In this article, we discuss 10 cheap ETFs to invest in for beginners. If you want to see more stocks in this selection, click 5 Cheap ETFs to Invest in For Beginners.
Many investors who are apprehensive at the thought of navigating the unpredictable stock market at this time, or those who are just starting out their investment journey, usually prefer exchange traded funds over individual stocks. This has many tactical benefits. For example, with limited money, investors are exposed to the top performing companies via exchange traded funds, which they could possibly not afford otherwise. Secondly, ETFs are overseen by experienced money managers, which means the chances of market success are higher as compared to novices trading on their own.
Investors also seek out exchange traded funds to diversify their portfolios with value, growth, and defensive plays. The blended nature of ETFs allows portfolio diversification that is difficult to achieve with limited funds. Some investors turn towards growth-heavy tech stocks in light of recession fears, as these companies are better positioned to navigate macro uncertainties. Beginners can get exposure to the biggest and most expensive tech names with cheap ETFs as well.
While the first six months of 2022 were ghastly at the stock market, investors continue to pour into exchange traded funds. US-listed ETFs saw inflows of $297.3 billion in the first half of 2022, with $36.9 billion inflows in June alone. Although the performance of ETFs has declined as their underlying indices run red, investors take comfort in the idea of the situation improving in the long-term. Beginners who are looking to buy market leaders like The Procter & Gamble Company (NYSE:PG), NVIDIA Corporation (NASDAQ:NVDA), and Salesforce, Inc. (NYSE:CRM) can seek out cheap ETFs to invest in.
We selected exchange traded funds that are priced under $30 as of July 7. These funds offer exposure to some of the largest companies in their respective sectors. We have discussed these ETFs in terms of their top holdings. The purpose of the article is to give readers a basic overview of some of the prominent affordable ETFs in the US.
Cheap ETFs to Invest in For Beginners
10. Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ)
Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) aims to invest in companies that operate in the artificial intelligence sector and the firms that utilize AI in their products and services. The ETF seeks to track the performance of the Indxx Artificial Intelligence & Big Data Index. Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) was founded in 2018, with total net assets of $138.49 million and an expense ratio of 0.68%.
One of the top holdings of Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) is Microsoft Corporation (NASDAQ:MSFT). Microsoft’s Azure offers a range of AI services for developers and data scientists, including HD vision, speech, language, and machine learning models. On June 29, Redburn analyst Alex Haissl initiated coverage of Microsoft Corporation (NASDAQ:MSFT) with a Buy rating and a $370 price target, observing that Azure is “a key part of Microsoft’s positive equity story” that is worth $1 trillion, but the market undervalues Azure and its potential is not priced in Microsoft’s current valuation.
Among the hedge funds tracked by Insider Monkey, 259 funds were bullish on Microsoft Corporation (NASDAQ:MSFT) at the end of Q1 2022, with collective stakes worth $65.6 billion. Fisher Asset Management featured as the largest shareholder of the company, with 27.8 million shares valued at approximately $8.6 billion.
Like The Procter & Gamble Company (NYSE:PG), NVIDIA Corporation (NASDAQ:NVDA), and Salesforce, Inc. (NYSE:CRM), elite hedge funds are bullish on Microsoft Corporation (NASDAQ:MSFT).
Here is what Carillon Clarivest Capital Appreciation Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2022 investor letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
9. Global X Cloud Computing ETF (NASDAQ:CLOU)
Global X Cloud Computing ETF (NASDAQ:CLOU) seeks to invest in companies that benefit from the mainstream adoption of cloud computing, as well firms that specialize in Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space, data center REITs, and cloud and edge computing infrastructure. The exchange traded fund tracks the performance of the Indxx Global Cloud Computing Index. Global X Cloud Computing ETF (NASDAQ:CLOU) was established in 2019, with net assets of $677.77 million and an expense ratio of 0.68%. The portfolio consists of 35 stocks.
One of the most significant stocks in Global X Cloud Computing ETF (NASDAQ:CLOU)’s portfolio is Salesforce, Inc. (NYSE:CRM), a market leader in cloud computing that offers expertise in customer relationship management, sales, ERP, customer service, marketing automation, business analytics, and mobile application development.
