Published - November 28, 2022 @ 1:00 PM (EET)

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Exchange-traded funds, or ETFs, can be an excellent entry point for new investors and those looking to diversify their portfolios for long-term growth.

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Like bonds, ETFs can hold multiple securities and provide exposure to a wide range of shares or bonds within one investment offering.

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Since they're relatively cheap and carry lower risk than individual stocks, ETFs may be the right vehicle for investors who favor the buy-and-hold strategy.

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Unlike bonds and mutual funds, ETFs trade on an exchange like a stock, making them very easy to sell and buy with generally low internal expenses.

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While there are quite literally thousands of ETFs to choose from, here are some of the top ones that cover various market segments:

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1. INVESCO QQQ TRUST

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Among the best-known ETFs, Invesco tracks the Nasdaq-100 Index, which includes the 100 largest non-financial companies listed on the Nasdaq based on market capitalization.

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Based on total return over the past 15 years, the exchange-traded fund is rated the best-performing large-cap growth fund (1 of 317).  

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In the U.S., it is also the second most traded based on the average daily volume traded as of 31 March 2022.

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With a single investment, you'll gain access to blue-chip companies, including Apple, Amazon, Microsoft, Tesla, and many more.

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2. THE VANGUARD S&P 500 ETF (VOO)

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Since investors cannot invest in an index, the goal of the Vanguard S&P 500 ETF (VOO) is to track and mirror the returns of the S&P 500 index.

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The fund appeals to investors because it is well-diversified and made up of equities of 500 of the largest U.S. publicly traded companies.  

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With a solid track record of profitability compared to smaller companies, these stocks tend to be more stable and offer investors a high potential for investment growth.

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Launched in 1975, The Vanguard Group, based in Malvern, Pennsylvania, is among the world's largest equity and fixed income managers.

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3. iSHARES CORE MSCI EAFE ETF (IEFA)

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IEFA delivers exposure to developed-market stocks in Europe and Asia, excluding the U.S. and Canadian equities, covering about 98% of global equity markets outside of North America.

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The fund is the cheaper, younger variation of BlackRock's flagship iShares MSCI EAFE ETF (EFA), which debuted in 2012 as part of an ultra-low-cost, iShares Core series, designed to attract buy-and-hold investors.

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With the low expense ratio of 0.07%, investors can benefit from this ETF as it offers a low-cost way to add some international exposure to portfolios and benefit from the long-term growth of the global economy.

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4. THE FIDELITY QUALITY FACTOR ETF (FQAL)

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The fund, which owns about 125 securities, tracks a proprietary index that selects U.S. stocks based on factors like higher profitability, a good balance sheet, and stable cash flows.

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Recently the CFRA awarded the fund a five-star rating based on a combination of its risk, reward, and cost attributes and using portfolio-level and fund-specific analysis.

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FQAL has higher reward potential and incurs less risk than its high-quality peers. Thus, the fund may appeal to investors looking to combine a quality-focused approach with a U.S.-specific methodology.

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BEGIN INVESTING

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The ETF space has grown tremendously in recent years, reaching $4 trillion in invested assets by 2019.  It is estimated that, in 2020, there were 7,602 individual ETFs listed globally.

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Luckily, investing in ETFs has become increasingly easy with multiple platforms available to traders, of which most offer low-commission trading.

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ETFs trade through both online and traditional brokers, while a brokerage account enables investors to trade shares of ETFs just as they would trade shares of stocks.

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