Buying ETFs is a great way to build a diversified investment portfolio. They can provide broad diversification to an asset class, sector, theme, or investment style. That can help enhance your returns while lowering your risk profile.
Here are three top ETFs to buy this June that you won't regret owning in the coming years.
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Schwab U.S. Dividend Equity ETF
Dividend stocks have historically been exceptional investments. Over the last 50 years, dividend-paying stocks in the S&P 500 have delivered more than double the return of non-payers (9.2% average annual return compared to 4.2%, according to data from Ned Davis Research and Hartford Funds). They have delivered that higher return with less volatility.
The Schwab U.S. Dividend Equity ETF (SCHD 0.50%) is one of the best ETFs focused on dividend stocks. It tracks the Dow Jones U.S. Dividend 100 Index, which measures the performance of 100 high-quality, high-yielding dividend stocks. The index screens companies based on several dividend-quality characteristics, including dividend yield and the five-year dividend growth rate. That dual focus on yield and growth is noteworthy as dividend growers have delivered the highest total returns among stocks by dividend policy (10.2% annualized).
NYSEMKT: SCHD
Key Data Points
The Schwab U.S. Dividend Equity ETF has a 3.3% dividend yield based on its payments over the last 12 months. That's triple the S&P 500's current 1.1% dividend yield. Meanwhile, its 100 holdings have grown their payouts by more than 9% annually over the last five years. The fund's combination of yield and growth has enabled it to deliver strong total annual returns of 13.3% since its inception in 2011. Given its focus on dividend growers, the fund should continue to deliver a growing income stream and strong total returns, with lower volatility levels.
Vanguard Total Bond Market ETF
Bonds play an integral role in helping reduce a portfolio's risk profile. They provide a fixed-income stream that can help smooth out your portfolio's return over the long term. While bonds will lower overall returns compared to a portfolio with 100% stocks, they can also significantly reduce volatility and overall losses during a bad year in the stock market.
The Vanguard Total Bond Market ETF (BND +0.05%) is one of the largest bond ETFs. It provides broad exposure to the entire U.S. dollar-denominated bond market, excluding inflation-protected and tax-exempt bonds. The ETF delivers income and helps reduce a portfolio's risk profile.
NASDAQ: BND
Key Data Points
The ETF holds nearly 11,400 high-quality bonds. U.S. government bonds comprise nearly 70% of its portfolio, while investment-grade corporate and foreign bonds account for the remainder. The Vanguard Total Bond Market ETF currently has an average yield to maturity of 4.6% with an average effective maturity of more than eight years. As a result, it should provide investors with a rather steady stream of interest income.
Vanguard Utilities ETF
Utility stocks have historically delivered bond-like income streams and lower volatility due to their slower growth profiles. While they should continue to provide income and less volatile returns in the future, utility growth rates are accelerating due to surging electricity demand from AI data centers. U.S. power demand is on track to grow 60% over the next 20 years, six times faster than it grew over the last two decades.
The Vanguard Utilities ETF (VPU 0.44%) is one of the best ways to invest in the sector's growth resurgence. The fund invests broadly in the U.S. utility sector. It currently holds 67 utility stocks, led by NextEra Energy (NEE +0.11%), which accounts for 12.6% of its holdings.
NYSEMKT: VPU
Key Data Points
NextEra Energy is playing a leading role in supporting the country's AI power surge. It recently agreed to buy fellow utility Dominion (the ETF's seventh largest holding at 3.4% of its portfolio) in a $67 billion deal. It will create the world's largest regulated electric utility business, with operations focused on several of the country's fastest-growing states. The combined company expects to deliver more than 9% annual earnings per share growth through 2032, a rapid growth rate for a utility. The Vanguard Utilities ETF will benefit from accelerating growth in the utility sector, positioning it to deliver powerful total returns going forward.
Ideal ETFs to buy this month
The Schwab U.S. Dividend Equity ETF, Vanguard Total Bond Market ETF, and Vanguard Utilities ETF can help diversify your portfolio, reduce your risk profile, and enhance your returns over the long term. Those features make them great ETFs to buy this June, a decision you're unlikely to regret.
