Investors can harness the power of entire indices by adding ETFs focusing on the Dow Jones (
DJIA
), S&P 500 (
SPX
), and Nasdaq 100 (
NDX
) to their portfolios. Investing can be complex, but it can also be very simple. Simply investing in these three major U.S. indices would have generated significant returns over the past decade. Over the past 10 years, the Dow, S&P 500, and NASDAQ have gained 144%, 172%, and 272%, respectively.
It wouldn't be feasible to invest in all 500 stocks of the S&P 500, for example. However, you can add an S&P 500 ETF to your portfolio, giving you ample diversification and exposure to the growth of hundreds of the best companies in the United States. It's sensible for all investors to have some exposure to the broader indices, and it's a great way for new investors to start their portfolios with instant diversification.
Investors can use these three ETFs to add the breadth and depth of these three indices to their portfolios.
Vanguard S&P 500 ETF (
NYSEARCA:VOO)
Investing in the Vanguard S&P 500 ETF is an effective way to gain exposure to the power of the S&P 500 as a whole. This massive ETF has $281 billion in assets under management.
As you might expect, since it covers the entire S&P 500, VOO ETF is very diversified with 506 holdings, and
VOO's top 10 holdings only make up
24.3% of the fund, essentially mirroring the concentration of the S&P 500 itself. The Vanguard S&P 500's top holding is the largest stock in the S&P 500 by market cap, Apple (
NASDAQ:AAPL
), which accounts for 6% of the fund.
The rest of the top 10 is rounded out by familiar names, including tech giants like Microsoft (
NASDAQ:MSFT
), Alphabet (
NASDAQ:GOOGL
), Amazon (
NASDAQ:AMZN
), Tesla (
NASDAQ:TSLA
), and Nvidia (
NASDAQ:NVDA
), as well as large-cap stocks from other sectors like Berkshire Hathaway (
NYSE:BRK.A
) (
NYSE:BRK.B
), ExxonMobil (
NYSE:XOM
), and UnitedHealth Group (
NYSE:UNH
).
VOO pays a dividend and currently yields 1.6%, which is roughly in line with the average yield of the S&P 500. Vanguard is known for its low-cost funds and ETFs, and VOO is no different, with a minuscule expense ratio of just 0.03%.
The Vanguard S&P 500 ETF has a favorable Smart Score of 8. Its average analyst price target of $421.99 indicates upside of 11.3% from current levels. Blogger sentiment is bullish, while hedge fund involvement is decreasing.
Last year, VOO stock fell 18.2%, closely tracking the performance of the S&P 500. However, things are looking up in 2023 as the ETF is up 8.4% year to date. Ultimately, the Vanguard S&P 500 is an efficacious and cost-effective way to add exposure to the entire S&P 500 to your portfolio.
Invesco QQQ Trust (
NASDAQ:QQQ)
The Invesco QQQ Trust ETF, often referred to colloquially as "The Q's," is a massive $161 billion ETF that invests in the 100 largest non-financial companies in the Nasdaq.
The Nasdaq is the index that is most closely associated with the technology sector, so it is unsurprising that most of
QQQ's top holdings here are the same tech stocks that make up VOO’s top holdings. Stocks like Microsoft, Apple, Amazon, Alphabet, NVIDIA, Meta Platforms (
NASDAQ:META
), and Tesla dominate the top 10 holdings. Pepsi (
NASDAQ:PEP
) is the one notable non-tech stock amongst the top 10 holdings.
While QQQ is a diversified ETF with 102 holdings, it is much more concentrated than VOO. Its top 10 holdings make up 53.2% of the fund. Like VOO, QQQ pays a dividend and currently yields 0.7%.
The Invesco QQQ Trust has a positive ETF smart score of 8 out of 10, indicating an Outperform rating, and the consensus price target of $341.20 implies 11.5% upside from today’s prices. Meanwhile, blogger sentiment is positive, while hedge fund involvement is decreasing.
Tech stocks had a tough go of it in 2022, so it's unsurprising that QQQ lost 32.5% last year. However, investor enthusiasm for tech has returned in 2023, and QQQ has soared to a 13.3% gain year-to-date. Overall, the Invesco QQQ Trust is a cost-effective way (0.20% expense ratio) to add the innovation of the large-cap tech stocks in the Nasdaq 100 to your portfolio.
SPDR Dow Jones Industrial Average ETF (
NYSEARCA:DIA)
In some ways, the much larger S&P 500 has overtaken the Dow Jones Industrial Average as the dominant barometer for the U.S. economy. However, the Dow Jones is still viewed as a blue-chip index of world-class companies.
