Exchange-traded funds can give investors exposure to some solid growth and dividend stocks, without introducing much risk.
If you’re just getting started with investing and don’t know what to invest in, putting money in exchange-traded funds (ETFs) can be a good idea. An ETF gives you a position in dozens, hundreds, or sometimes even thousands of different stocks. It is a more balanced investment when compared with just investing in a single stock.
There are, however, many ETFs to choose from, which can make the process of picking the right fund complicated. But there are two funds that I believe can help give new investors the best of both worlds: dividends and growth. Together, the Schwab U.S. Dividend Equity ETF (SCHD +0.75%) and the Invesco Nasdaq 100 ETF (QQQM 0.31%) can be solid investments that you can hang on to in your portfolio for not only years, but potentially forever. Here’s why they can be no-brainer buys for any type of investor.
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Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF focuses on quality dividend stocks whose payouts are safe and sustainable. It invests in stocks while considering financial ratios, to ensure that the fund’s overall risk isn’t too high. The ETF currently yields 3.8%, which is more than 3 times the S&P 500 average of 1.1%.
As of Nov. 4, there were 103 holdings in its portfolio. The top three stocks in the fund are Cisco Systems, Amgen, and Lockheed Martin, with each one of them making up a little over 4% of the fund’s overall weight. There’s also good sector diversification in this fund as energy, consumer staples, healthcare, and industrial stocks each make up over 10% of the portfolio.
Schwab U.S. Dividend Equity ETF
Today’s Change
(0.75%) $0.20
Current Price
$26.72
Key Data Points
Market Cap
$0B
Day’s Range
$26.49 – $26.74
52wk Range
$23.87 – $29.72
Volume
74K
Avg Vol
0
Gross Margin
0.00%
Dividend Yield
N/A
Another attractive feature about the ETF is that it has a low expense ratio of just 0.06%. That means for an investment of $10,000, you would be incurring annual fees from the fund of just $6. As your portfolio rises in value, however, so too will the fees. When you’re dealing with percentages and long-term compounding, it’s always important to ensure fees aren’t too high, as they can chip away at your gains over time, which is why this low-cost fund can make for a solid long-term investment.
Invesco Nasdaq 100 ETF
Dividends are great for stability and recurring cash flow, but for long-term investors, the real payoff can come from having exposure to the top growth stocks. This is where the Invesco Nasdaq 100 ETF comes into play.
This ETF tracks the Nasdaq-100 index, which is a collection of the most valuable non-financial stocks on the Nasdaq exchange. You’ll get exposure to the best and brightest growth stocks on that exchange, including Nvidia, Apple, Microsoft, Broadcom, and many other big names in tech.
The fund has an expense ratio of 0.15%, which is higher than that of the Schwab fund, but its returns may more than make up for that in the long run. The benefit of investing in growth stocks is that they can lead to better long-term gains for investors. And while 0.15% in fees may not make this an ultra-low-cost fund, it’s still not terribly expensive; a $10,000 investment would incur an annual fee of just $15.
Today’s Change
(-0.31%) $-0.77
Current Price
$251.06
Key Data Points
Market Cap
$0B
Day’s Range
$246.45 – $251.09
52wk Range
$165.72 – $262.23
Volume
30K
Avg Vol
0
Gross Margin
0.00%
Dividend Yield
N/A
Over the past five years, this ETF has generated total returns (which include dividend payments) of 137%, which is comfortably higher than the Schwab fund’s returns of just 64%. And if you were to simply track the S&P 500 through an index fund such as the SPDR S&P 500 ETF, then you’d be up around 118% over that same time frame. Targeting growth stocks can lead to superior long-term gains.
The risk is that in the event of a downturn in the economy, growth stocks can come under pressure and incur heavy losses. But over the long term, they are likely to recover, especially the best of the best, which is why this Invesco ETF is most suitable for investors who are willing to remain invested for the long haul (i.e., at least five years).