In the last 12 months, many investors have heard that this is a “stock picker's market." This means that there's a bigger gap between winning stocks and losing stocks. Some of the obvious winners were the Magnificent 7 stocks. But investors could find quality stocks in any sector, it just took time and research.
Many investors choose a different and easier approach: investing in one or more exchange-traded funds (ETFs). These funds invest in a group (i.e., a basket) of stocks that are usually correlated to a particular index, like the S&P 500 index.
Based on retail and institutional investor demand, there are a diverse set of ETFs for you to consider. Some of these track a broad index, while others allow you to focus your investments on a specific sector. This can be a good way to get exposure to a red-hot sector without having to select specific stocks.
In addition to the fund's holdings and performance, you'll want to make sure to find a fund that has a low expense ratio so that you aren't losing your profits in fees. Here are seven ETFs for you to consider to maximize your gains in 2025.
Quick Links
- SPDR S&P 500 ETF Trust
- Consumer Staples Select Sector SPDR Fund
- Health Care Select Sector SPDR Fund
- Global X U.S. Infrastructure Development ETF
- iShares MSCI Global Gold Miners ETF
- Vanguard International High Dividend Yield ETF
- iShares Russell 2000 ETF
#1 - SPDR S&P 500 ETF Trust (NYSEARCA:SPY)
If you’re looking for a “set it and forget it” ETF, the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) is a great choice. The ETF is benchmarked to the S&P 500 index, which gives investors broad exposure to many of the index's top names.
This is a market cap-weighted ETF, which means the weight (i.e., the percentage of shares) the ETF invests in any one company will be proportionate to that company’s weight in the S&P 500 index. As of September 2024, approximately 31% of the fund’s holdings are invested in the technology sector, with about 10% of the weighting going equally to semiconductor stocks and software stocks.
The SPY ETF is passively managed, which is one reason it has an ultra-low expense ratio of 0.09%. The fund also pays a quarterly dividend offering a 1.2% yield and pays out $6.84 per share annually.
About SPDR S&P 500 ETF Trust
SPDR S&P 500 ETF Trust (the Trust) is a unit investment trust. The Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index (the Index). The Trust seeks to achieve this investment objective by holding a portfolio of the common stocks that are included in the Index (the Portfolio), with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the Index.
Read More - Current Price
- $590.53
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 2 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $590.53 (0.0% Downside)
#2 - Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP)
As interest rates recently moved lower, investors should consider the sectors that are most likely to benefit from this trend continuing. As the pressure on consumers eases, consumer staples stocks will likely become more attractive. That makes the Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) a good name to consider.
The fund tracks the stocks in the Consumer Staples Select Sector index. Like the index, the fund is market-cap-weighted to a list of 38 consumer staples stocks that are part of the S&P 500 index.
As of September 2024, the fund is heavily concentrated in hypermarkets & supercenters as well as household products. Not surprisingly, the top three holdings in the fund by percentage are Procter & Gamble Co. (NYSE: PG), Costco Wholesale Corp. (NASDAQ: COST), and Walmart Inc. (NYSE: WMT).
Like the SPY, the XLP is passively managed with an expense ratio of 0.09%. The fund pays a quarterly dividend with a yield of 2.20%.
About Consumer Staples Select Sector SPDR Fund
Consumer Staples Select Sector SPDR Fund (the Fund) seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in The Consumer Staples Select Sector Index (the Index).The Fund typically invests in substantially all of the securities represented in the Index in approximately the same proportions as the Index.
Read More - Current Price
- $80.22
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 2 Buy Ratings, 17 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $80.22 (0.0% Downside)
#3 - Health Care Select Sector SPDR Fund (NYSEARCA:XLV)
Another sector SPDR fund to consider is the Health Care Select Sector SPRD Fund (NYSEARCA: XLV). Health care is widely seen as an evergreen sector, as people need to get medical care regardless of economic conditions. However, there are areas – such as elective surgeries – that may do better when the consumer is less impacted by inflation. That’s reflected in the price of the XLV ETF, which is up 14% in 2024.
The fund has 50 holdings in a diverse range of industries, such as pharmaceuticals, healthcare providers, equipment and supplies, biotechnology, life sciences companies, and healthcare technology.
As of September 2024, almost 50% of the fund’s weighting is in biotechnology, with three of the fund’s top five holdings being Eli Lilly & Co. (NYSE: LLY), AbbVie Inc. (NYSE: ABBV), and Merck & Co. Inc. (NYSE: MRK).
Like the other SPDR funds, the XLF ETF has an ultra-low 0.09% expense ratio. It also pays a dividend with a 1.28% yield.
About Health Care Select Sector SPDR Fund
Health Care Select Sector SPDR Fund (the Fund) seeks to closely match the returns and characteristics of the S&P Health Care Select Sector Index (the Index). The companies included in the Index are selected on the basis of general industry classification from a universe of companies defined by the Standard & Poor's 500 Composite Stock Index (S&P 500).
Read More - Current Price
- $142.88
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $142.88 (0.0% Downside)
#4 - Global X U.S. Infrastructure Development ETF (BATS:PAVE)
Like the XLP and the XLV, the Global X U.S. Infrastructure Development ETF (BATS: PAVE) is a thematic ETF. In this case, the fund invests in companies that are focused on building out infrastructure in the United States. That means traditional infrastructure projects like rebuilding roads and bridges and updating the nation’s electrical grid. And it also is investing in companies that are taking steps to reshore their businesses in the United States.
