In this article, we discuss top 10 ETFs for beginners. If you want to see more ETFs in this selection, click Top 5 ETFs For Beginners.
According to data from Susquehanna International Group, ETF volumes in the United States climbed and accounted for 29% of the total equity transactions on September 27, the highest level since December 2018. The boost in ETF volumes came as the S&P 500 declined to a new low, indicating a bear market, and the Cboe Volatility Index jumped to its highest level in three months. Investors are trying to navigate the increasingly volatile market, and they tend to take shelter in exchange traded funds.
ETF trades increase during market turmoil, given they offer safety, are easy to invest in, and investors can place directional bets. Chris Murphy, co-head of derivatives strategy at Susquehanna, told Bloomberg:
“This increase in ETF volume as a percentage of overall volume is a clear indication that the focus right now is squarely on the macro environment, on finding liquidity and on playing momentum.”
Beginners looking to enter the stock market amid the current turbulence can decidedly benefit from ETF trades. The activity in exchange traded funds is likely to stay high as a result of the difficult macro. Traders tend to flock towards ETFs that track the performance and investment results of large benchmark indices, for safe exposure to underlying equities like Johnson & Johnson (NYSE:JNJ), ConocoPhillips (NYSE:COP), and UnitedHealth Group Incorporated (NYSE:UNH).
We explored ETFs that offer exposure to multiple sectors of the economy, both value and growth plays, large and small-cap equities, and dividend stocks for a well-rounded outlook of some of the top funds listed on US exchanges. We have selected the ETFs priced under $100 as of September 30, keeping in mind affordability for beginners. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
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Top ETFs For Beginners
10. iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT)
NAV as of September 30: $79.47
iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT) seeks to track the performance of the S&P Total Market Index, offering exposure to the overall U.S. stock market, ranging from some of the smallest to largest companies. iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT) has net assets of $38.8 billion as of September 30 and a portfolio consisting of 3,370 stocks. The fund was established on January 20, 2004. The expense ratio stands at 0.03% and the 30-day SEC yield is 1.54%, with iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT) making quarterly dividend payments. It is one of the best ETFs for beginners.
Apple Inc. (NASDAQ:AAPL) features as the largest holding of iShares Core S&P Total U.S. Stock Market ETF (NYSE:ITOT), representing 5.92% of the total portfolio. Apple Inc. (NASDAQ:AAPL) is one of the best technology stocks to buy according to hedge funds. In Q2 2022, 128 funds reported owning stakes in Apple Inc. (NASDAQ:AAPL), compared to 131 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the leading position holder in the company, with approximately 895 million shares worth $122.3 billion.
Like Johnson (NYSE:JNJ), ConocoPhillips (NYSE:COP), and UnitedHealth Group Incorporated (NYSE:UNH), Apple Inc. (NASDAQ:AAPL) is one of the favorite stocks of elite hedge funds.
“Apple was the largest new purchase in the quarter, at a 2% weight. Apple underperformed the overall market last quarter, and given very minimal debt, this price weakness translated into a commensurate fall in its enterprise value. For stocks with higher debt levels, it takes a disproportionately bigger market cap drop to achieve the same valuation improvement and this is a key reason we avoid highly leveraged names where significant price weakness can be experienced during a revaluation process. Alongside this decline in EV for Apple, its estimated free cash flows have risen steadily throughout the year. This contrast between a falling enterprise value and rising free cash flow, which is highlighted in Figure 12, made the stock sufficiently better valued such that it entered the portfolio. While Apple’s valuation is now attractive enough to warrant inclusion in the portfolio, it still ranks in the bottom quartile of the portfolio’s holdings and so the stock’s initiating weight is capped at a 2%. This contrasts significantly with Apple’s near-7% position in the S&P 500 benchmark, and reflects both our preference to avoid too much concentration risk as well our goal of ensuring that the overall portfolio valuation is as attractive as possible while balancing characteristics of stability and low indebtedness.”
9. Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG)
NAV as of September 30: $56.49
Next on our list of the top ETFs for beginners is Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG), which aims to closely track the total return of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. The fund offers exposure to large-cap U.S. equities that exhibit growth characteristics. Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG) was established at the end of 2009, and the net assets as of September 29 came in at $13.2 billion. The expense ratio is 0.04% and Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG) provides potential for tax-efficiency. The fund has 250 holdings in its portfolio, which is passively managed.
