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This article reviews 7 of the best ETFs that can help you get closer to your investing goals. Here are the seven best ETFs to buy right now:
- Invesco QQQ ETF (QQQ)
- Vanguard S&P 500 ETF (VOO)
- Invesco Nasdaq Next Gen 100 ETF (QQQJ)
- ARK Innovation ETF (ARKK)
- Vanguard Total Stock Market Index Fund (VTI)
Let’s analyze each of these in more detail.
Best ETFs to Buy
#1. Invesco QQQ ETF (QQQ)
The Invesco QQQ is an exchange-traded fund that tracks the Nasdaq-100 Index, composed of the 100 largest non-financial companies listed on the Nasdaq.
- Performance over 1-Year: -4%
- Expense Ratio: 0.20%
- Percent Off All-Time High: -18%
- AUM: $186 billion
- Number of Holdings: 103
The Nasdaq-100 Index is one of the three most common indices that investors follow. Given the considerable amount of tech stocks in the Nasdaq, it’s outperformed the S&P 500 and Dow Jones Index over the last decade — and it’s not even close.
While there are several Nasdaq ETFsthat follow the Nasdaq-100 Index, the market predominantly chose QQQ.
According to Lipper, a financial service and analytics firm, it’s become the #1 Highest Rated growth fund based on total return over the past 15 years.
Additionally, QQQ is the second most traded ETF in the U.S. based on average daily volume.
This might not be a big deal if you’re planning to buy and hold, but the liquidity is there if you need it.
While there are +100 holdings in QQQ, a significant portion consists of mega-cap FAAMG stocks.
Each of them has continued to grow after eclipsing the $1 trillion milestone, but most of their gains are behind them.
However, their mix of continued growth potential and stability makes them great options for investors to consider.
QQQ Top Holdings:
- Apple (AAPL) 12.4%
- Microsoft (MSFT) 10.6%
- Alphabet (GOOG, GOOGL) 7.7%
- Amazon.com (AMZN) 7.5%
- Tesla (TSLA) 5.1%
- Nvidia (NVDA) 3.5%
- Meta Platforms (FB) 3.2%
- Costco (COST) 2.1%
- Broadcom (AVGO) 1.7%
- PepsiCo (PEP) 1.9%
#2. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF invests in the S&P 500 Index, representing 500 of the largest U.S companies.
- Performance over 1-Year: +2%
- Expense Ratio: 0.10%
- Percent Off All-Time High: -9%
- AUM: $276 billion
- Number of Holdings: 507
The Vanguard 500 ETF is one of the best ways to invest in the market’s most-followed index.
Except for the iShares Core S&P 500 ETF, VOO provides the optimal mix of low fees and high liquidity amongst S&P 500 funds.
However, minor differences in liquidity will be negligible if you’re implementing a buy-and-hold strategy.
VOO provides variable access to all 11 sectors of the economy, from Information Technology (28%) to Health Care (13%), to Real Estate (3%), and Energy (3%).
Given VOO’s market-cap-weighted structure, Big Tech has absorbed a sizable amount of the fund, but far less than their presence in QQQ.
FAAMG accounts for 20% of the Vanguard S&P 500 ETF.
Dollar-cost averaging into the S&P 500 is one of the few tried and true ways to generate wealth over time.
A small percentage of investors can consistently “beat the market” with individual stocks.
VOO is a cost-effective way to outperform nine out of ten active traders and most stocks over a long enough time horizon.
VOO Top Holdings:
- Apple (AAPL) 7.0%
- Microsoft (MSFT) 6.4%
- Alphabet (GOOG, GOOGL) 4.2%
- Amazon.com (AMZN) 3.9%
- Tesla (TSLA) 2.4%
- Nvidia (NVDA) 1.8%
- Berkshire Hathaway (BRK.B) 1.7%
- Meta Platforms (FB) 1.3%
- UnitedHealth Group (UNH) 1.3%
- Johnson & Johnson (JNJ) 1.2%
#3. Invesco Nasdaq Next Gen 100 ETF (QQQJ)
The Invesco Nasdaq Next Gen 100 ETF invests in the 101st to 200th largest companies on the Nasdaq. It is the younger sibling to QQQ.
- Performance over 1-Year: -20%
- Expense Ratio: 0.15%
- Percent Off All-Time High: -18%
- AUM: $960 million
- Number of Holdings: 105
QQQJ provides exposure to mid-cap tech stocks that are vying to be included in the Nasdaq-100 Index.
Such an event occurs when a QQQJ holding successfully grows enough to replace one of the current QQQ constituents.
About one out of three Next Gen 100 stocks eventually become a Nasdaq-100 stock, so it’s not uncommon.
