Which ETF is Best to Buy Now?

In 2024, with markets constantly evolving, picking the right ETF (Exchange-Traded Fund) is more critical than ever. What if I told you the answer isn't about merely tracking the best-performing ETF last year? It's about looking at emerging trends, understanding economic shifts, and betting on the future rather than the past.

Here's the twist — the best ETF to buy right now may not even be on your radar. In fact, the top contenders span diverse sectors, from clean energy and AI to health tech and infrastructure. These are the ETFs that are not just chasing gains but poised to redefine the market's future. Let’s dive deeper.

Why ETFs Over Stocks?

Before we talk specifics, it’s crucial to understand why ETFs are increasingly favored. ETFs combine the ease of stock trading with the benefits of diversification found in mutual funds. Unlike stocks, which rely on the performance of a single company, ETFs spread risk across multiple entities within a sector, index, or theme. Think of them as a buffet – you’re not betting on just one dish; you're getting a sample of everything.

But not all ETFs are created equal. Choosing the right one hinges on understanding:

1. Expense Ratios: The lower, the better.
2. Assets Under Management (AUM): Bigger funds are generally more stable.
3. Tracking Error: How well does the ETF follow its index?
4. Market Trends: What’s hot now and what will stay relevant?

Top ETFs of 2024 and Beyond

Let’s look at some of the ETFs that are creating a buzz in 2024.

1. Vanguard Information Technology ETF (VGT)

The Vanguard Information Technology ETF, or VGT, is one of the most popular technology ETFs. As we head deeper into the AI and tech revolution, VGT provides exposure to companies like Apple, Microsoft, and NVIDIA. These companies aren’t just shaping the present but are fundamentally altering the future.

• Expense Ratio: 0.10%
• Why it’s hot: AI and cloud computing are booming sectors.
• Risk factor: Concentrated in tech, so volatility is higher.

2. iShares MSCI Emerging Markets ETF (EEM)

Emerging markets are seeing a comeback. Countries like India and Brazil are positioning themselves as the next global economic powerhouses. EEM provides exposure to a diversified group of companies in emerging economies, making it a great pick for investors looking to tap into global growth.

• Expense Ratio: 0.68%
• Why it’s hot: As the U.S. slows, emerging markets have room for explosive growth.
• Risk factor: Currency fluctuations and political instability.

3. Global X Lithium & Battery Tech ETF (LIT)

With electric vehicles (EVs) going mainstream, lithium and battery tech ETFs are on fire. The LIT ETF gives you direct access to the companies behind the lithium and battery technology powering the EV revolution.

• Expense Ratio: 0.75%
• Why it’s hot: EV sales are expected to rise exponentially in the coming decade.
• Risk factor: Battery tech is evolving, and some companies might get left behind.

4. Invesco Solar ETF (TAN)

If you’re looking for an ETF that aligns with the green energy movement, TAN is a top choice. Solar energy has experienced rapid growth, with countries all over the world investing in solar infrastructure. This ETF provides access to companies that are at the forefront of solar power innovation.

• Expense Ratio: 0.69%
• Why it’s hot: Governments globally are pushing renewable energy.
• Risk factor: Solar tech is subject to market saturation and technological competition.

5. ARK Innovation ETF (ARKK)

Cathie Wood’s ARK Innovation ETF is known for its focus on disruptive technologies. If you believe in the future of biotech, genomics, and AI, ARKK might be the ETF for you. ARK funds often experience higher volatility due to their high concentration in speculative industries, but the long-term potential is enormous.

• Expense Ratio: 0.75%
• Why it’s hot: Disruptive tech companies are at the center of the next industrial revolution.
• Risk factor: High volatility and speculative focus.

Thematic ETFs: Betting on the Future

Thematic ETFs are quickly gaining traction because they allow investors to bet on future trends. Imagine investing in an ETF dedicated to the metaverse or clean water technologies—not just hyped ideas but sectors with growing market share.

For instance, Roundhill Ball Metaverse ETF (META) focuses on companies contributing to the development of the metaverse. Meanwhile, Invesco Water Resources ETF (PHO) offers exposure to companies that innovate in water technology, which is likely to become more essential as water scarcity increases worldwide.

The Case for Broad Market ETFs

While thematic ETFs are exciting, you might want something more stable. Broad market ETFs provide exposure to hundreds or even thousands of companies. These are generally lower risk but still offer substantial returns over the long term.

1. Vanguard Total Stock Market ETF (VTI)

If you want exposure to the entire U.S. stock market, VTI is a fantastic option. It offers a mix of large, mid, and small-cap stocks, providing broad diversification across various industries. VTI has a very low expense ratio, making it a favorite for long-term investors.

• Expense Ratio: 0.03%
• Why it’s hot: Broad exposure and low cost make it perfect for passive investors.
• Risk factor: U.S.-centric focus, subject to the performance of the U.S. economy.

2. SPDR S&P 500 ETF Trust (SPY)

The SPY is the oldest ETF, and it’s still one of the best. It tracks the S&P 500, which includes 500 of the largest U.S. companies. This ETF has been a staple in portfolios for decades and continues to deliver solid returns.

• Expense Ratio: 0.09%
• Why it’s hot: Exposure to top-performing U.S. companies.
• Risk factor: Focus on large-cap U.S. companies might limit growth opportunities.

The Power of Sector Rotation ETFs

Another strategy gaining steam is sector rotation, where investors shift money between sectors based on economic cycles. ETFs focused on this strategy tend to perform well during market shifts.

For example, Fidelity MSCI Consumer Staples Index ETF (FSTA) has been performing well due to increased spending on essential goods during inflationary times. Similarly, Financial Select Sector SPDR Fund (XLF) is another ETF benefiting from rising interest rates, as financial institutions are poised to profit.

Final Thoughts: Building a Balanced Portfolio

The key to ETF investing is diversification. You don’t want to put all your eggs in one basket, so it’s wise to invest in a mix of broad market, sector-specific, and thematic ETFs. The best ETF to buy now depends on your financial goals, risk tolerance, and time horizon.

In 2024, whether you believe in the power of AI, the potential of emerging markets, or the long-term growth of U.S. stocks, there’s an ETF for you. The real question is: what future do you believe in, and how can you capitalize on it?

So, what are you waiting for?

The market’s next big opportunity is out there, and the right ETF could be your ticket to significant gains.