Microsoft Corporation (NASDAQ:MSFT) is one of the premier holdings of Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG). Technology stocks represent a major portion of the portfolio, followed by healthcare, consumer discretionary, and communications services firms. Smart investors flock to Microsoft Corporation (NASDAQ:MSFT), and with 258 long positions, it was the most popular stock among hedge funds according to Insider Monkey’s Q2 2022 database. Ken Fisher’s Fisher Asset Management is the biggest stakeholder of the company, with 28.7 million shares worth $7.36 billion.
Here is what Baron Durable Advantage Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q2 2022 investor letter:
“Shares of Microsoft Corporation, a leading global provider of software solutions, declined 16.6% in the quarter along with the broader software group as well as due to growing concerns of a potential macro-driven slowdown. This is despite the company posting strong quarterly financial results and successfully absorbing headwinds from the war in Ukraine. The company had 21% revenue growth, 23% operating income growth, and 35% growth in Microsoft Cloud (all year-over-year in constant currency), which now represents 47% of total revenues.
As discussed above, we continue to believe Microsoft remains a durable and growing business as companies across all industries look to digitally transform, taking advantage of the continuously expanding solution set Microsoft has to offer.”
8. Fidelity Value Factor ETF (NYSE:FVAL)
NAV as of September 30: $40.01
Fidelity Value Factor ETF (NYSE:FVAL) seeks to track the performance of the Fidelity U.S. Value Factor IndexSM, exposing investors to large and mid-cap U.S. companies with attractive valuations. At the end of August, the net assets stood at $471.8 million. As of November 2021, the expense ratio of Fidelity Value Factor ETF (NYSE:FVAL) has been 0.29% and at the end of June 2022, the portfolio had 127 long positions.
Alphabet Inc. (NASDAQ:GOOG) is one of the top stocks in Fidelity Value Factor ETF (NYSE:FVAL)’s portfolio. At its upcoming product event, Alphabet Inc. (NASDAQ:GOOG) is expected to present new versions of the Pixel 7 smartphone and its Pixel Watch, the first smartwatch using Google technology.
According to Insider Monkey’s Q2 data, 153 hedge funds were long Alphabet Inc. (NASDAQ:GOOG), compared to 160 funds in the earlier quarter. Chris Hohn’s TCI Fund Management is a prominent stakeholder of the company, with approximately 2.5 million shares worth $5.4 billion.
Here is what Lakehouse Capital specifically said about Alphabet Inc. (NASDAQ:GOOG) in its Q2 2022 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) reported another strong quarterly result despite the tough macroeconomic conditions. Revenue increased by 13% as Search proved resilient, primarily led by strength in the travel and retail verticals. YouTube advertising growth was lighter and moderated due to a tough comparison period and a general softening in brand advertising spend. That said, YouTube’s user engagement and time spent still continues to grow which bodes well for future monetisation opportunities. Google Cloud outpaced the company’s overall growth with revenue increasing by 36% and while it has yet to show any signs of profitability, we remain supportive of Alphabet continuing to reinvest in its cloud business given the size of the market opportunity ahead. On the cost front, the company added another 10,000 employees during the quarter, but notably, the CFO mentioned that hiring will likely slow down over the next twelve months as the company focuses on greater operating efficiency. Overall, we’re pleased with how the company has performed and are confident that management will be able to control costs, if or when the economic environment becomes more challenging.”
7. iShares MSCI ACWI ETF (NASDAQ:ACWI)
NAV as of September 30: $77.81
iShares MSCI ACWI ETF (NASDAQ:ACWI) tracks the investment results of MSCI ACWI Index, which offers exposure to a mix of large and mid-capitalization developed and emerging market securities. iShares MSCI ACWI ETF (NASDAQ:ACWI) has a net expense ratio of 0.32% and the net assets as of September 30 came in at $14.3 billion. The fund was established on March 26, 2008. The portfolio holds 2,336 stocks and offers a 30-day SEC yield of 1.72%. iShares MSCI ACWI ETF (NASDAQ:ACWI) primarily invests in the information technology, financial, healthcare, consumer discretionary, industrials, consumer staples, and communications sectors. It is one of the best ETFs for balanced exposure to international markets.
