In this article, we discuss 10 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).
Our Methodology
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.”
8. iShares Select Dividend ETF (NASDAQ:DVY)
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)
5. Fidelity Value Factor ETF (NYSE:FVAL)
Fidelity Value Factor ETF (NYSE:FVAL) aims to track the performance of the Fidelity U.S. Value Factor IndexSM, which holds the large and mid-cap U.S. companies that have attractive valuations. The fund invests in 129 securities, offering a 30-day SEC yield of 1.50% and an expense ratio of 0.29%.
One of the leading securities in Fidelity Value Factor ETF (NYSE:FVAL)’s portfolio is Alphabet Inc. (NASDAQ:GOOG), the parent company of Google and Google subsidiaries. On June 2, Piper Sandler analyst Thomas Champion maintained an Overweight rating on Alphabet Inc. (NASDAQ:GOOG) but lowered the price target on the stock to $2,775 from $2,900. After a solid two-year streak, digital advertising spend seems to be normalizing, the analyst told investors. Group multiples have dropped and are 40% off recent highs, but history shows that multiples may not re-rate until after ad spend growth bottoms, added the analyst.
At the end of the first quarter of 2022, 160 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG), compared to 158 funds in the earlier quarter. Chris Hohn’s TCI Fund Management is one of the leading stakeholders of the company, with 2.3 million shares worth $6.6 billion.
In its Q4 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“In contrast, we made a different kind of mistake about a decade ago. Google, now Alphabet Inc. (NASDAQ:GOOG), performed very well for us while we owned it. The company kept outperforming our assumptions and we kept lowering them to be conservative. “Trees do not grow to the sky.” The stock kept going up and our value grew but did not keep pace with the stock. It hit our estimate of fair value and we sold it with a nice gain, patting ourselves on the back. We kept following the company and what they actually did over the next several years was roughly double the assumptions we used to value it. Therefore, our value was too conservative, and we sold it too cheaply, missing many years of compounding. Fortunately, we experienced some volatility several years ago that allowed us to purchase Alphabet Inc. (NASDAQ:GOOG) (Google) again with a margin of safety.”
4. Vanguard High Dividend Yield Index Fund (NYSE:VYM)
Vanguard High Dividend Yield Index Fund (NYSE:VYM) tracks the investment returns of the FTSE High Dividend Yield Index, which consists of companies characterized by high dividend yields. The fund follows a passively managed, full-replication approach, offering an expense ratio of 0.06%. The investments are concentrated in the industrials, healthcare, financials, energy, consumer discretionary, and consumer staples sectors.
The biggest holding of Vanguard High Dividend Yield Index Fund (NYSE:VYM) is Johnson & Johnson (NYSE:JNJ), an American multinational healthcare company. Johnson & Johnson (NYSE:JNJ) is a notable dividend king, with 60 years of consistent dividend increases under its belt. On April 19, the company declared a $1.13 per share quarterly dividend, a 6.6% increase from its prior dividend of $1.06. The dividend is payable on June 7. Johnson & Johnson (NYSE:JNJ) delivers a dividend yield of 2.56% as of June 6.
According to Insider Monkey’s data, 83 hedge funds were bullish on Johnson & Johnson (NYSE:JNJ) at the conclusion of the first quarter of 2022, with collective stakes worth $7.40 billion. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the biggest stakeholder of the company, with 6.65 million shares worth $1.17 billion.
3. Vanguard Small Cap Index Fund (NYSE:VB)
Vanguard Small Cap Index Fund (NYSE:VB) tracks the performance of the CRSP US Small Cap Index, providing exposure to diversified domestic small-cap companies with a passively managed, full-replication approach. Vanguard Small Cap Index Fund (NYSE:VB) offers an expense ratio of 0.05%. The total net assets held as of the end of April were $120.5 billion and the portfolio consists of 1,548 stocks. Vanguard Small Cap Index Fund (NYSE:VB) primarily invests in the technology, real estate, industrials, healthcare, financials, and consumer discretionary sectors.
The biggest holding of Vanguard Small Cap Index Fund (NYSE:VB) is Constellation Energy Corporation (NASDAQ:CEG), a company that generates and sells electricity in the United States, operating through five segments – Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions.