Being in the Dow Jones Industrial Average essentially screens out “bad." This is because Dow components have to be profitable and must have an excellent reputation, sustained growth, and be of interest to a large number of investors, according to S&P Global (
NYSE:SPGI
) (the company that maintains both the S&P 500 and Dow Jones Industrial Average).
The Dow Jones only includes 30 companies, so the SPDR Dow Jones Industrial Average ETF is naturally much more concentrated than the S&P 500 or Nasdaq ETFs listed above. The ETF has 31 holdings, and
DIA's top 10 holdings make up 55.2% of the fund.
Unlike the S&P 500 or the Nasdaq, the Dow is a price-weighted index, so high-priced Dow components like UnitedHealth have an outsize position in the fund. UNH, the health insurance giant, makes up nearly 10% of the fund.
The rest of the top 10 is essentially a who's who of iconic U.S. companies like Goldman Sachs (
NYSE:GS
), Home Depot (
NYSE:HD
), McDonald’s (
NYSE:MCD
), Caterpillar (
NYSE:CAT
), and Visa (
NYSE:V
), with Microsoft serving as the lone representative from ‘big tech.’
Because DIA isn’t as exposed to tech as VOO or QQQ, it soundly outperformed both ETFs last year (just as the Dow itself outperformed the S&P 500 and the Nasdaq), with a loss of 7% for 2022. However, as you might guess, DIA is lagging behind these two counterparts as tech rebounds in 2023, with a 2.4% gain year-to-date.
The SPDR Dow Jones Industrial Average ETF Trust has a neutral ETF Smart Score of 7. Further, the average DIA stock price target of $370.67 indicates upside potential of 8.7% from current pricing.
Like the other two ETFs above, DIA pays a dividend and yields 1.9%. Like its counterparts, it also features an investor-friendly expense ratio of 0.16%.
Investor Takeaway
In conclusion, history shows that investing in indices like the Dow, S&P 500, and Nasdaq is a fruitful way to invest over the long term. These 3 ETFs offer investors a way to gain exposure to each index in an effective, easy, and inexpensive manner.
All three of these indices look like sensible investments over the long term. Note that the Dow outperformed the others last year, thanks to its lower exposure to tech, while the QQQ is outperforming this year as tech rebounds. The VOO ETF may be the best way to get "the best of both worlds" as it features a mix of tech stocks and “old economy” stocks.
Disclosure
Artificial Intelligence stocks have been surging on the back of the hype surrounding ChatGPT, the viral AI chatbot that reached 100 million users in just two months.
What happened
Tesla (NASDAQ: TSLA) stock took investors on a roller-coaster ride Tuesday morning, first rushing ahead 5% before turning tail and giving back more than half its gains -- and the day is still young.
Wall Street's main indexes edged higher on Tuesday, as gains in growth stocks such as Tesla and Nvidia outweighed worries that the Federal Reserve will likely stay on its rate-hike path this year after data pointed to still-elevated inflation.
When Lucid Group (NASDAQ: LCID) rolled onto the electric vehicle (EV) scene in 2021, investors lined up to get a piece of the company, sending its share price soaring in the following months after it went public through a special purpose acquisition company (SPAC).
Tesla (TSLA) could team with OpenAI, the firm behind the wildly popular bot ChatGPT, to further boost its artificial intelligence (AI) enterprise, analysts said.
It's impossible to predict the stock market, but there are many reasons to be optimistic. With inflation falling and the labor market still strong, many economists are starting to expect a soft landing instead of a major recession, which could be good news for equity valuations.
Tesla Inc workers in New York state said on Tuesday they are launching a campaign to form a union, setting the stage for the latest labor challenge for Chief Executive Elon Musk.
Stocks hit the ground running in 2023, with the Nasdaq Composite up by 13.6% year to date as outsized inflation levels off and resilient economic data suggest the economy could avoid a severe recession.
U.S. stock indexes were set for a muted open on Tuesday after data showed consumer prices accelerated in January but the pace of annual increase slowed, likely keeping the Federal Reserve on a path of moderate interest rate hikes.
The NASDAQ 100 Pre-Market Indicator is down -10.88 to 12,491.43. The total Pre-Market volume is currently 49,675,173 shares traded.The following are the most active stocks for the pre-market session: Palantir Technologies Inc. (PLTR) is +1.06 at $8.67, with 6,116,365 shares trad
U.S. stock index futures edged higher on Tuesday ahead of January consumer inflation data that could offer investors further clues on how long the Federal Reserve will stick to its hawkish monetary policy.
Tesla Inc workers in New York said on Tuesday they will launch a campaign to form a union, setting stage for the latest labor challenge for Chief Executive Elon Musk.
Some of Wall Street's most speculative names, including meme stocks and shares of artificial intelligence companies, are leading the equity market rally this year, helped by renewed interest from retail investors.
