If you are looking for a relatively safe way to invest in the stock market, investing in index funds is an excellent idea. Each index fund is unique. However, generally speaking, they are funds that have broad market exposure. They also have minimal overhead and fees. The result is that many of the best index funds outperform other funds that you may be looking at when all things are considered. Still, there is a wide range of index funds for you to choose to invest in. As a consequence, you may be wondering which are the best index funds to add to your portfolio this year.
If your goal is to find the best index funds for this year, you have your work cut out for you. There are thousands of funds available for you to choose from. This means that you must find the top performers to add to your portfolio. You should keep in mind that diversification will often yield safer and more significant results even when selecting an index fund. Rather than placing all your eggs in a single index fund basket, consider spreading your investment of capital across various top picks. These are some of the primary options to consider for 2017 if you want to maximize profitability.
1. Vanguard Total Stock Market Index Fund (VTSAX)
The Vanguard Total Stock Market Index is unique because it includes a diversified mix of small, mid and large-cap stocks from many sectors. This is a great fund to tap into a cross-section of the entire market rather than into a small segment of the market. Over the past 10 years, this fund has generated an annualized return of 8.6 percent. This meets the overall S&P 500 average. This is a broad fund. Therefore, you may consider investing more heavily in it and less heavily in market-specific index funds.
2. Vanguard 500 Index Fund (VFINX)
This is one of the best index funds to invest in for several reasons. It has a small minimum initial investment required of $3,000. Vanguard 500 Index Fund also has 0.16 percent expenses. This is exceptionally low considering the size of this fund. It has a solid return that keeps up well with the S&P 500 average. It is also a great alternative or complement to the Vanguard Total Stock Market Index Fund.
3. Vanguard Small Cap Value Index (VSIAX)
Small-cap stocks may seemingly be riskier. However, they often outperform the market as a whole when viewed in historical context. If you want to tap into this sector of the market in a relatively safe way, the Vanguard Small Cap Value Index is an excellent fund to consider. In fact, in comparison to the Vanguard Total Stock Market Index, it has a better return over a 10-year period. Its annualized return over this period is 9.1 percent. This incredible growth paired with the possible risk makes investing in this fund a wise idea.
4. PowerShares Aerospace & Defense Fund (PPA)
Under President Trump, many investors are anticipating heavy spending in this sector in the years to come. The PPA fund is heavily allocated to this sector. It includes solid shares in Boeing as well as United Technologies Corp and other top industry players. There are other index funds concentrated in this sector of the market. Still, this fund is one of the more well-diversified options available.
5. Vanguard All-World FTSE ex-U.S. Index
There are many fabulous investment opportunities available internationally as well. The Vanguard All-World FTSE ex-U.S. Index fund is currently invested in more than 2,500 individual stocks in several dozen countries. Many of the stocks are in emerging markets. This fund currently has an annualized return of 5.0 percent over the last five-year period. You also have to keep in mind that emerging markets may soon outpace domestic markets.
6. SPDR S&P Bank ETF (KBR)
The Trump presidency is also expected to impact the financial markets heavily in the coming years. This fund includes a heavy emphasis on financial institutions such as Bank of America and JP Morgan, to name a few. Many investors are banking on deregulation of Wall Street. This could create a boom in the financial sector.
7. Vanguard Intermediate-Term Corporate Bond Index (VICSX)
If you prefer safer yet still profitable investments, a bond index may be a great option to consider. The Vanguard Intermediate-Term Corporate Bonds Index is invested heavily in intermediate-term bonds. They have historically out-performed shorter and longer term bonds. This is one of the best index funds available for bonds investors. The reason is that it has had an annualized return of 6.8 percent over the last five years.
8. Global X SuperDividend Emerging Markets ETF (SDEM)
With factors related to strong growth in the United States paired with exports to the West, higher oil prices and adjustments to commodities prices, this is a fund that is worth watching in the next year. It focuses heavily on the commodities market. Also, its emphasis is on Brazil and Russia in particular.
9. Vanguard Emerging Markets Stock Index (VEMAX)
The Vanguard Emerging Markets Stock Index is a fund that heavily tracks stocks in popular emerging markets like China, India, and Taiwan. With an annualized return of 1.8 percent annualized over the last five years, you may wonder why this is one of the best index funds you should invest in. While historical performance in this sector is relatively poor, the potential for these emerging markets to shine as well as the incredibly cheap nature of many of these stocks makes this a great market to invest at least some of your funds in.
For investors who want a piece of the biotech pie, the Direxion Daily S&P Biotech Bull 3X Shares fund is a great option to consider. The biotech and pharmaceutical industries are currently highly profitable. Moreover, this trend is expected to continue in the coming years. Few people believe that the Trump presidency will negatively impact this industry through regulations or a new healthcare program.
Choosing the right funds to invest in can be a significant challenge. Some people will look heavily at historical trends. Others will disregard historical trends altogether to look at the possibilities for future growth. While both options are reasonable in specific circumstances, you will be pleased to find incredible opportunities listed here. Take the time to explore each of these best index funds for 2017 to learn more about their pros and cons. Then, consider the proper allocation for your portfolio. Now is the time to act on these hot funds.