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Top ETFs

By Capital.com News

16:23, 8 July 2024

ETFs, or exchange-traded funds, offer traders a versatile gateway into the financial markets. These ‘baskets’ of assets – traded on-exchange, like shares – track an entire index, sector, commodity, or other financial market. As a result, they enable traders to gain exposure to multiple assets in a single trade. 

The thousands of ETFs available globally track everything from the sprawling US stock market to niche technological advancements. The appeal of ETFs lies not only in this wide scope, but also the efficient diversification they can offer. 

Traditionally, a trader would have to take a position on multiple markets to diversify their portfolio. Using ETFs, you can diversify in a single trade. This also tends to help traders keep commissions and other charges down, though that varies by broker. 

Of course, finding the best ETFs to trade will vary depending on your goals, available capital, risk appetite, and a range of other factors. Here, we look at five well-known ETF markets – but remember, past performance does not guarantee future results, and you should do your own research before trading. 

Vanguard Total Stock Market ETF

By tracking the CRSP US Total Market Index, the Vanguard Total Stock Market ETF (VTI) provides exposure to the entire US equity market – including small-, mid-, and large-cap growth and value stocks.

The range of industries it encompasses can make the VTI a strong cornerstone for a diversified portfolio in a single fund. The breadth of the ETF's holdings ensures participants gain exposure to the whole market – streamlining the investment process while aiming for the total market's returns.

However, since the index that the VTI tracks is capitalisation-weighted, its large-cap stocks have a more significant impact on its performance than their smaller-cap cousins. This concentration can result in fewer diversification benefits from the smaller segments of the market, which sometimes offer higher growth potential.

The VTI includes leading US companies Berkshire Hathaway, Johnson and Johnson and Visa among its constituents, and so reflects the performance of the US economy at large. 

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Invesco QQQ Trust

The Invesco QQQ Trust is a widely recognised ETF that mirrors the performance of the US Tech 100 Index

The Invesco QQQ Trust offers traders targeted access to large-cap technology and innovation-driven companies. This includes key constituents like Apple, Amazon, Microsoft, and Alphabet (Google), making Invesco QQQ Trust a popular choice for those looking to capitalise on the growth of the technology sector and its leading players.

A potential disadvantage, however, is its heavy concentration in a single area. This can lead to higher volatility and risk, especially during market downturns in the tech industry.

Vanguard FTSE Developed Markets ETF

The Vanguard FTSE Developed Markets ETF (VEA) offers exposure to a wide array of stocks across developed markets outside of the United States, including Europe, Canada, Japan, and Australia. 

US100

19,526.60 Price
-1.140% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 7.0

ETH/USD

3,500.61 Price
-0.620% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

Gold

2,401.36 Price
-1.830% 1D Chg, %
Long position overnight fee -0.0198%
Short position overnight fee 0.0116%
Overnight fee time 21:00 (UTC)
Spread 1.20

XRP/USD

0.59 Price
-1.950% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

By tracking the FTSE Developed All Cap ex US Index, the VEA enables traders to diversify their portfolio internationally with a single investment. Traders use the ETF in an attempt to access potential growth and stability in developed markets, and to mitigate the volatility associated with single-market investments.

That said, the ETF does create exposure to currency risk, where fluctuations in exchange rates can affect returns for US traders. 

Constituents of the VEA include well-known companies like Nestle, Samsung and Toyota, representing a broad range of sectors from consumer goods to technology and automotive.

iShares Core MSCI Emerging Markets ETF

The iShares Core MSCI Emerging Markets ETF (IEMG) is designed to track the results of the MSCI Emerging Markets Investable Market Index, composed of large-, mid-, and small-cap emerging market equities. The ETF offers broad exposure to emerging market stocks in developing economies like Asia, Latin America, and Africa.

Some traders use the IEMG to diversify internationally with a focus on emerging markets, which may offer higher growth potential compared to developed markets. This can be an attractive proposition for those looking to increase their portfolio's risk-reward profile.

However, investing in emerging markets comes with increased volatility and risk due to factors like political instability, currency fluctuations and lower liquidity.

IEMG’s constituents span a diverse range of companies and sectors, including tech giants like Taiwan Semiconductor Manufacturing, e-commerce leader Alibaba and telecommunications company Tencent. This offers a reasonably comprehensive look into the financial landscape of the geographies covered by the ETF.

The Vanguard Total Bond Market ETF 

The Vanguard Total Bond Market ETF (BND) is a fixed-income ETF that seeks to track the performance of the Bloomberg US Aggregate Float Adjusted Index. It provides broad exposure to US investment-grade bonds, spanning government, corporate, and municipal debt, as well as mortgage-backed securities.

Traders and investors use the BND for its diversification benefits – its broad exposure makes it a cornerstone for conservative investment strategies focused on capital preservation.

However, like all bond investments, BND is subject to interest rate risk; its value may decline as interest rates rise. Additionally, being focused on investment-grade bonds, it may offer lower yields compared to high-yield bonds.

The ETF’s constituents cover a broad array of issuers, including US Treasury bonds, government agency bonds, corporate bonds from leading companies, and mortgage-backed securities – it represents the entirety of the US investment-grade bond market.

FAQs

What are the top-performing ETFs?

To identify the ‘top-performing’ ETFs you need to examine a range of metrics like return on investment across your preferred time frame, liquidity, and volatility – and these will be constantly changing based on market factors. 

We encourage you to conduct thorough research and consider your financial goals, risk tolerance and external market trends before trading an ETF. Given the multitude of strategies and sectors in the ETF universe, the best fit for one trader may not suit another. 

How can I trade top-performing ETFs?

To trade on top-performing ETFs, you first need to conduct thorough research to determine whether or not they’re a suitable product for you. You’ll also want to consider things like your trading strategy ahead of time. 

Once you’re happy that trading ETFs will help you meet your trading goals, you then find a broker that offers them – whether directly or via a derivative. 

You can trade ETFs and a range of other markets on our platform, using CFDs or spread betting. Since derivatives like this offer access to leverage, which can magnify your gains and losses, it’s important to learn about these products before opening an account. Luckily, you can find out more with our in-depth market guides.

Markets in this article

BABA
Alibaba Group Holding Limited (Extended Hours)
75.47 USD
-1.24 -1.620%
GOOGL
Alphabet Inc - A (Extended Hours)
177.97 USD
-0.32 -0.180%
AMZN
Amazon.com Inc (Extended Hours)
182.84 USD
-1.65 -0.900%
AAPL
Apple Inc (Extended Hours)
224.55 USD
-0.28 -0.120%
BRKb
Berkshire Hathaway
434.80 USD
-7.03 -1.590%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

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