QQQJ is far more volatile to the upside and downside than its big brother, QQQ. Here’s a snapshot comparing their performance over the period of one year:
QQQJ is a great way to gain exposure to high-growth technology stocks if you’re willing to take on more risk and volatility.
QQQJ Top Holdings:
- Trade Desk (TTD) 2.1%
- Expedia (EXPE) 2.0%
- MongoDB (MDB) 1.9%
- Horizon Therapeutics (HZNP) 1.9%
- Diamondback Energy (FANG) 1.8%
- Tractor Supply (TSCO) 1.8%
- CoStar Group (CSGP) 1.8%
- CDW Corp. (CDW) 1.7%
- ON Semiconductor (ON) 1.7%
- Enphase Energy (ENPH) 1.7%
#4. ARK Innovation ETF (ARKK)
- Performance over 1-Year: -58%
- Expense Ratio: 0.75%
- Percent Off All-Time High: -67%
- AUM: $10.9 billion
- Number of Holdings: 36
The ARK Innovation ETF is the flagship fund offered by Cathie Wood and her team at ARK Invest.
ARKK is actively managed, and therefore its holdings are subject to change daily, but the fund’s intentions remain the same.
ARKK consists of high-growth, mainly unprofitable tech companies that are attempting to disrupt the incumbents.
For example, ARKK’s top-holding Tesla (TSLA) is taking on the automotive industry and revolutionizing the way society thinks about energy.
Teladoc (TDOC) challenges the traditional health care industry by providing medical care through phone and video consults.
Coinbase (COIN) competes against traditional finance and banking, an industry that went without competition for the last 500 years.
ARKK is a bet on the most ambitious areas of innovation changing the way the world works.
ARKK Top Holdings:
- Tesla (TSLA) 10.7%
- Zoom Video Communications (ZM) 6.8%
- Roku (ROKU) 6.7%
- Teladoc (TDOC) 6.6%
- Coinbase Global (COIN) 6.2%
- Block (SQ) 5.7%
- Exact Sciences (EXAS) 5.3%
- Unity Software (U) 4.7%
- Twilio (TWLO) 3.9%
- CRISPR Therapeutics (CRSP) 3.6%
#5. Vanguard Total Stock Market Index Fund ETF (VTI)
The Vanguard Total Stock Market Index Fund ETF tracks the performance of the overall stock market.
- Performance over 1-Year: -1%
- Expense Ratio: 0.03%
- Percent Off All-Time High: -10%
- AUM: $287 billion
- Number of Holdings: 4091
You’ll notice it has the same top holdings as the Vanguard S&P 500 ETF, so it might be inefficient to own each of these funds.
However, VTI allocates slightly less to the 10 largest holdings — 24% compared to 29% from VOO.
Additionally, you’ll gain exposure to small- and mid-cap stocks through VTI, but not with VOO.
VTI Top Holdings:
- Apple (AAPL) 5.9%
- Microsoft (MSFT) 5.1%
- Alphabet (GOOG, GOOGL) 3.5%
- Amazon.com (AMZN) 3.2%
- Tesla (TSLA) 2.0%
- Nvidia (NVDA) 1.4%
- Berkshire Hathaway (BRK.B) 1.0%
- Meta Platforms (FB) 1.1%
- UnitedHealth Group (UNH) 1.1%
- Johnson & Johnson (JNJ) 1.0%
Best ETFs: Frequently Asked Questions
What is the best performing ETF?
The best performing ETF — over a long enough time horizon — will be a fund that tracks the S&P 500, such as the Vanguard S&P 500 ETF. Everyone has different investing goals, but an ETF like VOO or SPY will be sufficient for most investors.
What ETFs are good for beginners?
Broad-based ETFs that track the overall market are good options for beginners, such as QQQ, VTI, VOO, or DIA.
What is the downside of ETFs?
Some downsides to ETFs are high fees and becoming over-diversified. While diversification can lower a portfolio’s risk, too much will limit its return potential.
Are ETFs good for long-term investing?
ETFS are good for long-term investing because their diversification can help preserve wealth. The S&P 500 will be here 50 years from now. You can’t say the same about an individual stock.
Bottom Line: Best ETFs To Buy
The best ETFs ultimately depends on your investing goals and time horizon. Some of the funds mentioned in this article will align with your goals, and others will be horrible additions to your portfolio.
This article is for informational purposes only. It is not intended to be investment advice. To learn more about how we evaluate individual equities, check out our editorial guidelines and research methodology. This article was updated on November 3rd, 2022 to reflect the most current data on each ETF. Given recent market developments we can no longer recommend blockchain equities.