If you are an investor who is looking for diversification, ETFs are the best options for you. These exchange-traded funds hold stocks from diverse sectors and hence offer you the best risk balance. Some of the ETFs target only the big names in certain sectors in order to provide 100 percent returns to shareholders. As an investor, you must choose such ETFs that are rated highly by investment analysts and those that hold the creamy stocks of a particular sector. This way, you can protect yourself from the volatility in the stock market. As per Zacks investment agency, the following ETFs are considered the best choices of investment now, as their prices are trading far lower than their potential.
Reap the benefits of the ripe technology sector
Information technology sector is one of the most sought after sectors in the market today. It is also one of the most successful ones currently. If you are looking for good returns from this sector and are in double minds about investing in any one single stock, you can opt to invest in the Vanguard Information Technology ETF (VGT, Financial). As the name indicates, this ETF invests in only technology companies. Currently, this fund invests in close to 393 technology stocks. Some of the top holdings of the fund are technology giants like Apple (AAPL, Financial) at 16.8%, Microsoft (MSFT, Financial) at 7% and Google (GOOG, Financial) at 7%. The best part of this fund is that, it invests in stocks that are into various kinds of businesses like Technology hardware and storage (21.8%), Internet software and services (16.7%), data processing and outsourcing (10.2%), communications equipment (7.9%), IT consulting (6.4%) and application software (5.5%). The other sectors that the fund invests in small numbers are electronic components, electronic manufacturing, home entertainment software, semiconductors and technology distributors. With an asset base of $7.2billion and an expense ratio of 0.12, this fund is ranked No.1 by Zacks, which means this fund is a “strong buy”. The share price trend of the fund for the last year is as follows:
Good spread of consumer stocks
The next fund that is ranked No.1 by Zacks is the one that invests in stocks from the consumer products sector. This includes retail, electronics, home furnishings and the like. We are talking about the First Trust Consumer Discretionary AlphaDEX ETF (FXD, Financial). The fund is exposed to a very reasonable amount of risk, has an asset base worth $2.3bilion and an expense ratio of 0.70. At present, the fund has its stakes in about 132 top stocks which includes some top names like Graham Holdings (GHC, Financial) at 1.49%, GameStop Corporation (GME, Financial) at 1.47%, and Dollar Tree Incorporation (DLTR, Financial) at 1.41%. Some of the top sectors that this fund chooses its stocks from are speciality retail (31.94%), restaurants (10.48%), consumer durables (10.42%), media (10.39%), multi-line retail (9.41%) and textiles (5.23%). Stocks from sectors like automobiles, diversified consumer services, food retailing and auto components too make up for a smaller portion of the fund. The share price trend of the fund for the last one year is as follows:
Conclusion
The ETFs mentioned above are being advised as strong buys by Zacks, because they have immense growth potential in the coming years. Their prices are currently quite attractive when compared to the market anticipations of their growth rates. The next important factor that will be pivotal for the phenomenal growth of these funds in the future is the sector that they specialise in. Information technology and speciality retail are two hot sectors right now with great promises for the future. This fund has invested in the best of stocks from these sectors; hence investors can be assured of great returns in the coming years.
