ETFs
2 Top ETFs to Buy Now That Could Help You Prepare for Life
These two Vanguard funds are about to take off.
Well-chosen exchange traded funds (AND F) can help you make huge profits in the stock market. But these funds can be even more lucrative if you can buy them before a powerful catalyst sends their shares soaring.
For example, real estate and small caps have always been excellent long-term investments. That should remain true for many years to come. And now may be a particularly good time to invest in these wealth-building asset classes. Here’s why.
Why You Should Invest in Real Estate
Stubbornly high inflation and the Federal Reserve’s efforts to control it have taken a heavy toll on the residential and commercial real estate sectors. But with rising prices finally easing, the Fed may soon be able to reverse its interest rate hikes. The $120 trillion U.S. housing market could be on the verge of its long-awaited rebound.
Rate cuts typically translate into lower mortgage rates, making home ownership more affordable. At the same time, lower financing costs make it easier for businesses to expand. Lower borrowing costs also tend to make real estate investments more profitable.
THE Vanguard Real Estate Exchange Traded Fund (VNQ -0.94%) offers investors a simple way to take advantage of this rise. The fund holds stakes in more than 150 real estate companies. Many of these companies could see their profits soar if interest rates fall.
The ETF focuses on real estate investment trusts (FPI) who purchase and hold commercial or residential properties. Examples include industrial sites, data centers, office buildings, healthcare facilities, retail stores, telecommunications towers, apartments, and storage units. Prologis, Digital Real Estate Trust, Simon Real Estate Group, Well tower, Real estate income, American TowerAnd Public storage are among the fund’s main holdings.
REITs must pay out at least 90% of their profits to shareholders in dividends each year. The Vanguard Real Estate ETF’s dividend yield, meanwhile, currently stands at about 3%. These quarterly cash payments could provide you with a reliable source of passive income.
Additionally, the ETF has a modest value expense ratio of 0.13%, which equates to $1.30 for every $1,000 invested annually. The fund also has a minimum investment of just $1, so you don’t need a lot of money to get started.
Why You Can Expect Big Returns on Small Business Investment
Rate cuts could also boost earnings small cork And average capitalization businesses, which often rely on borrowed money to expand their operations. Vanguard Russell 2000 Exchange Traded Fund (ETF) (VTWO -0.80%) is a great way to own a piece of these lucrative asset classes.
As of May 31, Vanguard’s ETF held positions in nearly 2,000 small- and mid-cap stocks. These companies are growing their earnings at an impressive annual rate of 16% on average.
Better still, the fund’s securities are attractively valued, with an average price/earnings ratio (Price-earnings ratio) of 16.2. This places the ETF’s price-to-earnings-to-growth ratio (ANKLE) a ratio slightly above 1. Investing in growing companies at such reasonable valuations should put you in a strong position for wealth-generating returns.
The ETF’s annual expense ratio of just 0.1% means that nearly all of the potential gains go into your investment account rather than the fund company’s coffers. And like the Vanguard Real Estate ETF, the Vanguard Russell 2000 ETF’s minimum investment of just $1 makes it accessible to nearly any investor.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Tower, Digital Realty Trust, Prologis, Realty Income, and Vanguard Real Estate ETF. The Motley Fool recommends Simon Property Group and recommends the following options: long January 2026 $180 calls on American Tower, long January 2026 $90 calls on Prologis, and short January 2026 $185 calls on American Tower. The Motley Fool has a position in American Tower, Digital Realty Trust, Prologis, Realty Income, and Vanguard Real Estate ETF. disclosure policy.