Why this ETF is my number one recommendation for new investors | Smart Switch: Personal Finance

(Dave Kovaleski)

There has been a record number of new investors entering the market in the last two years, driven by a variety of factors, not the least of which is the increased ease and lower cost of doing so.

According to a recent survey of invest.com86% of new investors in 2021 plan to increase their stock holdings in 2022, undeterred by the fact that the market has fallen sharply since last November.

Don’t overreact to market volatility it is indeed a good lesson already learned. The market downturn has pushed down the valuations of many high-quality companies, making it a good time to buy. Since most new investors are younger and aren’t afraid to take on riskier positions, according to the survey, there is one exchange-traded fund in particular that stands out as a great option for new investors: the Fidelity MSCI Information Technology Index ETF (NYSEMKT: FTEC).

Image source: Getty Images.

Invest in a wide swath of the IT market

The Fidelity MSCI Information Technology Index ETF is not a small fund by any stretch of the imagination with some $6.4 billion in net assets. But it is much less popular than its bigger rivals, the Cutting Edge Information Technology ETF and the Technology Select Sector SPDR Fund, each with around $50 billion in assets. All three are great funds, but let’s look at why the Fidelity fund may be the best option for a new investor.

The Fidelity ETF tracks the MSCI USA IMI Information Technology 25/50 Index, one of the broadest benchmarks used for technology sector ETFs. The IMI in the index name stands for “investment market index,” meaning it is based on the entire TI universe: large, mid, and small-cap names. Then, it applies certain limits and screens to ensure diversification. The result is a fund that owns around 367 stocks, including software companies, information technology companies, and technology hardware and equipment companies.

However, it does not include three notable names: Amazon, Metaplatformsand Alphabet — as they are classified as retail or communication services. but includes Apple, Microsoftand nvidia — his three largest holdings.

Why this ETF stands out among new investors

There are a few main reasons why this ETF stands out for new investors. Invest in a sector that has produced some of the best long-term returns on the market: technology. If you are a new investor and have a long-term horizon for your holdings, you can afford to be more aggressive and invest in a sector that may have more short-term volatility (look at the current market) but typically produces excellent long-term investments. long term. returns.

This ETF, which was launched in 2013, has returned 21.9% annually since its inception on February 28. Over the past five years, it has returned 25.5% annualized. And in the last 12 months, as of March 31, it is up 18.2%, despite having lost more than 9% so far this year. Those are very good results, among the best in its category, comparable to its aforementioned older brothers.

Another reason it likes it compared to other tech-focused ETFs is its broad diversification within the sector, giving it a lower standard deviation — a measure of return volatility — than many of its competitors.

The other two factors are your expenses and your price. Fidelity ETF’s MSCI Information Technology Index has the lowest expense ratio in its class at just 0.08%. That means the investor pays only $0.80 per year for every $1,000 invested.

Finally, the ETF is currently priced at around $123 per share, which is among the lowest in its class. If you’re a new investor and don’t have a lot of capital to invest, you may find this price level more affordable while enjoying strong performance at a low cost.

10 Stocks We Like Better Than Fidelity MSCI Information Technology Index ETF

When our award-winning team of analysts has stock advice, it’s worth listening to. After all, the newsletter they have published for over a decade, Motley Fool Stock Advisorhas tripled the market.*

They just revealed what they think are the top ten stocks for investors to buy right now…and Fidelity MSCI Information Technology Index ETF was not one of them! That’s right, they think these 10 stocks are even better buys.

*Stock advisor returns from March 3, 2022

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the board of directors of The Motley Fool. David Kovaleski has no position in any of the mentioned stocks. The Motley Fool owns and recommends Alphabet (A shares), Amazon, Apple, Meta Platforms, Inc., Microsoft, and Nvidia. The Motley Fool recommends Alphabet (C-shares) and recommends the following options: $120 March 2023 Apple long calls and $130 March 2023 Apple short calls. The Motley Fool has a disclosure policy.

Previous post Rising wages and prices land councils with their own cost-of-living crisis | Inflation
Next post world market: five world market themes for the week ahead
%d bloggers like this: