I am beyond excited for this week’s topic: The best ETFs for 2024.

I’ve spent more than a decade in the financial media industry, and for many of those years, I’ve put together an annual look-ahead at exchange-traded funds (ETFs) that I, as well as ETF-industry experts, believed would prove useful in the year ahead given various economic themes expected to dominate the coming year. It was a yearly chance to help readers find portfolio holdings that aligned with their goals, and an excuse for me to dive headfirst into one of my favorite subjects.

That streak was snapped in late 2022, my first year at WealthUp. Hands were few. Time was short. Tasks were plentiful. And one of my favorite Yuletide pastimes had to go by the wayside.

But this year, the list is back.

The Tea

Exchange-traded funds are, in short, one of the most versatile and cost-effective tools in the financial toolbelt. ETFs allow you to instantly diversify your portfolio with the click of a button, make tactical investments in sectors and themes with lower risk than you’d get with a single-stock investment, and invest in some asset classes (gold, oil, and other commodities immediately come to mind) in a much easier manner than any other available option.

WealthUp Tip: Don’t know what an ETF is? Check out our primer, as well as a list of the best ETFs for beginners.

Because ETFs can play more than one role in a portfolio, my year-ahead lists tend to revolve around three specific types of ETFs:

Core ETFs: ETFs you can literally buy and hold for decades, even into (and during) retirement. They cover the basic building blocks of most traditional portfolios.
Tactical ETFs: ETFs that I’ve selected because they can leverage a trend that experts believe will come to the fore in the year ahead.
Defensive ETFs: These are ETFs that you might not necessarily buy at the beginning of the year. But if at some point, you feel like being more defensive with your portfolio, these ETFs are generally designed to limit losses in some way.

In this week’s letter, I’ll quickly run you through a few of my favorites, then I’ll point you toward my fuller list of all 24 Best ETFs of 2024.

The Take

To give you a decent sampling, here’s a look at two core ETFs, two tactical ETFs, and one defensive ETF.

SPDR Portfolio S&P 500 ETF
Type: Core
Style: S. large-cap stock
Expense ratio: 02%, or 20¢ annually on a $1,000 investment

The SPDR Portfolio S&P 500 ETF (SPLG) is an index fund that tracks the popular S&P 500 Index—a collection of 500 large U.S.-listed companies. It’s market cap-weighted, which means the larger the stock, the more of that stock the ETF holds, and the more that stock affects performance. So right now, multitrillion-dollar companies Apple (AAPL) and Microsoft (MSFT) are the biggest “weights” in the fund. Large-cap U.S. stock funds are an anchor of most portfolios, providing a combination of growth potential and dividend income. And among S&P 500 trackers, SPLG is the cheapest, costing a mere 0.02% annually.

Global X Artificial Intelligence & Technology ETF
Type: Tactical
Style: Thematic (artificial intelligence)
Expense ratio: 68%, or $6.80 annually on a $1,000 investment

The Artificial Intelligence & Technology ETF (AIQ) invests in companies that could benefit in some way from advances in artificial intelligence (AI) technologies. Maybe they provide AI software or services, like International Business Machines’ (IBM) Watsonx. Maybe, like chipmakers Intel (INTC) and Qualcomm (QCOM), they build hardware that enables AI technology. Or maybe simply using AI is a significant growth driver for them—take Netflix (NFLX), which uses AI to do everything from creating thumbnails to recommending content. “There’s certainly a sense of FOMO [fear of missing out] when it comes to AI,” Marc Pinto, Head of Americas Equities for Janus Henderson, said in the firm’s 2024 outlook call. “Investors want to make sure they have exposure to AI … they know it’s going to be big.”

Pimco Active Bond Exchange-Traded Fund
Type: Tactical
Style: Intermediate core-plus bond
Expense ratio: 58%, or $5.80 annually on a $1,000 investment

The Pimco Active Bond Exchange-Traded Fund (BOND) is an actively managed bond ETF that typically focuses on higher-quality, intermediate-term debt. So, rather than track an index, multiple human managers make portfolio decisions, taking on greater or lesser risk depending on the market environment. The fund holds more than 1,100 bonds to create a portfolio that is “intermediate” in nature—at an average maturity (how long until the bonds mature) of nine years, it’s not long-term, but it’s not short-term either. BOND currently invests most heavily in securitized debt (packaged mortgages and other consumer debt), at 60% of assets right now. Investment-grade corporate bonds (21%) and U.S. government bonds (13%) are other significant holdings. “BOND has a long track record, proven management, and has performed well,” says Todd Rosenbluth, Head of Research at VettaFi. “It’s a great way of getting exposure.”

