The S&P 500 soared by about 10% in the first quarter of 2024, posting gains in each of the first three months of the year to fuel tremendous investor confidence. But as the old saying goes, it’s a market of individual stocks, not one homogenous “stock market” that moves in lockstep.
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That fact has been on display with the impressive gain of over 15% for the communication services sector that includes Facebook parent Meta Platforms Inc. (ticker: META), which has surged more than 40% since Jan. 1. Many stocks in this sector and in the related information technology segment have put up significantly higher returns than the 10% gain for the broader market. On the other hand, embattled aerospace stock Boeing Inc. (BA) has plummeted about 30% despite a rosy environment for other firms.
Many investors are content to just buy and hold index funds without making active or tactical trades. But as this divergence shows, sometimes it can be incredibly profitable to have bias toward one area of Wall Street versus another. The following seven ETFs are options to consider if you want to make a focused and strategic play in pursuit of outperformance:
| ETF | Assets Under Management | Expense Ratio |
| ProShares Bitcoin Strategy ETF (BITO) | $2.6 billion | 0.95% |
| Invesco QQQ Trust (QQQ) | $254 billion | 0.20% |
| Vanguard Information Technology ETF (VGT) | $70 billion | 0.10% |
| VanEck Semiconductor ETF (SMH) | $16.3 billion | 0.35% |
| Invesco S&P MidCap Momentum ETF (XMMO) | $1.6 billion | 0.34% |
| SPDR S&P Homebuilders ETF (XHB) | $1.8 billion | 0.35% |
| Invesco S&P 500 GARP ETF (SPGP) | $4.6 billion | 0.34% |
ProShares Bitcoin Strategy ETF (BITO)
Expense ratio: 0.95%, or $95 annually on $10,000 invested Assets under management: $2.6 billion
With “spot” bitcoin ETFs getting approval from the U.S. Securities and Exchange Commission to start the year, there has been a massive influx of capital to a group of funds that allow investors to play the cryptocurrency directly without managing a digital wallet. The largest of these is actually the Grayscale Bitcoin Trust (GBTC), which now commands $27 billion in assets under management, however this ProShares BITO fund is almost identical in its strategy yet charges significantly lower annual expenses.
While neither fund tracks Bitcoin prices exactly on a 1-to-1 basis, that mild divergence hasn’t mattered much with such a massive uptrend to the crypto market in 2024. With BITO commanding roughly $2.6 billion in assets and charging 0.95% in annual expenses, compared with 1.5% for the Grayscale fund, it seems a better choice if you’re interested in Bitcoin ETFs right now.
Invesco QQQ Trust (QQQ)
Expense ratio: 0.2%, or $20 annually on $10,000 invested Assets under management: $254 billion
March brought another round of records for the S&P 500, and so, too, did the Nasdaq set a new high-water mark. As the index tied to the top stocks on the tech-heavy Nasdaq, the gains for the Nasdaq 100 are more reliant on the kinds of companies that most investors are drawn to lately. The QQQ fund from Invesco is benchmarked to the 100 largest companies listed on the Nasdaq, and nowhere else.
As a result, technology firms represent more than half of QQQ’s total assets, led by familiar companies like Apple Inc. (AAPL) and Microsoft Corp. (MSFT), but you’ll also get other large-cap companies like Costco Wholesale Corp. (COST) and PepsiCo Inc. (PEP) as part of the portfolio. Considering most of the tech titans that dominate the news are on the Nasdaq, investors who want to focus more on these picks may find QQQ a better alternative than just a plain-vanilla large-cap index fund.
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Vanguard Information Technology ETF (VGT)
Expense ratio: 0.10%, or $10 annually on $10,000 invested Assets under management: $70 billion
Of course, some investors aren’t interested in carving out a small piece of Big Tech as part of their strategy right now. With high-flying stocks in the sector, some investors would rather go all-in on tech. One of the simplest and largest ETFs to play the sector directly, VGT holds roughly 310 tech stocks in total — though about 60% of the portfolio is allocated toward the 10 biggest firms you know and love.
With more than 10 large-cap U.S. technology stocks up more than 25% this year, there’s strong momentum behind VGT right now as Wall Street closes out an impressive first quarter. Just keep in mind that biasing toward a single sector instead of a more diversified approach is more aggressive, and can carry bigger risks as well as the potential for bigger rewards.
VanEck Semiconductor ETF (SMH)
Expense ratio: 0.35%, or $35 annually on $10,000 invested Assets under management: $16.3 billion
As mentioned, tech stocks have been having a great year in 2024. But the semiconductor sector stands at the head of the pack thanks to highfliers including Nvidia Corp. (NVDA), which has surged more than 80% since Jan. 1, and Micron Technology Inc. (MU), which is up more than 50%. While SMH is the largest and most liquid way to invest in chipmakers, it is very focused on just 25 of the largest and most dominant chipmakers out there.
It’s worth noting that semiconductor stocks can be very volatile as pricing and demand trends move around. But with a strong outlook for the sector and impressive returns so far this year, this tactical tech ETF is firing on all cylinders.
Invesco S&P MidCap Momentum ETF (XMMO)
Expense ratio: 0.34%, or $34 annually on $10,000 invested Assets under management: $1.6 billion
If the market is up 10% across the first three months of the year, it’s safe to say that it’s a strong environment for investors. And in times like these, smaller companies with strong momentum generally tend to climb faster than larger and sleepier blue chips. This phenomenon has made XMMO one of the top-performing ETFs of 2024, with a gain that is about three times that of the broader market in the same period.
With an average market cap of just under $11 billion and only about 80 total holdings, XMMO represents the top 20% of the S&P Midcap 400 based on near-term momentum metrics. Past performance is no guarantee of future return, and there is decidedly more risk here than in a large-cap index fund, but you can’t argue with the recent performance of this standout fund.
SPDR S&P Homebuilders ETF (XHB)
Expense ratio: 0.35%, or $35 annually on $10,000 invested Assets under management: $1.8 billion
This leading homebuilders ETF has been on a tear over the last year, surging 60% in the prior 12 months thanks to a recovering market for builders as well as home sales. Generally, real estate is moving higher as a sector thanks to easing mortgage rates and cooling inflation trends that have dampened prior concerns about affordability.
As a result, there’s also been a jump in builder confidence — and leading XHB components like roofing specialist Carlisle Cos Inc. (CSL) and homebuilder Toll Brothers Inc. (TOL) have been rising lately in kind. And if the Federal Reserve doesn’t just stand pat on interest rates but chooses to reduce rates in 2024, it could further boost the sector in the months ahead, despite its already impressive run.
Invesco S&P 500 GARP ETF (SPGP)
Expense ratio: 0.34%, or $34 annually on $10,000 invested Assets under management: $4.6 billion
Some investors may look at the prior funds and say to themselves, “All that momentum is great… but isn’t it too late to buy in?” If this sentiment rings true for you, then consider this tactical Invesco fund that is focused on GARP — that is, “growth at a reasonable price.” In other words, you’re not overpaying for hot stocks based on massive multiples of their current sales or profits and are instead looking for companies that are growing but also pretty fairly valued.
The list of about 80 total components includes companies you won’t find at the top of other ETFs — including refiner Marathon Oil Corp. (MRO) and fertilizer company CF Industries Holdings Inc. (CF), among others. The returns are a bit more muted than those of red-hot tech stocks, but the more reasonable valuation for these growth stocks may mean they will hang tough if and when the current bull market loses steam over the coming months.
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Update 04/03/24: This story was published at an earlier date and has been updated with new information.
