3 Easy Ways to Invest in the US Stock Market Using ETF Indices

exchange traded funds

exchange traded funds

Written by Tony Dong at The Motley Fool Canada

The US stock market accounts for roughly 55% of the world’s market capitalization by weight and has been an absolute powerhouse over the past decade, generating outsized returns fueled by the rise of high-growth tech companies.

Beginning investors in 2022 should allocate at least 50% of their portfolio to US stocks. While you can choose your own, a better way to get exposure to dozens, even hundreds of major US stocks, is by using a exchange-traded fund (ETF) that tracks a known stock market index.

The best known indices include the S&P 500the NASDAQ100and the Dow Jones Industrial Average. Let’s look at the top Canadian ETFs that give each of us exposure!

The S&P 500

The S&P 500 is made up of 502 blue-chip US companies such as Microsoft, Apple, Alphabet, JPMorganand Amazon and spans multiple sectors with a concentration in technology and finance. It is widely regarded as the benchmark for US equity performance.

Vanguard S&P 500 Index ETF (TSX:VFV) is the leading Canadian ETF to track the S&P 500. VFV costs to maintain a Management Expense Ratio (MER) of 0.08%, plus an additional 0.15% in foreign withholding taxes on dividends. the background is not covered coin.

The NASDAQ 100

the NASDAQ100 tracks the largest companies listed on the NASDAQ exchange. It is currently considered a barometer for the performance of US mega-cap growth stocks, with heavy weighting assigned to top technology stocks such as advanced micro devices, NVIDIAand Tesla.

iShares NASDAQ 100 Index ETF (TSX:XQQ) is the top Canadian ETF to track the NASDAQ 100. Compared to VFV, XQQ is much more volatile as it is a high-risk, high-reward bet on the US tech sector. Currently holding XQQ will cost you a MER of 0.39%. Unlike VFV, XQQ is currency hedged.

The Dow Jones Industrial Average

As the oldest US stock index in existence (1896!), the Dow Jones Industrial Average consists of 30 large-cap, blue-chip stocks representing the leading companies in every major US industry. You can track it by buying BMO Dow Jones Industrial Average Hedge CAD ETF Index (TSX:ZDJ)

Current notable underlying stocks other than those listed above include walmart, waltdisney, Coca Cola, house deposit, Goldman Sachs, mcdonald’s, Visa, boeing, Johnson and Johnsonand 3M. Holding ZDJ will cost you a MER of 0.26% and is currency hedged.

The silly takeaway

Your choice of ETF here will depend on your view of the US stock market. Do you think mega-cap growth and tech stocks will continue to outperform? Buy XQQ. Do you think old-fashioned value stocks will have their day? Buy ZDJ. Do you want to make a balanced and more diversified bet on the entire US market? Buy VFV.

Regardless of your choice, buying and holding any of these three ETFs for the long term is a winning proposition. Continually making deposits, reinvesting dividends, and staying the course through fear, uncertainty, and doubt is the key to a winning investment portfolio.

The charge Beginner Investors: 3 Easy Ways to Invest in the US Stock Market Using ETF Indices first appeared in The Motley Fool Canada.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Foolish taxpayer Tony Dong has no position in any of the mentioned stocks. The Motley Fool owns and recommends Home Depot. The Motley Fool recommends Advanced Micro Devices, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Goldman Sachs, Johnson & Johnson, Microsoft, Nvidia, Tesla, Visa and Walt Disney.


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