Down, down, down. That was the story last year. Stocks fell. Bonds fell. And so did the exchange-traded funds (ETFs) that held positions in either of the two assets.
But we're now in a new year with new opportunities. Here are three unstoppable ETFs to stock up on in 2023.
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1. Vanguard Long-Term Bond ETF
Bonds could be a better investment in 2023 than they were in 2022. That might especially be true for the first half of the year. Bank of America predicts that bonds should perform well in the first six months of 2023 as inflation and interest rates peak.
The Vanguard Long-Term Bond ETF (BLV -0.50%) appears to be a smart way to play a potential bond boom. Its 30-day SEC yield (which gives the best picture of the current yield) tops 4.8%.
This ETF is relatively low risk. It owns over 2,900 long-term bonds. All of them are investment-grade. More than 44% are U.S. government bonds, which are about as safe as they come. The Vanguard Long-Term Bond ETF is also an inexpensive way to dip your toes into the bond waters with its super-low expense ratio of 0.04%.
Over the long term, stocks are likely to outperform bonds and bond ETFs such as this one. However, the prospects for the Vanguard Long-Term Bond ETF in 2023 appear to be pretty good.
2. Vanguard Small-Cap Value ETF
Several Wall Street analysts think that the stock market could rebound in the second half of 2023. If they're right, a new bull market could be on the way later in the year. The best time to invest in small-cap stocks is during the early stages of a young bull market. Until that happens, though, value stocks are likely to perform better.
The Vanguard Small-Cap Value ETF (VBR -0.66%) gives you a way to split the difference. This ETF, as its name indicates, focuses on small-cap stocks with attractive valuations.
Small-cap stocks tend to be more volatile than large-cap stocks. However, the Vanguard Small-Cap Value ETF allows you to buy more than 880 small-cap value stocks in one fell swoop. And you can do so without spending too much for the privilege thanks to the ETF's low expense ratio of 0.07%.
This ETF is also one that you can buy and hold for well beyond 2023. Small-cap value stocks have historically outperformed the S&P 500 over the long term.
3. SPDR S&P Biotech ETF
Geneticists Craig Venter and Daniel Cohen believe that the 21st century will be the "century of biology." With the major advances in gene editing, immunotherapies, and other areas in the last few years, they're probably right.
Picking individual biotech stocks comes with a high level of risk. The SPDR S&P Biotech ETF (XBI -2.05%), though, enables investors to buy a basket of more than 150 biotech stocks. While its expense ratio of 0.35% is higher than those of the two Vanguard ETFs on our list, it's nonetheless a cost-effective way to invest in the biotech industry.
The SPDR S&P Biotech ETF has performed dismally over the last two years. It plunged more than 20% in both 2021 and 2022. However, biotech stocks are poised for a big comeback -- and so is this ETF.
There's no guarantee that this rebound will come this year, but it could. Even if not, the SPDR S&P Biotech ETF is likely to deliver exceptional returns over the next decade as we move farther into what truly should be the century of biology.