RBC Capital analyst Rishi Jaluria on June 1 reiterated his Outperform rating and $235 price target on Salesforce, Inc. (NYSE:CRM) after its Q1 results. The analyst observed that while Salesforce, Inc. (NYSE:CRM)’s FY23 outlook was “mixed”, the management “encouragingly” raised operating margins by 40bps. He also noted that the demand guidance by Salesforce, Inc. (NYSE:CRM) was “overall positive” and the revenues for Sales Cloud and Service Cloud remain stable.
Among the hedge funds tracked by Insider Monkey, 114 funds were long Salesforce, Inc. (NYSE:CRM) at the end of March 2022, up from 110 funds in the preceding quarter. Akre Capital Management features as a prominent shareholder of the company, with a position worth $602.3 million.
“Salesforce.com Inc. is the dominant provider of customer relationship management software and technology. Salesforce has high retention rates, pricing power, high free cash flow, and a competitive moat. The company continues to execute well. Margins decreased slightly during the fourth quarter but continue to be on path for material expansion over the long term. Salesforce is seeing increased spending as employees are returning to the office, and we believe the global pandemic has only improved its prospects.”
8. Global X Millennials Consumer ETF (NASDAQ:MILN)
Global X Millennials Consumer ETF (NASDAQ:MILN) invests in companies that have a high potential of benefiting from the increasing spending power and select preferences of the U.S. Millennial generation. These companies operate in the social media and entertainment, food, apparel, health and fitness, travel and mobility, education, housing and home goods, and financial services sectors. The ETF corresponds to the price and yield performance of the Indxx Millennials Thematic Index. Global X Millennials Consumer ETF (NASDAQ:MILN) was founded in 2016, with net assets of $106.02 million and an expense ratio of 0.50%. The fund has 82 holdings in its portfolio.
The largest stock in Global X Millennials Consumer ETF (NASDAQ:MILN)’s portfolio is Activision Blizzard, Inc. (NASDAQ:ATVI), a California-based interactive entertainment and gaming company. Microsoft is in the process of acquiring Activision Blizzard, Inc. (NASDAQ:ATVI). On July 1, Activision Blizzard, Inc. (NASDAQ:ATVI) closed the acquisition of the Boston-based entertainment studio, Proletariat, to serve players in the elaborate multiplayer online game, World of Warcraft.
According to Insider Monkey’s data, 80 hedge funds reported long positions in Activision Blizzard, Inc. (NASDAQ:ATVI) at the end of March 2022, up from 70 funds in the previous quarter. Warren Buffett’s Berkshire Hathaway is the leading position holder in the company, with 64.3 million shares worth $5.15 billion.
Here is what FPA U.S. Core Equity Fund has to say about Activision Blizzard, Inc. (NASDAQ:ATVI) in its Q1 2022 investor letter:
“One of the Fund’s biggest winners in the first quarter was Activision Blizzard. On January 18, 2022 Microsoft (NASDAQ:MSFT) agreed to purchase ATVI for $95.00 per share in an all-cash transaction. The Fund has been invested in ATVI since the second quarter of 2018.
The investment thesis was threefold. First, the greater than $200 billion gaming industry is the largest and fastest growing form of entertainment in the world. More than three billion people play games currently and the population of global gamers is expected to grow faster than global population growth this decade.14 Second, ATVI has some of the best intellectual property in the gaming industry including Warcraft, Diablo, Overwatch, Call of Duty and Candy Crush in addition to global eSports activities through Major League Gaming. Third, ATVI has had a pristine balance sheet with net cash over the past four years, generated robust free cash flow and traded at an undemanding valuation.
