ETFs, or exchange-traded funds, have opened up a world of new possibilities for investors. Rather than having to purchase individual equities in a certain sector, these funds allow investors to benefit from diversification and easily add exposure to a group of stocks. They are also highly liquid assets with lower cost ratios than actively managed investments, which is another incentive for ETFs.
When the market volatility increases and you want to decrease single stock risk, ETFs for both short and long-term investment opportunities make a lot of sense. They're also beneficial for playing particular sectors of the market, allowing investors to profit from areas that are booming this year.
If you're interested in these sorts of investment opportunities, keep reading to learn about three excellent sector ETFs that you should consider buying right now.
Select Sector SPDR Trust Energy ETF (NYSEARCA: XLE)
One of the biggest surprises so far in 2022 has been energy's strength, which has rallied while the overall market is off to one of the worst starts to a year on record. Demand for oil and gas is increasing as the world's economy recovers, which is excellent news for firms in the sector. Inflation is also helping energy stocks, as higher oil prices result in better earnings for these businesses. Furthermore, the pandemic essentially created a significant supply gap and compelled almost every oil and gas firm to cut costs and strengthen their balance sheets amid so much uncertainty, which might be another cause why these stocks are off to a hot start.
While there are several strong individual names in the sector, the Select Sector SPDR Trust Energy ETF is perhaps the most useful way to profit from it. The XLE is a low-cost income-producing ETF with an annual cost ratio of 0.12 percent and a distribution yield of 4.21 percent, making it an ideal way to gain exposure to energy stocks at a modest price. The fund’s top holdings include some of the best names in the business, such as:
- Exxon Mobil Corporation
- Chevron Corporation
- EOG Resources Schlumberger NV
SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA: SPYD)
Dividend stocks have been in the news lately as investors search for safe places to park their money to confront inflation's growing threat. Investing in dividend-paying stocks can be a wonderful method to increase your money and create long-term wealth, but it might be tough to determine which firms will endure over time. After all, the worst-case situation for a dividend investor is for a firm to have to reduce its payout as a result of low earnings. That's one of the primary reasons to consider adding the SPDR Portfolio S&P 500 High Dividend ETF to your investments.
This ETF tracks an index of the 80 highest-yielding stocks selected from the S&P 500, making it ideal for investors that are interested in high-quality large-cap dividend stocks. It’s important to note that this ETF is trading well above its 200-day moving average, in contrast to the major indices. This implies that it is showing relative strength in a weak market environment. The fund’s distribution yield is 3.68% and it offers exposure to S&P components including:
- Exxon Mobil
- Baker Hughes Company
- M&T Bank Corporation
Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP)
If you're a financial investor looking for a sector ETF to protect against economic uncertainty, the Consumer Staples Select Sector SPDR Fund is a good place to start. It's a fund made up of some of the world's most important consumer brands, which are firms that can always deliver solid earnings in any market environment. For instance, consider items like toilet paper, snacks, soda, and cleaning supplies. These are things that are constantly in demand, giving investors piece of mind during uncertain times.
The 0.12% expense ratio and 2.28 percent distribution yield of this fund are two more reasons to consider it. It's also outperforming the S&P 500 at the start of 2022, which is a good sign that investors want different stocks in a volatile market. Top holdings for the Consumer Staples Select Sector SPDR Fund include:
- Procter & Gamble
- Altria Group