Some of Wall Street's most speculative names, including meme stocks and shares of artificial intelligence companies, are leading the equity market rally this year, helped by renewed interest from retail investors.
When investors think of game-changing electric vehicle (EV) stocks, Tesla (NASDAQ: TSLA) might come to mind. But there are many other ways to gain exposure to the growth of EV adoption.Freeport-McMoRan (NYSE: FCX) benefits from a growing EV industry through a boost in copper dema
Tesla has changed prices for one version of each of its Model 3 sedan and Model Y crossover, the fourth price adjustment by the electric vehicle maker since the start of the year.
Cathie Wood's ARK Innovation ETF (
ARKK
) heated up in a big way to start the year. Even after last week's modest pullback, ARKK is up just north of 31% year-to-date. Despite the explosive rally that sparked the ETF's best-ever month, questions linger as to what comes next for the basket of innovative stocks Wood views as "the new Nasdaq."
Undoubtedly, high interest rates and calls for recession have caused ARKK to feel far more pain than the market averages. With the recent hype surrounding
ChatGPT and next-generation
artificial intelligence (AI) products, it certainly seems that innovation is finally getting a moment to shine, even with the tides turned so heavily against tech. I think innovation can still power solid gains, even in today's less accommodating environment.
Of course, not all innovators are built the same and can stack up with the disruptive capabilities of an AI chatbot like ChatGPT. Further, there's also the risk that recent "AI hype" could be overdone and lead to more tears for investors chasing a bounce with less consideration for the fundamentals.
As for the ARK Innovation Fund, I do think most of the pain has already been dealt. Wood continues to stick with hyper-growth stocks, even as the Federal Reserve continues applying pressure with every interest rate hike.
Despite the risk of a sudden reversal, I remain mildly bullish on ARKK. Wood's continued dip-buying could pay off as inflation backs down, allowing the Federal Reserve to hit the pause button. Perhaps a course correction may be needed, with a few rate cuts thrown into the mix at a later date.
In any case, I think it's a dangerous game to play rate cuts or a rate pause at this juncture. It's too hard to predict the Fed when not even they know with great certainty what they'll be doing a few months down the road.
ARK Innovation Fund: Cathie Wood Continues to Buy the Dip
Cathie Wood has been a busy buyer of tumbling tech stocks over the past year. Whether we're talking about topping up Tesla (
NASDAQ:TSLA
) or scooping up some of the lesser-known small-caps, it's clear that Wood has its sights set on where the puck is headed next.
It's no mystery that Tesla stock significantly contributed to ARKK's rise and fall. Wood's latest round of purchases signals that Tesla still possesses the innovative edge to keep up-and-coming EV rivals at bay. Beyond EVs, Tesla also seems to have a dataset and AI capabilities to help it keep powering higher.
Recently, Wood noted that she sees firms with "proprietary datasets" as "hidden gems that will benefit most from artificial intelligence." I think Wood is right to look at the data as a sign of future AI strength.
Tesla is an EV pioneer that arguably has one of the richest datasets in the industry. A rich trove of data can be viewed as food for its forward-looking innovations like autopilot.
For now, there's not much clarity on when self-driving vehicles will be ready for prime time, and it's difficult to determine which EV player has the early edge. Further, datasets may not necessarily translate into AI dominance. Datasets are an important input, but a firm's ability to effectively leverage such data is arguably more important.
In the meantime, investors shouldn't hold their breath waiting for an autonomous vehicle (AV), as its "ChatGPT moment" may be many years off.
Small Cap Bets Look Very Intriguing
Looking forward, I think small-cap tech exposure is a reason to prefer Cathie Wood's ARK line of funds over constructing one's own hyper-growth portfolio. Such small caps are incredibly risky. However, with Wood's expertise, I do think
ARK ETFs can improve the risk/reward for investors as she looks to uncover "hidden gems" across an ocean of pain.
Recently, Wood scooped up 3D metal printing firm Velo3D (
NYSE:VLD
) and oncology firm Repare Therapeutics (
NASDAQ:RPTX
) for the ARK Autonomous Technology and Robotics ETF (
ARKQ
) and ARK Genomic Revolution ETF (
ARKG
), respectively. Shares of both small-cap firms are battered, but Wood hasn't shied away from names that many investors have left behind after tech's brutal 2022.
The Bottom Line on ARK Innovation
It's about time that ARK ETFs felt a bit of relief. After such a brutal year, I'd not be shocked if hyper-growth tech's relief rally has more room to go. In any case, investors should proceed cautiously as nothing less than volatility should be expected with any of the ARK funds -- ARKK boasts a 1.38 beta, meaning shares are more volatile than the S&P 500 (
SPX
).
