ETFs aren’t every investor’s cup of tea as they don’t offer massive room for growth or risk, but they can make a great portfolio addition
Jan. 4, 2022
Since the first exchange-traded fund (ETF) was made open to investors in 1993, the popularization of the investment product has grown substantially. There are now over 7,000 ETF’s traded globally, but we’ve narrowed it down to three that could make solid investments in 2022.
Vanguard Total Stock Market ETF
The one size fits all for ETFs — a perfect solution for investors that would rather not trouble themselves with market movements or those who struggle with handling their emotions when investing.
Vanguard was founded by Jack Bogle, who popularized ETFs for investors that didn’t want to concern themselves with the day-to-day movements of the market. A subreddit, r/bogleheads, has even come about in honor of the man, solely dedicated to ETF investing.
Vanguard Total Stock Market ETF (NYSEARCA: VTI) is a favorite among investors given its almost perfect diversification mix, spread across small-cap, mid-cap, and large-cap companies, including both growth and value, as well as plenty of geographical diversification. Although not impenetrable when it comes to wild market movements, it does offer investors a layer of protection as can be seen from its smooth incremental growth, demonstrated by its chart.
Invesco QQQ Trust
Invesco QQQ Trust (NASDAQGM: QQQ) is perfect for the tech-heavy investor — it basically tracks the biggest and best from the NASDAQ 100. If you want to just hold FAANG stocks, say no more, because this has all of them.
Just look at the lineup of top 10 holdings that make up 56% of the ETF’s weighting — Apple, Microsoft, Amazon, Alphabet (Google), Facebook (Meta), Tesla, Nvidia, Paypal, Netflix, and Adobe.
Tech has become far more than just an industry, and really if you look at the top 10 holdings, you’re getting exposure to the largest, most successful, and best-capitalized growth stocks in the world, and you strike a unique balance between disruptive and mature businesses, as well as several industry leaders in their segments.
It’s perfect for anyone starting out that wants exposure to companies they know and use all the time.
ETFMG Prime Cyber Security ETF
ETFMG Prime Cyber Security ETF (NYSEARCA: HACK) is just one of the options investors can look at for an industry-specific ETF. In this case, you don’t get the diversification across industries, but this particular one is quite sheltered compared to others.
The benefit of investing in HACK is that cyber-security is, or will essentially, become a need for all businesses as we see further digitalization. Data protection regulation is more important than ever, and cyberattacks have become increasingly commonplace in recent years, so although not impossible, it’s unlikely the industry will collapse out of nowhere.
Cybersecurity is no small market either — currently valued at $183 billion, but it’s expected to grow at an 11.6% compound annual growth rate (CAGR) reaching a total value of $540 billion by 2030 — so you’re getting growth too. By picking this ETF, you don’t have to worry about who will become the leader in cybersecurity, just that you will benefit from its growth.
So there we have it — three top ETF picks for 2022. ETFs can be a great way to offset risk for all investors, even the individual DIY stock pickers out there, so maybe it’s one to add to your watchlist too if you fit that description.