WealthUp Tip: Have a larger nest egg and a lot of investing experience? Consider these top investments for accredited investors.

Invesco S&P 500 Low Volatility ETF
Type: Defensive
Style: S. low-volatility stock
Expense ratio: 25%, or $2.50 annually on a $1,000 investment

The Invesco S&P 500 Low Volatility ETF (SPLV) is an index ETF that holds the 100 stocks from the S&P 500 Index that have the lowest realized volatility over the past 12 months. Volatility here, Invesco says, “is a statistical measurement of the magnitude of up and down asset price fluctuations over time.” The less volatile the stock, the greater its weighting every three months, when the fund rebalances. Market volatility usually goes hand-in-hand with big drops in stocks. So, naturally, low-volatility stocks are considered a way to hedge against a downward swing in the market. Thus, SPLV could be one of the best ETFs for 2024 … if we get plenty of turbulence throughout the year.

iShares LifePath Target-Date ETFs
Type: Core
Style: Target-date
Expense ratio: 08%-0.11%, or 80¢-$1.10 annually on a $1,000 investment

OK, it’s a bit of a cheat, but we’re counting all of the iShares LifePath Target-Date ETFs as one fund. You can learn more about this kind of product on our target-date fund primer, but in short, it’s meant to be a one-stop shop for retirement savers. Each fund will have a target year—say, 2050, 2055, 2060, and so on. You buy the fund with the year closest to your projected retirement year. The fund manager holds a mix of stocks and bonds—that mix starts out pretty aggressive (lots of stocks, few bonds), but the closer time gets to the target date, the more conservative they’ll get, selling off stocks and buying bonds. What’s special about iShares’ product is they’re the only target-date ETFs in existence—all other target-date funds are mutual funds. So if you don’t have a workplace retirement account, but instead just your own personal brokerage account or IRA, these ETFs can be an excellent, cost-efficient “set it and forget it” retirement solution.

You can check out my full list of all 24 picks (including longer explanations of the five above) at our Best ETFs for 2024 page.

Wait. What About a Bitcoin ETF?

Cryptocurrencies including Bitcoin and Ethereum have been on a stellar run, rebounding from a miserable 2022 for the space. But I haven’t picked a crypto ETF for 2024—largely because of what’s on the horizon.

The crypto funds on the market today are futures ETF, meaning they get their exposure through futures contracts. Futures ETFs are OK if that’s all you have to work with, but spot ETFs (which track the market price of an underlying asset) provide returns that are more consistent with the actual asset. As of right now, the U.S. Securities and Exchange Commission has approved precisely zero crypto spot ETFs—but that could change in 2024.

“It feels very likely that in January, the SEC will allow [spot crypto ETFs] to move forward, and that by the end of the first quarter, we’ll have multiple products trading,” Rosenbluth says.

There’s no guarantee, mind you—more than a few experts have felt a spot Bitcoin ETF was imminent for the past couple of years. But if you’re not currently invested in a crypto ETF but haven’t yet … well, what’s the harm in waiting a couple more months for a potentially much more representative fund?

Where Can You Invest in These ETFs?

You can invest in ETFs through virtually any brokerage account or investing app. But here are a few noteworthy platforms worth bringing up right now:

SoFi Invest: SoFi Invest allows you to trade stocks, ETFs, and options fee-free (and options don’t even have contract fees). You can invest for yourself, or put your portfolio on autopilot with SoFi’s free robo-advisory services. SoFi Invest frequently offers sign-up bonuses, too—right now, you can get between $10 and $1,000 in free stock for funding a new Active Invest account.
Interactive Brokers: Interactive Brokers is one of the leading trading platforms for intermediate, advanced, and professional traders. You can trade stocks, ETFs, and options, sure, but also futures, micro futures, futures options, even foreign exchange, through IBKR’s powerful legacy Trader Workstation or its web and mobile platforms.
Robinhood: The Robinhood investment app helped pioneer commission-free trading, and users currently enjoy no commissions on stocks, ETFs, and options. Robinhood also frequently offers free stock for signing up—currently, you can get $5 to $200 to put toward fractional shares if you sign up, link a bank account, and fund your account with at least $10.

Riley & Kyle

WealthUp (Young and the Invested is now WealthUp)

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Disclaimer: This article does not constitute individualized investment advice. These securities appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: Investing Feed: Ring in the New Year With These ETFs