ETFs
3 ETFs that are crying out for purchases in May
Investments can be screaming buys for many different reasons. They may be seriously undervalued for no good reason. This may be a first bet on a promising long-term trend. Or maybe you’re considering something that still makes sense for a long-term investor: you might as well create an automated recurring purchasing plan for this one!
These “screaming buy” situations often apply to stocks, but also work for exchange-traded funds (ETFs). On that note, let me show you a trio of ETFs that are crying out to buy in May 2024 for a wide variety of reasons. I’ll start with one of these funds that’s considered a “set it and forget it” investment. Next, you’ll find two more ETFs with specific redemption catalysts at this very moment.
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Always a good idea: the Vanguard S&P 500 ETF
Let’s say you’re looking for a solid foundation for your long-term investments. You can build from this robust platform and add individual actions over time. It’s also a completely reasonable option to leave your entire nest egg in this meat-and-potatoes ETF for the long term. Why worry about beating the market when you can simply follow in Wall Street’s footsteps to the bank? After all, market-matching returns can generate breakthrough wealth over twenty years.
Many ETFs can fulfill this role by faithfully tracking a broad market index with minimal fees. On this score, you can’t go wrong with the classic Vanguard S&P 500 ETF (NYSEMKT:VOO).
This ETF reflects the returns of S&P500 (SNPINDEX: ^GSPC), stock index which constitutes the benchmark for measuring the overall performance of the American stock market. You can also choose an even broader index like the Russell 3000 or a more focused market barometer like the Dow Jones Industrial Average (DJINDICES: ^DJI), but there’s nothing wrong with the proven Wall Street favorite.
And Vanguard isn’t the only ETF manager in this space. THE SPDR S&P 500 ETF Trust (NYSEMKT: SPY) does the same thing, achieving extremely similar results. But why settle for the SPDR fund’s modest 0.09% annual expense ratio when you can rely on Vanguard’s commitment to ultra-low fees? The Vanguard version’s annual spending stops at just 0.03%.
So whether you’re new to investing in the stock market, looking for a reliable way to simply follow long-term market trends for wealth creation, or betting on a generally undervalued market without picking individual winners , the Vanguard S&P 500 ETF should be your next stop.
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A timely bet on the microchip sector: the SPDR S&P Semiconductor ETF
Semiconductors have made a splash in recent months. The artificial intelligence (AI) boom wouldn’t be possible without high-powered computer chips, and chipmakers with a proven role in an AI-driven future have seen their stocks soar.
But the rising tide of AI isn’t lifting all semiconductor boats. The S&P Semiconductors Select Industry Index has underperformed the S&P 500 since OpenAI introduced ChatGPT in 2022. If this sounds like a market mistake, but you’re not sure which semiconductor stocks are best positioned to rebound from today’s modest stock prices, you should consider SPDR S&P Semiconductor ETF (NYSEMKT:XSD).
The S&P 500 is weighted by market cap, giving large-cap stocks more power to move the market than their smaller counterparts. The Dow is weighted by stock prices, so more expensive components carry more weight in this system. The S&P Semiconductor Index follows a third path, starting with market capitalizations, but with a 4.5% limit on the weight of any specific stock symbol. The index is rebalanced to match this policy once per quarter.
The index was last rebalanced on March 17. About seven weeks later, the three largest components are analog chip designers. Semtechexpert in radio frequency identification (RFID) Impinjand solar panel manufacturer First solar. None of these stocks would be among the top 10 holdings in a price- or market-cap-weighted index, so the S&P’s sector-tracking index effectively gives extra weight to smaller names.
So, investing in ETFs is not always easy. You need to know what you’re buying and how that choice compares to alternatives. The SPDR S&P Semiconductor ETF’s chosen index has recently lagged other chip industry trackers, arguably setting it up for a robust long-term rebound. This ETF currently appears undervalued compared to its high-flying peers.
An early investment in cryptocurrencies: the Fidelity Wise Origin Bitcoin ETF
Spot price Bitcoin (CRYPTO: BTC) ETFs exist today. Integrating this new asset class into the simple and familiar investment processes of an ETF structure adds many useful features.
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You can invest in the future price performance of Bitcoin in the same account you use for stock trading.
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Institutional investors, IRA accounts, and some 401(k) retirement plans can access Bitcoin ETFs.
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Owning Bitcoin involves a whole host of tricky issues. Sticking to the ETF method allows you to avoid digital wallets, data hack issues, and having to move real dollars into the digital realm. These questions become the ETF manager’s problem.
So, if you’re eager to jump on the Bitcoin bandwagon but worried about the unusual complexity of the crypto market, a spot price Bitcoin ETF could be your next step. And maybe you’re already an experienced crypto owner with all the right accounts and expertise, but you want to add some Bitcoin exposure to your retirement account. Again, a Bitcoin ETF can help you.
Once again, you have several options with almost identical projects and perspectives. In January, when the new Bitcoin ETFs hit the market, many buying decisions had to end in a draw.
But it becomes easier to pick a favorite after a few months of live market movements. Of the 11 approved Bitcoin ETFs, only five manage more than $1 billion in Bitcoin assets. One has a significantly higher annual fee than the others, leaving four reasonable choices on the table:
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iShares Bitcoin Trust (NASDAQ: IBIT) is the largest remaining name with $17.2 billion in Bitcoin under management. Financial center black rock (NYSE: BLK) manages this ETF, adding another level of investor confidence.
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Fidelity Wise Origin Bitcoin Trust (NYSEMKT: FBTC) also comes from a respectable financial services provider, with a technical twist. Most Bitcoin ETFs rely on Coinbase (NASDAQ: COIN) to execute their Bitcoin transactions and configure their digital wallets. Fidelity prefers to manage its own digital assets and transactions. It is also very popular with $9.9 billion in Bitcoin assets already.
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ARK 21 shares Bitcoin Trust (NYSEMKT:ARKB) is quite similar to the iShares fund, but has a slightly lower annual fee. With $2.9 billion in Bitcoin assets, it operates under the wing of famous growth investor Cathie Wood.
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Last but not least, Bitwise Bitcoin ETF (NYSEMKT: BITB) has $2.2 billion worth of Bitcoin under its belt and the lowest annual fees of all. Bitwise also shares a portion of this ETF’s profits with the Bitcoin development community, so your investment in this fund helps the cryptocurrency in a small but important way.
Your mileage may vary, but I like Bitwise for its low fees and direct involvement in the Bitcoin community.
Bitcoin’s growing adoption and growing use as a store of value could drive its price higher in May 2024. The fourth halving event is expected to increase public interest and awareness while enforcing strict supply limits digital currency. The combination of these factors points to a potentially bright future for Bitcoin in the years to come.
But Bitcoin prices have faded recently, overtaken by economic worries and a sigh of exhaustion after halving. If you agree that Bitcoin is going to get back on the path to value creation again, this price drop looks like a fantastic buying opportunity. Choose your favorite Bitcoin ETF, like the Bitwise Bitcoin ETF, and get started.
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Anders Bylund has positions in Bitcoin, Bitwise Bitcoin ETF Trust, Coinbase Global and Vanguard S&P 500 ETF. The Motley Fool has positions and recommends Bitcoin ETFs, Coinbase Global and Vanguard S&P 500. The Motley Fool recommends First Solar and Impinj. The Mad Motley has a disclosure policy.
3 ETFs that are crying out for purchases in May was originally published by The Motley Fool