ATVI closed the quarter at $80.11—a nearly 16% discount to the acquisition price. Assuming it takes about a year for the deal to close, a 18.6% return seems to be good upside relative to the risk of a deal not closing due to anti -trust concerns. If the transaction closes it would make Microsoft the third-largest company in gaming by revenue behind Tencent and Sony. There is plenty of competition from these larger players as well as smaller competitors such as EA, Take-Two Interactive, Roblox and Epic Games’ Fortnite. The Fund remains invested in ATVI given the significant discount, but should the discount narrow in the coming quarters the Fund could reduce or eliminate the position.”
7. Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ)
Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) tracks the performance of the PHLX Semiconductor Sector Index, which invests in the 30 biggest U.S. listed companies engaged in the semiconductor industry. The ETF offers an expense ratio of 0.19% and an average market cap of approximately $130 million.
Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ)’s biggest holding is Texas Instruments Incorporated (NYSE:TXN), a company that manufactures and sells semiconductors to electronics designers worldwide. Benchmark analyst Cody Acree initiated coverage of Texas Instruments Incorporated (NYSE:TXN) on June 29 with a Buy rating and a $205 price target. The analyst observed that the company is a market leader in the analog industry by a “substantial margin”. The analyst also cited that his price target for Texas Instruments Incorporated (NYSE:TXN) includes valuation multiples on a price-to-earnings, price-to-sales, and forward EV-to-EBITDA basis that are at a discount as compared to its peer group.
According to Insider Monkey’s data, 46 hedge funds were bullish on Texas Instruments Incorporated (NYSE:TXN) at the end of Q1 2022, with combined stakes worth about $2 billion. Jean-Marie Eveillard’s First Eagle Investment Management is the leading shareholder of the company, with 3.3 million shares valued at about $622 million.
Here is what Davis Opportunity Fund has to say about Texas Instruments Incorporated (NASDAQ:TXN) in its Q4 2021 investor letter:
6. WisdomTree Cybersecurity Fund (NASDAQ:WCBR)
WisdomTree Cybersecurity Fund (NASDAQ:WCBR) tracks the investment results of the WisdomTree Team8 Cybersecurity Index. The ETF focuses on companies that provide cyber security-oriented products while meeting WisdomTree’s ESG criteria. WisdomTree Cybersecurity Fund (NASDAQ:WCBR) was founded in January 2021, with total assets under management of $70 million and a net expense ratio of 0.45%.
Datadog, Inc. (NASDAQ:DDOG) is one of the top holdings of WisdomTree Cybersecurity Fund (NASDAQ:WCBR), a company that runs an analytics platform for user experience monitoring, network performance monitoring, cloud security, developer-focused observability, and incident management. According to Insider Monkey’s Q1 data, 82 hedge funds reported long positions in Datadog, Inc. (NASDAQ:DDOG), up from 73 funds in the preceding quarter. Stephen Mandel’s Lone Pine Capital is the leading shareholder of the company, with roughly 3 million shares worth $449.15 million.
In addition to The Procter & Gamble Company (NYSE:PG), NVIDIA Corporation (NASDAQ:NVDA), and Salesforce, Inc. (NYSE:CRM), Datadog, Inc. (NASDAQ:DDOG) is one of the stocks that elite hedge funds are monitoring.
Here is what Baron Global Advantage Fund has to say about Datadog, Inc. (NASDAQ:DDOG) in its Q1 2022 investor letter:
“Another example is Datadog, the leading infrastructure monitoring, application performance monitoring and log management software platform. Datadog’s stock declined 15% during the quarter, despite reporting sparkling operational results, with revenues accelerating to a growth rate of 84% year-over-year with 33% free cash flow margins, while guiding for 2022 significantly above expectations. Datadog added 4,600 new customers in the quarter, while existing customers continued to increase their spending on Datadog products at a rapid pace with the number of customers using four or more products increasing to 33% from 22% last year. While Datadog’s stock was down, its intrinsic value has undoubtedly increased. This is enabled by rapid innovation (Datadog released 13 new products in 2021) into a market that is benefiting from the secular growth in cloud, digital transformation, and the explosion in complexity as the number of vendors, diversity of technologies and related infrastructure continued to expand.”
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Disclosure: None. 10 Cheap ETFs to Invest in For Beginners is originally published on Insider Monkey.