Blue-chip stocks — typically large stocks known for solid financials and strong performance — are the bedrock of any portfolio. That’s because they can provide a little bit of everything, be it growth, stability and/or income via dividends.
Anyone can feel safe owning several individual blue-chip stocks in a portfolio. However, if you’re looking for a baseline holding of the market’s best blue chips, it pays to explore exchange-traded funds, which allow you to invest in large baskets of these stocks at minimal costs.
Here are 10 of the best blue-chip ETFs on the market, with a number of varied flavors.
Vanguard S&P 500 ETF (ticker: VOO). Any list of the best blue-chip stock ETFs should begin with the Vanguard S&P 500 ETF. VOO is one of the three best ETFs that track the large-cap Standard & Poor’s 500 index — a group of stocks that beats active fund managers roughly 90 percent of the time. The SPDR S&P 500 ETF (SPY) and iShares Core S&P 500 ETF (IVV) do the same thing, but VOO does it cheaper, and as a result, it performs ever so slightly better. Top holdings will mirror the S&P 500, so right now VOO is led by Apple (AAPL), Alphabet (GOOG, GOOGL) and Microsoft Corp. (MSFT). Expenses are 0.05 percent, or $5 annually per $10,000 invested.
[See: The 10 Best ETFs for Value Investors.]
PowerShares QQQ Trust (QQQ). The QQQ is indeed a hot mess of a fund, but as several experts will tell you, it works. This PowerShares ETF is a bizarre hybrid mixing a broad-market fund with a tech fund, with more than 55 percent of the QQQ invested in information technology stocks. It’s also heavy in consumer discretionary (21 percent) and health care (13 percent), leaving little weight among three other sectors and outright ignoring three others. The fund’s top holdings include Apple (at a whopping 11.8 percent), Microsoft and Amazon.com (AMZN). Expenses are 0.2 percent.
Vanguard Dividend Appreciation (VIG). Yes, the VIG is technically a dividend fund, but anyone looking for sheer income potential will be sorely disappointed with the fund’s paltry 2.2 percent yield — not much better than the VOO right now. The VIG does target stocks that have increased their dividends for at least 10 consecutive years, but that serves as more of a quality screen (it takes decent financials to produce consistent dividend growth) than anything else. This fund’s top holdings are a who’s who of bulletproof balance sheets, including Microsoft, Johnson & Johnson (JNJ) and the Coca-Cola Co. (KO). Expenses are 0.1 percent.
iShares Core High Dividend ETF (HDV). The flip side to the VIG is a dividend fund that actually does care about offering a big, healthy yield. The HDV invests in 75 high-paying, large-cap dividend stocks, most heavily in the energy, consumer staples and healthcare sectors. Stalwart dividend holdings such as Exxon Mobil Corp. (XOM), Verizon Communications (VZ) and JNJ help deliver a yield of roughly 3.6 percent. Expenses are 0.12 percent.
Consumer Staples Select Sector SPDR (XLP). Speaking of consumer staples, investors who want access to this area of the market will find themselves in dependable blue-chip heaven with the Consumer Staples Select Sector SPDR. Consumer staples companies make or sell products that you need in thick or thin, from food to prescription drugs to toilet paper. XLP’s heaviest weightings go to Procter & Gamble Co. (PG) — maker of products such as Tide laundry detergent and Pampers diapers — Coca-Cola and Philip Morris International (PM). Expenses for XLP are 0.14 percent.
[Read: GAMR: A Video Game ETF For All-Pro Investors.]
Vanguard Mega Cap ETF (MGC): If you want the blue-chippiest of blue-chip stocks, the MGC has you covered. This Vanguard ETF’s holdings represent the top 70 percent of U.S. market capitalization, and on average, they sit at more than $100 billion in market cap. This is a pretty well-balanced fund, with six industries garnering a double-digit weight, and top holdings are an unsurprising lineup of Apple, Alphabet and Microsoft. MGC is also cheap at just 9 basis points.
PowerShares S&P 500 Low Volatility Portfolio (SPLV). If simple safety and protection is more your aim, consider the SPLV. This fund holds the 100 stocks in the S&P 500 that have exhibited the lowest volatility over the past year, in hopes of providing investors a more balanced ride. Naturally, then, this fund leans toward blue chips — blue chips such as Coca-Cola, DaVita HealthCare Partners (DVA) and PepsiCo (PEP). And for all of the focus on low volatility, SPLV has been high-performance, besting the S&P 500 by 13 percentage points over the past five years. Expenses are 0.25 percent.
WisdomTree Europe Hedged Equity Fund (HEDJ). If you’re looking for blue-chip exposure in the rest of the world, Europe — the most developed continent in the world — is a natural first place to look. Perhaps the best way to get it is via the HEDJ, which not only goes long in European stocks, but also hedges against a weak euro. That has helped WisdomTree’s fund outperform the non-hedged Vanguard FTSE Europe ETF (VGK) by 17 percentage points since HEDJ’s inception. HEDJ is long European blue chips such as Anheuser-Busch InBev (BUD), Siemens and Unilever (UN). Expenses are a little higher, too, at 0.58 percent.
[See: 10 Best ETFs for Large-Cap Stock Growth.]
Vanguard FTSE All-World ex-US ETF (VEU). The VEU is a broader international solution for blue-chip stocks. Although it’s still invested heavily in Europe (46 percent), it also includes companies from the Pacific and North American regions, as well as emerging markets such as China and India. Despite having a pretty wide holdings list numbering more than 2,500 stocks, VEU still leans heavy at an average market cap of nearly $25 billion. European large-caps like Nestle and Roche lead the fund’s top holdings, though Asia peeks through stocks including Toyota Motor Corp. (TM) and Taiwan Semiconductor Manufacturing Co. (TSM). Expenses are 0.12 percent.
ProShares UltraPro S&P500 (UPRO). If you really feel good about blue-chip stocks, the UltraPro S&P500 fund is your way to express it. UPRO is a 3x leveraged long fund — that means it’s designed to produce three times the daily returns of the S&P 500 (before fees and expenses). In other words, if the S&P 500 goes up 1 percent, UPRO should go up 3 percent. But beware: Just like you can triple your upside, you can triple your losses too. In short, this fund is a tool meant for quick plays by more experienced traders. This is also the most expensive fund on the list, at 0.95 percent.
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10 Great Ways to Pack Your Portfolio With Blue Chips originally appeared on usnews.com
