Exchange-traded funds (ETFs) are great tools for investing in the stock market. ETFs offer broad diversification to different sectors of the economy, and a few well-chosen funds can be all the diversification you need to safely grow your money over the long term. Here are two ETFs that could be timely buys right now.
1. Vanguard Real Estate ETF
The U.S. real estate market is valued at $136 trillion, according to Statista. The Vanguard Real Estate ETF (VNQ 0.66%) is a relatively low-risk way to profit from this massive industry, and now could be a timely opportunity to invest.
The Vanguard Real Estate ETF holds a diversified portfolio of 158 positions in real estate investment trusts (REITs) that specialize in commercial properties. REITs are required to distribute at least 90% of their taxable income to shareholders in dividends, which is an attractive feature of this ETF.
The fund passes on the dividends from its REIT holdings to shareholders, and it's currently paying a high trailing dividend yield of 3.75%. These payouts come from a diverse range of real estate properties, including office buildings, hotels, retail locations, and data center sites.
Here are the top 10 holdings in the fund as of Dec. 31, 2024, and their percentage weighting:
- Vanguard Real Estate II Index Fund Institutional Plus (13.94%)
- Prologis (5.84%)
- Equinix (5.19%)
- American Tower (5.11%)
- Welltower (4.55%)
- Digital Realty Trust (3.46%)
- Simon Property Group (3.35%)
- Public Storage (2.81%)
- Realty Income (2.77%)
- CBRE Group Class A (2.40%)
Demand for real estate often rises with lower interest rates and plummets when interest rates spike. Higher interest rates make loans more expensive, which puts downward pressure on real estate values. But with long-term borrowing rates starting to level out, demand is returning to the market.
The National Association of Realtors reported that nearly 90% of metro areas registered home price increases in the fourth quarter. Even though the Vanguard ETF is focused on the commercial side, rising home prices bode well for the general direction of property values.
This ETF has a low expense ratio of 0.13%, which means an investor will incur a fee of only $1.30 per year for every $1,000 invested. With the real estate market showing signs of rebounding, this is a great time to consider buying shares of the Vanguard Real Estate ETF for capital appreciation potential and dividend income.
2. KraneShares CSI China Internet ETF
Warren Buffett became a billionaire by spotting value that others missed. Buying shares of strong companies when they are trading at low discounted valuations can set you up for tremendous returns, and there is currently a fire sale in China.
Fear of a slow economic recovery in that country has sent shares of its leading tech companies to incredibly low valuations. The KraneShares CSI China Internet ETF (KWEB 1.49%) is a great way to invest in these stocks before they rebound.
Here are the top 10 holdings in the fund as of Feb. 10 and their percentage weighting:
- Alibaba Group (10.44%)
- Tencent Holdings (9.96%)
- Meituan (7.26%)
- PDD Holdings (7.09%)
- Trip.com Group (5.38%)
- Netease (4.18%)
- Full Truck Alliance (4.07%)
- JD.com (4.05%)
- Kanzhun (3.88%)
- Baidu (3.85%)
These stocks have forward price-to-earnings ratios ranging from 9 to 19, yet the average earnings growth estimate on Wall Street ranges from 4% to 30%.
One reason to expect these companies to flourish over the long term is China's growing middle class. One quarter of the global middle class population will reside in China by 2027, according to Brookings, which provides a major tailwind for leading Chinese retailers. Revenue in the country's e-commerce market is valued at $1.3 trillion, according to Statista, and is expected to grow over 7% per year through 2029.
U.S. tariffs on imports from China could create more uncertainty for an economic recovery in the near term, but the government has implemented various measures to stimulate economic growth recently. The low valuations for these stocks already account for weak business performance, which provides investors an attractive risk-reward ratio.
The fund has risen 35% over the last year and could hit more new highs in 2025. Its expense ratio of 0.70% brings the annual cost to $7 for every $1,000 invested.
