, influencing investors to keep it in the top 10 ETFs for 2021.
iShares Evolved U.S. Healthcare Staples ETF (IEHS)
IEHS focuses on healthcare sectors with the market capitalisation of $16.4 million and an expense ratio of 0.18%. This fund includes top holdings from UnitedHealth (UNH), Abbott Laboratories (ABT), Medtronic (MDT), Johnson & Johnson, etc.
IEHS showed decent growth in 2020 and can deliver a further gain in 2021.
Expert Tip on Investing In ETFs
We believe an investor should focus on his trading personality and trading goal before involving the financial market. Before investing in an ETF, investors should do extensive research on the particular asset to get an idea about it. Later on, the core idea of investing is to identify a reliable price level where a trader should enter. In that case, the best approach is to follow a trading strategy, usually the technical or fundamental strategy with a strong track record. Moreover, while trading on an intraday chart, you should focus on the market directly from the higher timeframe. When higher time frames and lower time frames show the same direction, the price may continue the momentum. Lastly, money management and risk management is the core area of getting success in financial trading. You should minimize the risk by allotting a small percentage of your investment in a single trade.
Why Trade ETFs?
There are some great reasons to choose ETFs over the traditional stock market investment:
In open-end mutual fund shares, investors can trade once per day after the markets close. Later on, they should wait until the end of the day for the net asset value, where traders do not have the opportunity to trade intraday.
On the other hand, investors can buy or sell ETFs on an intraday basis when the market is open. Therefore, the technical and fundamental analysis works well in ETF trading. Moreover, if we compare the trading cost, we would see ETFs trading are cheaper than stock trading.
Frequently Asked Questions
The number one ETF depends on traders’ requirements from the market and how they implement their knowledge over the price.
The good or bad depends on how much time you can spend and how many plans you have taken. However, based on the macro outlook, low-risk ETFs may provide profit for years.
Both street investors and Wall Street investors invest in ETFs.
A share is a unit of stock, while ETFs are a basket of stocks. In ETFs trading, traders can buy and sell the position on an intraday basis.
ETFs are less risky than traditional mutual fund trading that encourages beginner investors to invest. However, to get the maximum benefit, traders should focus on a trading system with a money management technique.
The total size of the ETF is near $6.3 trillion.