5 top ETFs Fools own in their Stocks and Shares ISAs
Exchange-traded funds can prove useful for exposure to specific sectors or international indices, for example. Read on to find out the names of five that a handful of our free-site writers hold in their Stocks and Shares ISAs…
Invesco EQQQ Nasdaq 100
What it does: This ETF tracks the Nasdaq 100 index, which represents the largest 100 non-financial companies on the Nasdaq Stock Exchange.
By Harshil Patel. The Invesco EQQQ Nasdaq 100 ETF (LSE:EQQQ) might sound like a mouthful, but it offers a simple way to own the largest growth shares.
In fact, it’s one of the largest individual holdings in my Stocks and Shares ISA. In recent years, it has become dominated by the global tech giants.
25% of the fund is invested in Apple, Microsoft and Nvidia. A further 25% of the fund is invested in Amazon, Broadcom, Meta, Tesla, Costco and Alphabet.
I find this ETF an efficient and low-cost way to own these tech heavyweights.
Performance has been stellar in recent years. For instance, over the last five years it gained 125%. And over the past decade, it’s up by a whopping 460%.
This far exceeds that of the S&P 500 and FTSE 100.
But note that returns in the Nasdaq 100 can be more volatile. In the most recent downturn in 2022, it fell by 26% vs a 10% decline in the S&P 500.
Harshil Patel owns shares in Invesco EQQQ Nasdaq 100 ETF .
iShares Core EURO STOXX 50 EUR
What it does: the ETF tracks the performance of a diversified index made up of the 50 largest companies in Europe
By Gordon Best. I’m a big fan of investing in markets which may be undervalued. Europe has stood out to me in recent years as a region with plenty of uncertainty, but just as much quality too. iShares Core EURO STOXX 50 EUR (LSE:EUE) tracks 50 of the largest stocks across the Eurozone. It offers diversification across various sectors, including financials, consumer goods, and technology.
Of course, the European market maybe isn’t quite as dynamic as many companies in the US, but with very solid growth numbers, and experienced management, it could well capitalise on the same trends. With specialist semiconductor companies like ASML, the same growth as US companies could be seen, but as a much more reasonable valuation.
I do have some concerns though. A strong Dollar can severely impact European companies operating in other currencies, plus there is a constant risk from geopolitical escalation as the conflict in Ukraine continues.
Gordon Best owns shares in iShares Core EURO STOXX 50 EUR.
iShares Edge MSCI World Quality Factor ETF
What it does: The iShares Edge MSCI World Quality Factor ETF seeks to track the performance of an index composed of stocks with strong and stable earnings.
By Paul Summers. To say that I like the iShares Edge MSCI World Quality Factor ETF (LSE: IWFQ) is putting it mildly. It’s easily the biggest holding in my Stocks and Shares ISA.
With a portfolio including the usual tech suspects as well as pharma giant Novo Nordisk, this $4bn passive vehicle has returned almost 80% in the last 5 years (at the time of writing).
The ETF focuses only on ‘quality’ stocks with track records of high returns on equity, stable earnings growth and sound finances. In other words, it avoids owning the dross.
None of this comes free but the ongoing charge of 0.3% is reasonable compared to actively-managed funds with the same objective.
My only real concern is that 70% of the portfolio is devoted to US stocks. With the election coming next month, there could be a bit of volatility on the cards.
Paul Summers owns shares in iShares Edge MSCI World Quality Factor ETF.
L&G Cyber Security UCITS ETF
What it does: L&G Cyber Security ETF is made up of cybersecurity stocks and tracks the ISE Cyber Security UCITS Index.
By Ben McPoland. Warren Buffett said something really interesting a few months ago. He predicted that AI-enabled scamming is going to be “the growth industry of all time“.
I think he’s right. As well as tricking people, AI can be used to create malware that adapts its behaviour to avoid detection by traditional antivirus software.
This is partly why I have the L&G Cyber Security ETF (LSE: ISPY) in my ISA. The ETF holds a basket of cybersecurity giants, including Palo Alto Networks and CrowdStrike.
Barely a week goes by nowadays without some major hacking incident. So this investment offers me thematic exposure to an industry that research firm McKinsey thinks could one day be worth $1.5trn.
Naturally, the ETF is closely tied to the performance of certain cybersecurity companies. These may face hacks, innovation challenges, or competitive pressures.
But since launch in 2015, the share price is up around 150%. I expect it to continue climbing over time as earnings in the cybersecurity sector grow.
Ben McPoland owns shares in CrowdStrike and L&G Cyber Security UCITS ETF.
VanEck Semiconductor ETF
What it does: The ETF invests in the 25 largest US-listed companies producing semiconductors, or semiconductor equipment.
By Dr James Fox. The semiconductor sector is fast-moving with consistent technological developments and innovation cycles. In fact, this fast-paced environment can make it challenging for shareholders to stay updated on the latest developments and trends.
So, while I do invest in individual semiconductor stocks, an ETF which invests in the 25 largest US-listed companies producing semiconductors, or semiconductor equipment allows me to spread risk and hedge my bets.
The VanEck Semiconductor ETF (NASDAQ:SMH) has performed very well in recent years, up 46% over 12 months and 269% over five years. However, potential investors may be intrigued to see that the share price has pulled back in recent months.
This does create an interesting entry point, but also reflects the constantly shifting sentiment relating to artificial intelligence and data centres – these sectors have driven demand for high-end chips over the past 18 months – which may represent a risk.
Personally, I’m looking beyond the near-term volatility and thinking about where this stock could be in a decade as our economies become increasingly reliant on semiconductor technology.
James Fox owns shares in VanEck Semiconductor ETF
The post 5 top ETFs Fools own in their Stocks and Shares ISAs appeared first on The Motley Fool UK.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended ASML, Alphabet, Amazon, Apple, CrowdStrike, Microsoft, Nvidia, Palo Alto Networks, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2024