Investments can be screaming buys for many different reasons. They may be seriously undervalued for no good reason. Maybe it's an early bet of a promising long-term trend. Or perhaps you're looking at something that always makes sense to a long-term investor -- you might as well set up an automated dollar-cost averaging plan for this one!
These "screaming buy" situations are often applied to stocks but also work for exchange-traded funds (ETFs). On that note, let me show you a trio of ETFs that are screaming buys in May 2024 for widely varied reasons. I'll start with one of those funds considered a "set it and forget it" investment. Then, you'll find two more ETFs with buy-in catalysts specific to this moment in time.
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Always a good idea: The Vanguard S&P 500 ETF
Let's say you're looking for a robust foundation for your long-term investments. You can start from this robust platform and add individual stocks over time. It's also a perfectly reasonable option to leave your entire nest egg in this meat-and-potatoes ETF for the long haul. Why worry about beating the market when you can simply ride Wall Street's coattails all the way to the bank? After all, market-matching returns can deliver game-changing wealth over a couple of decades.
Many ETFs can play this role by faithfully tracking a broad market index with minimal fees. On that note, you can't go wrong with the classic Vanguard S&P 500 ETF (VOO 0.15%).
This ETF mirrors the returns of the S&P 500 (^GSPC 0.12%) market index, which is the gold standard for measuring the American stock market's overall performance. You could also pick an even broader index like the Russell 3000 or a more focused market barometer like the Dow Jones Industrial Average (^DJI 0.34%), but there's nothing wrong with the tried-and-true Wall Street favorite.
And Vanguard is not the only ETF manager in this space. The SPDR S&P 500 ETF Trust (SPY 0.14%) 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 lean on Vanguard's commitment to ultra-low fees? The Vanguard version's annual expenses stop at just 0.03%.
So, whether you're brand new to investing in the stock market, looking for a reliable way to simply follow along with the market's wealth-building long-term trends, or betting on a generally undervalued market without picking individual winners, the Vanguard S&P 500 ETF should be your next stop.
A timely bet on the microchip sector: The SPDR S&P Semiconductor ETF
Semiconductors have been a big story in recent months. The artificial intelligence (AI) boom wouldn't be possible without high-powered computer chips, and chipmakers with proven roles in an AI-driven future have seen their stocks skyrocket.
But the rising AI tide isn't lifting all semiconductor boats. The S&P Semiconductors Select Industry Index has underperformed the S&P 500 since OpenAI presented ChatGPT in 2022. If that looks like a market mistake, but you're not sure which semiconductor stocks are in the best position to surge from today's modest stock prices, you should consider the SPDR S&P Semiconductor ETF (XSD 0.06%).
The S&P 500 is weighted by market cap, giving large-cap stocks more market-moving muscle than their smaller peers. The Dow is weighted by stock price, so high-priced components carry more weight in that system. The S&P Semiconductor index goes a third way, starting with market caps but with a 4.5% limit on the weight of any specific stock ticker. 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 designer Semtech, radio-frequency ID (RFID) expert Impinj, and solar panel maker First Solar. None of these stocks would be among the top 10 holdings in an index weighted by price or market cap, so the S&P's industry-tracking index effectively gives smaller names some extra weight.
So, ETF investing isn't always drop-dead easy. You should know what you're buying and how that choice compares to alternatives. The SPDR S&P Semiconductor ETF's chosen index has trailed behind other chip-industry trackers recently, arguably setting it up for a robust rebound in the long run. This ETF looks undervalued next to its high-flying peers right now.
An early cryptocurrency investment: The Fidelity Wise Origin Bitcoin ETF
Spot-price Bitcoin (BTC -1.11%) ETFs are a thing nowadays. Wrapping this newfangled asset class into the simple and familiar investing processes of an ETF structure adds a bunch of helpful features.
- You can invest in Bitcoin's future price performance in the same account you use for stock trades.
- Institutional investors, IRA accounts, and some 401(k) retirement plans can access the Bitcoin ETFs.
- Owning Bitcoin involves a whole range of tricky wrinkles. Sticking with the ETF method lets you skip digital wallets, data-hacking concerns, and having to move real-world dollars into the digital realm. These issues become the ETF manager's problem.
So, if you've been itching to jump aboard the Bitcoin bandwagon but are worried about the crypto market's unfamiliar complexity, 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.
Once again, you have several options with nearly identical plans and prospects. Back in January, when the new Bitcoin ETFs originally hit the market, many buying decisions must have ended with a coin flip.
But it's getting easier to pick a favorite after a few months of live-action market movements. Out of the 11 approved Bitcoin ETFs, only five manage more than $1 billion of Bitcoin assets. One comes with significantly steeper annual fees than the rest, leaving four reasonable choices on the table:
- iShares Bitcoin Trust (IBIT 3.04%) is the largest remaining name with $17.2 billion of Bitcoin under management. Financial powerhouse BlackRock (NYSE: BLK) runs this ETF, adding another layer of investor trust.
- Fidelity Wise Origin Bitcoin Trust (FBTC 3.10%) also comes from a respectable provider of financial services, with a technical twist. Most Bitcoin ETFs rely on Coinbase (NASDAQ: COIN) services to execute their Bitcoin trades and set up their digital wallets. Fidelity prefers to manage its own digital assets and trades. It's also quite popular with $9.9 billion of Bitcoin assets already.
- ARK 21 Shares Bitcoin Trust (ARKB 2.94%) is quite similar to the iShares fund, but its annual fees are slightly lower. With $2.9 billion of Bitcoin holdings, this one runs under the wing of famed growth investor Cathie Wood.
- Last but not least, Bitwise Bitcoin ETF (BITB 3.07%) has $2.2 billion of Bitcoin under its belt and the lowest annual fees of all. Bitwise also shares some 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 increasing mainstream adoption and growing use as a store of value could drive its price higher in May 2024. The fourth halving event should raise public interest and awareness while enforcing the digital currency's strict supply-side limits. The combination of these factors suggests a potentially bright future for Bitcoin in the coming years.
But Bitcoin prices have swooned recently, caught up in economic concerns and a post-halving sigh of exhaustion. If you agree that Bitcoin will get back in its value-building saddle again, this price dip looks like a fantastic buying opportunity. Pick your favorite Bitcoin ETF, like the Bitwise Bitcoin ETF, and get started.
