Uncertain About Single Stock Pick? Play S&P 500 ETFs

Wall Street appears to be returning on its normal course with the reopening of economies after the coronavirus-led stay-at-home mandate. Although an improving trend is palpable, uncertainty is far from over.

Huge jobless claims in the United States, fear factor in human minds in socializing and uncertainty about the return of corporate health may be unnerving some investors about where to park money in such a record-low yield environment.

Bonds have seen their share of highs this year thanks coronavirus worries. But with the reopening of global economies, bonds are losing their sheen on falling safe-haven status. iShares 20+ Year Treasury Bond ETF TLT (which yields about 1.94% annually) has lost 4.6% against 9.5% gains offered by the S&P 500 past month.

Why to Bet on Index Funds?

Against the above-mentioned backdrop, investors can find index funds as good bets. This is a passive investment strategy that allows investors to take advantage of major corporations at one go and minimizes stock-specific risks. Warren Buffett is also a proponent of investing in index funds. “A low-cost index fund is the most sensible equity investment for the great majority of investors,” per Warren Buffett.

In this regard, the S&P 500-based ETFs look to be safe bets. These are way broader than the Dow Jones, which has a concentrated approach with specific blue-chip stocks. Plus, about 51% of global CFOs surveyed by CNBC expect the Dow to slip back below 19,000 before it could spring higher.

The Nasdaq is also a good bet given its broad-based approach, but this index is tech-heavy and has rallied a lot amid lockdowns driven by the work-and-learn-from-home culture. So, further rally may be out of gas.

Meanwhile, the average annualized total return for the S&P 500 index over the past 90 years is around 10% before adjusting for inflation. With S&P 500 stocks, one can own about “80% of the market capitalization of the entire United States,” per certified financial planner Peter Mallouk. After all, American businesses will rise over the long term, as will the S&P 500, if we go by Buffett’s conviction (read: Don't "Bet Against the American Economy:" ETF Areas to Win).

ETF Bets

Against this backdrop, we highlight below a few S&P 500 ETFs.

Vanguard S&P 500 ETF VOO

The underling S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market. The fund has a Zacks ETF Rank #2 (Buy). It yields 1.88% annually and charges only 3 bps in fees.

iShares Core S&P 500 ETF IVV

The S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market. The Zacks Rank #2 fund yields 2.23% annually and charges 4 bps in fees.

SPDR Portfolio S&P 500 High Dividend ETF SPYD

The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The Zacks Rank #2 ETF yields 6.35% annually and charges 7 bps in fees.

SPDR Portfolio SP 500 Value ETF SPYV

The S&P 500 Value Index measures the performance of the large-capitalization value sector in the U.S. equity market. The Zacks Rank #2 fund charges just 4 bps in fees and yields 2.81% annually.

SPDR Portfolio SP 500 Growth ETF SPYG

The underlying S&P 500 Growth Index measures the performance of the large-capitalization growth sector in the U.S. equity market. The Zacks Rank #1 (Strong Buy) fund charges just 4 bps in fees and yields 1.35% annually (read: 5 Reasons to Bet on Growth ETFs).

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iShares 20 Year Treasury Bond ETF (TLT): ETF Research Reports
 
iShares Core SP 500 ETF (IVV): ETF Research Reports
 
Vanguard SP 500 ETF (VOO): ETF Research Reports
 
SPDR Portfolio SP 500 Value ETF (SPYV): ETF Research Reports
 
SPDR Portfolio SP 500 Growth ETF (SPYG): ETF Research Reports
 
SPDR Portfolio SP 500 High Dividend ETF (SPYD): ETF Research Reports
 
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Zacks Investment Research
 
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