Wells Fargo analyst Neil Kalton on May 13 reiterated an Overweight recommendation on Constellation Energy Corporation (NASDAQ:CEG) but lowered the price target on the stock to $70 from $75. Although he adjusted his price multiple, his positive thesis after the Q1 results remains unchanged and he recommends investors take advantage of the share price weakness to boost or build positions. Over the long-term, the analyst continues to see Constellation Energy Corporation (NASDAQ:CEG)’s attractive nuclear fleet positioned to capitalize on the zero carbon theme.
According to Insider Monkey’s data, 47 hedge funds were bullish on Constellation Energy Corporation (NASDAQ:CEG) at the end of March 2022, with collective stakes worth $1.12 billion.
2. SPDR Portfolio S&P 500 Value ETF (NYSE:SPYV)
SPDR Portfolio S&P 500 Value ETF (NYSE:SPYV) tracks the total return performance of the S&P 500 Value Index, identifying stocks on the basis of book value to price ratio, earnings to price ratio, and sales to price ratio. The fund has assets under management of $13.4 billion as of June 6, offering a gross expense ratio of 0.04% and a distribution yield of 2.06%.
The biggest holding in SPDR Portfolio S&P 500 Value ETF (NYSE:SPYV)’s portfolio is Berkshire Hathaway Inc. (NYSE:BRK-B), an Omaha-based diversified conglomerate engaged in the insurance, freight rail transportation, and utility businesses worldwide. On April 30, Berkshire Hathaway Inc. (NYSE:BRK-B) reported its Q1 financial results, reporting an EPS of $3.18 and a revenue of $70.81 billion, outperforming Street estimates by $0.31 and $1.66 billion, respectively.
According to Insider Monkey’s first quarter database, 104 hedge funds were bullish on Berkshire Hathaway Inc. (NYSE:BRK-B), with collective stakes worth $19 billion, compared to 108 funds in the earlier quarter, holding stakes in the company valued at $19.3 billion.
1. iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT)
iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT) seeks to track the investment results of the S&P Total Market Index, a broad index comprising U.S. equities, including small, mid, and large-cap plays. As of June 6, the fund owns 3,623 stocks in its portfolio and has a 30-day SEC yield of 1.40% as of April 29. The management fee equals 0.03%.
One of the largest holdings in iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT)’s portfolio is Tesla, Inc. (NASDAQ:TSLA), the California-based manufacturer of electric vehicles and battery energy storage systems. On June 1, Goldman Sachs analyst Mark Delaney maintained a Buy rating on Tesla, Inc. (NASDAQ:TSLA) but adjusted the price target to $1,000 from $1,200. In the U.S. autos and industrial technology space, he is widely cutting estimates and price targets to account for increasing logistical constraints in the short-term and softer demand in the intermediate-term, he told investors.
According to Insider Monkey’s data, Catherine D. Wood’s ARK Investment Management is a significant stakeholder of the company, with 1.59 million shares worth $1.71 billion. Overall, 80 hedge funds were bullish on the stock at the end of March 2022.
Here is what Baron Fifth Avenue Growth Fund has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“During the first quarter, we bought back shares in Tesla, Inc., which designs, manufactures, and sells electric vehicles, solar products, energy storage solutions, and batteries. We believe that despite the run in the stock over the last few years, Tesla presents a favorable risk/reward profile and remains a Big Idea with only about 1% market share of the automotive market. Since we bought the stock during the first quarter, shares increased 27.1%, despite a complex supply-chain environment, on continued revenue growth and record profitability. Robust demand and operational optimization allow the company to offset inflationary pressures while vertical integration provides flexibility around supply bottlenecks. Moreover, we expect new localized manufacturing capacity to drive additional efficiencies while software initiatives, including the autonomous driving program, are accelerating, offering valuable optionality to the stock.”
You can also take a look at 10 Best ETFs to Invest In for Retirement and 10 Growth ETFs to Buy Now.
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Disclosure: None. 10 ETFs to Invest in For Beginners is originally published on Insider Monkey.
