1 week Ago
Exchange-traded funds (ETFs) are becoming increasingly popular with Stocks and Shares ISA investors. I own several to diversify my portfolio, a tactic that reduces risk gives me exposure to a broad range of investment opportunities. Here are three top funds I’ll buy for my ISA when I next have spare cash to invest.
Value Full disclosure. I opened a position in my first fund, the ( ), over the summer. I’m looking to increase my stake even further.
The fund’s delivered an average yearly return of 6% since it began a decade ago. This is a decent figure, although I think it could deliver a better return looking ahead given that demand for value stocks is gaining momentum. In total, Xtrackers ETF is invested in 400 large- and mid-cap companies based on a variety of classic value metrics.
These include forward and ratios. Major holdings here include tech shares , and . Around 40% of the fund’s tied up in US equities, which leaves it vulnerable to a potential Stateside recession.
But exposure to other territories like Japan and the UK helps to reduce this danger. Growth Since its creation in 2010, the ( ) has produced a tasty 18.5% average annual return.
That’s better than what the and have both delivered in that time. The fund’s star performance reflects its high exposure to fast-growth tech shares. Computer hardware and software, telecommunications, and e-commerce shares have risen sharply in value as our lives have been increasingly digitalised.
There seems to be a lot more scope for growth too, thanks to phenomena like artificial intelligence (AI), autonomous driving and quantum computing. This iShares fund has holdings in major players in these fields including , and . I am concerned about ETF’s high valuation however.
A meaty P/E ratio of 37.8 times leaves it vulnerable to a price correction if market confidence sours. That said, I still believe the potential long-term benefits still makes it worth a very close look.
Dividends The ‘s ( ) designed for those seeking reliable and growing dividends over time. And today, its dividend yield’s 3.5%, which is broadly in line with the average.
This fund focuses on high-yield European companies that’ve raised or held payouts for 10 successive years or more. Through a combination of steady passive income and share price gains, it’s delivered a solid average annual return of 8.1% since its inception in 2012.
In total, this SPDR fund holds 39 different stocks, of which its largest holdings are financial services providers , and . However, a large exposure to defensive industries like utilities and consumer staples helps it deliver decent returns even during economic downturns. I think it’s a great fund to consider, even if its denomination in euros leaves my returns vulnerable to exchange rate movements versus the pound.
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