Here’s a head-scratching stat: there are now more ETFs in the US than stocks.
The number of new exchange-traded funds has exploded over the last several years, with more than 5,100 ETFs now trading on the US market, according to JPMorgan.
That said, there are always hidden gems to discover in the ETF space — even those that have been around for ages.
To help uncover some of them, we asked a few financial advisors to share their favorite under-the-radar funds with us, which we’ve broken down below:
1. Pacer Nasdaq International Patent Leaders ETF (PATN)
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Chris Chen, a founder of Insight Financial Strategists, highlighted this fund. It tracks the Nasdaq International Patent Leaders Index, investing in top international growth stocks that own the patents for their innovative products.
That means its holdings likely have more growth potential than stocks in other funds that own less intellectual property, Chen said.
Date launched: September 2024
Year-to-date returns: 28.7%
Top 5 holdings: Taiwan Semiconductor Manufacturing (10.39%); Samsung Electronics (5.69%); ASML (4.73%); SK hynix (4.37%); Tencent (4.1%)
Expense ratio: 0.65%
2. iShares Expanded Tech-Software Sector ETF (IGV)
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Marcus Sturdivant, the founder of The Wall Street South Journal newsletter, highlighted this fund for its outsized exposure to software stocks.
He’s bullish on the sector because of the recent rotation out of AI hardware stocks, and because of software’s exposure to the cybersecurity theme, which he said is increasingly important as more AI models continue to come to market.
“People have to have cybersecurity,” he said. “We see that more and more every day.”
Date launched: July 2001
Year-to-date returns: 1.63%
Top 5 holdings: Palo Alto Networks (10.26%); Palantir Technologies (10.14%); Microsoft 9.6%); Crowdstrike (7.54%); Oracle (5.66%)
Expense ratio: 0.38%
3. Vanguard International High Dividend Yield Index Fund ETF (VYMI)
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Melissa Cox, the founder of Future Focused Wealth, said she started investing in this fund on behalf of her clients for a few reasons.
First, it provides steady income with a 3.48% annual dividend. Second, it allows her to diversify her clients’ portfolios away from AI concentration. And third, with some market researchers calling for upside potential in international stocks, it gives her exposure to that appreciation potential.
So far this year, the fund has beaten the S&P 500’s 12.6% return.
Date launched: March 2016
Year-to-date returns: 14.72%
Top 5 holdings: HSBC (1.76%); Novartis (1.58%); Royal Bank of Canada (1.56%); Roche Holding (1.56%); Nestle (1.43%)
Expense ratio: 0.07%