One of the top holdings of iShares MSCI ACWI ETF (NASDAQ:ACWI) is Amazon.com, Inc. (NASDAQ:AMZN), an American multinational technology conglomerate. On September 29, Citi analyst Ronald Josey reiterated a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) with a $185 price target, citing the company's refreshed device line-up which promotes its connected home vision. The analyst noted that Amazon.com, Inc. (NASDAQ:AMZN) remains his top pick with its Prime Early Access Sale ahead of the Holiday season, which boosts Prime member engagement, consistent Web Services growth, and progress on cost efficiencies.
Among the hedge funds tracked by Insider Monkey, 252 funds were long Amazon.com, Inc. (NASDAQ:AMZN) at the end of the second quarter of 2022, compared to 271 funds in the prior quarter. Jaime Sterne’s Skye Global Management is a significant position holder in the company, with 15.4 million shares worth $1.6 billion.
Here is what Lakehouse Capital specifically said about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) proved resilient in the face of ongoing macro pressures and delivered a strong quarterly result along with “better-than-feared” guidance for the third quarter. Net sales increased 7% year-on-year (10% constant currency) to $121.2 billion, while operating profit declined 57% to $3.3 billion. The drop in operating profit was attributable not only to external macro factors, such as elevated shipping and fuel costs, but also lower productivity and efficiency costs as a result of some overcapacity on the back of its recent investment cycle. It was pleasing to see that the company has begun to make progress on the more controllable costs, particularly productivity and staffing, with headcount, for example, down almost 100,000 over the quarter. We continue to believe Amazon is well positioned to manage these short-term issues and remains on track to deliver significant profit improvements over the next twelve months.
Management also confirmed that they have not seen any deterioration in Prime membership growth or retention following the 17% increase in Prime fees put through earlier in the year. This is not surprising to us, as in our view, the price increase was more than justified given the tremendous amount of customer value that has been added since the last price increase was implemented back in 2018, which includes the doubling of its fulfilment network and workforce, significant expansion of free same-day delivery and considerable investments in video and music content. Ultimately, we remain positive about Amazon’s future and believe that the company’s scale and market leadership will continue to drive growth for many years to come.”
6. iShares Core S&P U.S. Value ETF (NASDAQ:IUSV)
NAV as of September 30: $62.58
iShares Core S&P U.S. Value ETF (NASDAQ:IUSV) seeks to track the investment results of the S&P 900 Value Index, which comprises large- and mid-capitalization U.S. value stocks. As of September 30, iShares Core S&P U.S. Value ETF (NASDAQ:IUSV) has net assets of $10.7 billion. The 30-day SEC yield has remained 2.21% as of August 31, and the portfolio has 741 holdings. The expense ratio stood at 0.04%.
Berkshire Hathaway Inc. (NYSE:BRK-B) is the largest position in iShares Core S&P U.S. Value ETF (NASDAQ:IUSV)’s portfolio. Berkshire engages in insurance, freight rail transportation, and utility businesses worldwide. On September 21, Edward Jones analyst James Shanahan upgraded Berkshire Hathaway Inc. (NYSE:BRK-B) to Buy from Hold.
According to Insider Monkey’s data, 109 hedge funds were bullish on Berkshire Hathaway Inc. (NYSE:BRK-B) at the end of Q2 2022, compared to 104 funds in the last quarter. Michael Larson’s Bill & Melinda Gates Foundation Trust is the biggest position holder in the company, with 34.6 million shares valued at about $9.5 billion.
In addition to Johnson (NYSE:JNJ), ConocoPhillips (NYSE:COP), and UnitedHealth Group Incorporated (NYSE:UNH), Berkshire Hathaway Inc. (NYSE:BRK-B) is one of the stocks smart investors are monitoring in the current market environment.
Here is what Diamond Hill Large Cap Fund has to say about Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q1 2022 investor letter:
“Diversified holding company Berkshire Hathaway reported strong earnings during the quarter and benefited from continued share repurchases below intrinsic value. The company also announced significant deployments of excess cash during the quarter, including the acquisition of Alleghany and a large increase in its stake in Occidental Petroleum.”
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Disclosure: None. Top 10 ETFs For Beginners is originally published on Insider Monkey.