The fund's benchmark is the INDXX U.S. Infrastructure Development Index. This is a market-cap-weighted index. As of September 2024, about 80% of the fund’s weighting is in the industrial sector. However, no stock carries more than 3.75% of the fund’s total weighting.
This is a relatively new fund that has only been trading publicly since 2017. However, the stock price of the fund has nearly tripled in that time. The fund has an expense ratio of 0.47%.
About Global X U.S. Infrastructure Development ETF
The Global X U.S. Infrastructure Development ETF (PAVE) is an exchange-traded fund that mostly invests in stocks based on a particular theme. The fund tracks a market-cap-weighted index of US-listed companies that derive the majority of their revenue from or have a stated business purpose related to infrastructure development.
Read More - Current Price
- $44.02
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 14 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $44.02 (0.0% Downside)
#5 - iShares MSCI Global Gold Miners ETF (NASDAQ:RING)
Gold has been one of the best-performing asset classes in 2024. One way to invest in this trend is with a precious metals ETF. And the iShares MSCI Global Gold Miners ETF (NASDAQ: RING) is one of the solid choices for investors to consider.
The performance of the yellow metal is part of the ongoing uncertainty in the market. After all, gold tends to be an inflation hedge, but the rate of inflation, while sticky, is moving lower. On the other hand, the sharp move in gold has also correlated with expectations of lower interest rates, which devalues the U.S. dollar.
All of this points to continued strength in gold, and it may be time for gold mining stocks to catch up. The fund’s largest holding is that of Newmont Corp. (NYSE: NEM), which has more than 21% of the fund’s weighting. And the fund has an attractive expense ratio of just 0.39%.
About iShares MSCI Global Gold Miners ETF
The iShares MSCI Global Gold Miners ETF (RING) is an exchange-traded fund that is based on the MSCI ACWI Select Gold Miners IMI index, a market-cap-weighted index of companies that generate revenue primarily from gold mining. RING was launched on Jan 31, 2012 and is managed by BlackRock.
- Current Price
- $30.90
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 1 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $30.90 (0.0% Downside)
#6 - Vanguard International High Dividend Yield ETF (NASDAQ:VYMI)
Lower interest rates make some fixed-income investments less attractive. It’s also when savvy investors may pivot towards high-yield dividend stocks. Many investors prefer to keep their trading portfolio into growth stocks but may use an ETF for retirement savings.
The Vanguard International High Dividend Yield (NASDAQ: VYMI) is an attractive choice. Not only do you get a dividend yield of 4.40%, but you also get international exposure which can be important to a diversified portfolio.
The fund is up 8% in 2024, with much of that growth occurring in the last six months. That correlates with the sector rotation away from technology stocks and has pushed the VYMI near its 52-week high.
But while you don’t want to overpay for any asset, the reason to own a high dividend yield ETF is for passive income. One thing that may be off-putting to some investors is that the fund is heavily weighted in banks and financial stocks.
About Vanguard International High Dividend Yield ETF
The Vanguard International High Dividend Yield ETF (VYMI) is an exchange-traded fund that mostly invests in high dividend yield equity. The fund tracks a market-cap-weighted index of developed and emerging market firms (ex-US) that are expected to pay above average dividends over the next 12 months. VYMI was launched on Feb 25, 2016 and is managed by Vanguard.
- Current Price
- $69.95
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - iShares Russell 2000 ETF (NYSEARCA:IWM)
As interest rates moved higher, mid-cap and small-cap stocks were among the most impacted. That’s because many of these companies still have to fund their growth with debt. Higher interest rates meant higher borrowing costs, which has an impact on earnings.
However, as we move into a lower interest rate environment, these beaten-down stocks stand to be the biggest beneficiaries. Instead of trying to pick individual stocks, you can consider the iShares Russell 2000 ETF (NYSEARCA: IWM). The fund has been up more than 20% in the last 12 months as investors begin to shift away from large-cap stocks.
The market-cap-weighted fund is indexed to the Russell 2000 Index. Importantly, none of the fund’s holdings carries more than 0.55% of the fund’s weight and 92% of the fund’s holdings are those of U.S. companies.
Unlike many of the ETFs on this list, the iShares Russell 2000 ETF is specifically for growth-oriented investors. As such, the fund doesn’t pay a dividend.
About iShares Russell 2000 ETF
iShares Russell 2000 ETF (the Fund) is an exchange-traded fund. The Fund seeks investment results that correspond generally to the price and yield performance of the Russell 2000 Index (the Index). The Index is a float-adjusted capitalization weighted index that measures the performance of the small-capitalization sector of the United States equity market and includes securities issued by the approximately 2,000 smallest issuers in the Russell 3000 Index.
Read More - Current Price
- $230.92
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 13 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $230.92 (0.0% Downside)
As you can see, ETFs have many benefits for investors who want to take a more passive approach to growing their wealth. And many investors do quite well with this strategy. But one concern for ETF investors is that you have to take the “trash" along with the “treasure."
This is because a fund's holdings are tied to a specific index. And that means that it may include stocks that are underperforming the market. A fund can change its holdings as the index rebalances, but that's usually done quarterly.
However, if you're looking to grow your investments over time, you shouldn't put too much weight on quarterly performance. After all, a stock that's underperforming one quarter may be an outperformer in subsequent quarters.
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