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Exchange-Traded Funds (ETFs) are ideal investment vehicles for investors looking for instant diversification, flexibility, liquidity, and low expenses. In searching for the best ETFs to buy now, I look for ETFs that have low expense ratios and turnover, have a good chance to beat the market in the years to come, and together can form a diversified portfolio for most investors. Here are five best ETFs to buy now.

Quality Dividend Payers

Vanguard Dividend Appreciation ETF (VIG) - An ETF composed of 128 U.S. common stocks that have a history of increasing dividends for at least ten consecutive years. Dividends growth stocks, which provide both income and growth, are the single best investment for long term investors. Solid dividend stocks will always be in demand by investors during or near retirement, and they are particularly sought after during times of high market volatility, as they pay investors to wait out the volatility.

The top ten holdings in this ETF are McDonalds (MCD), International Business Machines (IBM), Coca-Cola (KO), Procter & Gamble (PG), Chevron (CVX), PepsiCo (PEP), ConocoPhillips (COP), Exxon Mobil (XOM), Wal-Mart (WMT), and United Technologies (UTX), which account for 43% of assets in the ETF.

As for sector breakdown, the ETF is heavily weighted in Consumer Staples (28%), Industrials (23%), and Energy (15%). VIG can essentially be considered a large cap stock fund, as large cap stocks account for 83% of the ETF.

The expense ratio is low at 0.24%, and turnover is also low at 15%.

Since its inception on 4/21/2006, the ETF is up 10.25%, while the S&P 500 is down 0.37%. This outperformance over 5 years is significant, and testimony to the safety found in dividend growth stocks.

The 52-week low is $46.26 and the high is $56.95. The ETF currently sells at $55 and should have support in the $47-$51 area. The ETF is available commission free through Firstrade, TD Ameritrade, and Vanguard.

International Stocks

Vanguard Europe Pacific ETF (VEA) - this is the index of European, Australasian, and Far Eastern (EAFE) market equities. The ETF has a very low expense ratio of 0.12% and very low turnover of 6%. The ETF is available commission free through TD Ameritrade and Vanguard.

By region, the ETF is 62% Europe, 23% Japan, and 8% Australia. By country, the ETF is concentrated in Japan (23%), UK (22%), France (9%), Switzerland (8%), Australia (8%), and Germany (8%). There are a total of 921 stocks, well diversified by sector, with biggest concentration in Financials (18%), Industrials (14%), and Consumer Staples (11%).

Since its inception on 7/20/2007, the ETF is down 34.36%, while the S&P 500 is down 15.43%. This underperformance is mainly due to the sovereign debt crisis in Europe in the past year. Investors who buy now for the long term should be well rewarded when the debt crisis resolves.

The 52-week low is $27.69 and the high is $38.61. The ETF currently sells at $31 and should have support in the $29-$30 area.

Emerging Markets

Vanguard Emerging Market ETF (VWO) - index of 905 emerging market stocks. This ETF charges a low 0.22% annual expense ratio, with low 15% annual turnover. The ETF is available commission free through Firstrade, TD Ameritrade, and Vanguard.

By country, the ETF is concentrated in China (17%), South Korea (14%), Brasil (14%), Taiwan (11%), South Africa (8%), India (7%), and Russia (6%). Financial stocks make up 21% of the ETF, while Materials account for 14% and Technology 12%.

Since its inception on 3/4/2005, the ETF is up 60%, while the S&P 500 is up 10%. This impressive outperformance should continue as emerging markets grow faster than developed markets.

The 52-week low is $33.42 and the high is $49.76. The ETF currently sells at $40 and should have support in the $36 area.

Small Cap Stocks

Vanguard Small Cap ETF (VB) - index of 1728 U.S. small cap stocks. This ETF charges a low 0.15% annual expense ratio, with low 12% annual turnover. The ETF is available commission free through TD Ameritrade and Vanguard.

The ETF is well-diversified, with largest concentrations in Industrials (17%), Technology (16%), Cyclicals (14%), Financials (12%), and Healthcare (11%).

Since its inception on 1/26/2004, the ETF is up 47%, while the S&P 500 is up 20%. Small cap stocks have better growth potentials and historically have outperformed the S&P 500, albeit with greater risk. Because of the greater risk, it is difficult to select individual small cap stocks to invest, and this ETF provides the much needed diversification.

The 52-week low is $56.49 and the high is $80.77. The ETF currently sells at $72 and should have support in the $58-$65 area.

High Yield Bonds

SPDR Barclays Capital High Yield Bond ETF (JNK) - index of bonds rated Ba1/BB+/BB+ or below using the middle rating of Moody's, S&P, and Fitch, respectively. High yield bonds, or junk bonds, are the only bonds I would recommend in this extremely low interest environment (please refer to my previous article title "Why Bonds Are No Longer Sound Investments"). This ETF charges a 0.40% annual expense ratio, with 40% annual turnover. The ETF is available commission free through TD Ameritrade.

The ETF is well-diversified, with largest concentrations in Industrials (17%), Technology (16%), Cyclicals (14%), Financials (12%), and Healthcare (11%).

Since its inception on 11/28/2007, the ETF is down 19%, while the S&P 500 is down 10%. Note this does not include dividends. The ETF currently yields about 7%, while the S&P 500 yields about 2%. If you add back the yield, the ETF has actually outperformed the S&P 500 in total returns. Both equities and junk bonds are attractive investments right now. An allocation in junk bonds can help provide diversification and a steady monthly income during volatile market conditions.

The 52-week low is $33.47 and the high is $39.01. The ETF currently sells at $38.60 and should have support in the $35-$37 area.

Conclusion

The best ETFs to buy now are well-diversified ETFs that charge low expenses, have good chances to beat the market, and can form a well-diversified portfolio for the years to come. In this regard, VIG, VEA, VWO, VB, and JNK are the best ETFs to buy now for long term investors. Investors are well-advised to buy them in an allocation compatible with their financial situation and risk tolerance. For simplicity, equal weight (20%) in each of the five ETFs should work for most investors.

Source: 5 Best ETFs To Buy Now