Disclosure
Easily one of the most impactful innovations in the modern age has been the rise and adoption of
electric vehicles (EVs). Once seen as a novelty, EVs now represent a conspicuous element of major metropolitan roadways. Nevertheless, even top-tier sectors can always use some help, which is where the surging
artificial intelligence industry comes into the picture. Through improved AI, engineers can foster positive outcomes for EVs and raise the investment proposition of their stocks.
Popular EV stocks on TipRanks
According to a September 2022 report by the
International Energy Agency, “Electric car sales reached a record high in 2021, despite supply chain bottlenecks and the ongoing Covid-19 pandemic. Compared with 2020, sales nearly doubled to 6.6 million (a sales share of nearly 9%), bringing the total number of electric cars on the road to 16.5 million.”
Not surprisingly, “Sales in 2021 were the highest in China at 3.3 million (tripling 2020 sales), followed by Europe with 2.3 million sold in 2021 (up from 1.4 million in 2020). In the United States, electric car sales doubled their market share to 4.5% in 2021, reaching 630 000 sold.” Still, not everything about EVs rates so positively.
The Problems with EVs and Their Integration
Primarily, EVs remain too expensive. In early 2022, Kelley Blue Book revealed that the
average price of a new EV jumped to $62,876. Given the pre-pandemic median household income of just under $70,000, EVs remain inaccessible to most consumers.
Second, the lack of charging infrastructure impedes mass-scale adoption. In the U.S., data from the federal government (from a 2015 study) indicates that
63% of all occupied housing units have a garage or carport. Nominally, though, this leaves millions of people without access to home charging.
Third, EVs need to be much more efficient to be net positive for the environment. As McKinsey & Company pointed out, “Increased EV adoption will affect more and different natural resources, as well as multiple industries, different geographies, and levels of carbon emissions.”
Fortunately, advancements in AI protocols should help bolster EVs and their stocks.
AI Protocols to Lower the Cost of Entry
While AI initiatives don’t directly lower EV prices, they can impart numerous improvements that ease the burden on consumers’ wallets. According to information technology publication
CIO, AI commands the ability to respond faster than humans, automate complex and/or time-consuming processes, and enable companies to do more with less and expand their operations.
Indeed, the latter point may be beneficial to companies like Tesla (
NASDAQ:TSLA
), which began
announcing layoffs last year. Improved AI integration may also help embattled organizations like TuSimple (
NASDAQ: TSP
), which specializes in autonomous truck driving technologies. By delivering a greater volume of products and advanced services to market quicker, corporate beneficiaries can potentially pass down savings to the end user.
Improved Efficiencies a Key Benefit of AI
With the global EV rollout occurring in earnest, investors ought to consider infrastructure developers such as ChargePoint (
NASDAQ:CHPT
). Again, with only 63% of residences in the U.S. having access to a garage or carport, that leaves CHPT with a very large total addressable market. Nevertheless, more charging stations alone may not solve the EV integration problem.
Mainly, the convenience factor stands to impede both EVs and their stocks. As Circuit Digest pointed out, even at a Tesla supercharging station, an EV may take up to 75 minutes to reach full charge. That’s not going to appeal to drivers of combustion-powered cars, who only need a few minutes to fill up.
However, IT expert Satyajit Sinha stated that “artificial intelligence is analyzing battery usage, recharge data and constructing a mathematical model to optimize the fast-charging capabilities without compromising the life span of the vehicles, which is improving battery performance and battery life cycle management, including driving range and charging time, and life span of the vehicles.”
Promoting Better Environmental Outcomes
As
TipRanks contributor Yulia Vaiman pointed out,
EVs alone won’t save the world, as climate change represents a complex problem. As she mentioned, EVs use plenty of critical resources, thus creating two major challenges.
First, increased demand for zero-emissions vehicles leads to sharp spikes in battery costs. In turn, the commodities that undergird said batteries – namely cobalt and nickel – have become pricier.
Second, Vaiman noted that “child labor issues in the cobalt mines of Congo push away Western producers, while the low grade of Indonesian nickel (about 40% of global output) requires a lengthy smelting process with extra high carbon emissions – defeating the very purpose of the ‘green’ battery-making.”
In other words, EV manufacturers may be better off enhancing the efficiency and lifespan of their products, and that’s exactly what improving AI brings to the table. According to scientific journal
Joule, AI algorithms and controllers “can provide a realistic driving-range estimation and optimize energy conservation, which can add extra driving range and reduce consumer ‘range anxiety.’”
The Takeaway: Improvements in AI Crucial for EVs and Their Stocks
Fundamentally, advancements in AI protocols don’t natively enhance EVs. Rather, they work with what is available, making the underlying products more efficient. In this manner, AI can mitigate resource consumption while still contributing to greater EV integration through reduced costs.
Disclosure
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