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Regardless of a poor finish to the yr, the S&P 500 has loved one other spectacular yr in 2024, rising 25%. Whereas the New 12 months is clouded with uncertainty, the enduring buzz round know-how shares may propel the index via the roof once more in 2025.
Buyers can acquire publicity to the index in various methods. They will purchase particular person shares, or open a place in an exchange-traded fund (ETF) that tracks the S&P 500.
Alternatively, traders can give attention to a particular group of shares utilizing the increasing array of sector or thematic ETFs — a development that’s gaining important traction.
Focused ETFs like these have the potential to outperform normal benchmarks such because the S&P 500. Furthermore, they provide extra advantages tailor-made to an investor’s targets.
Listed below are two value consideration right now.
iShares S&P 500 Data Expertise Sector ETF
As I say, pleasure round tech shares — and particularly these with a hand in growing synthetic intelligence (AI) — has powered the S&P 500’s good beneficial properties in 2024.
This may be illustrated by the beautiful efficiency of the iShares S&P 500 Data Expertise Sector ETF (LSE:IUIT). It’s up 42.3% within the yr thus far, pushed by tech heavyweights like chipmaker Nvidia, social media big Meta, and e-marketplace Amazon.
As with every funding, beneficial properties like these depart the fund at risk of a value correction. This could occur if extreme revenue taking units in, or if investor confidence all of a sudden fades.
However I’m assured the fund can proceed outperforming over the long run. In addition to AI, it offers publicity to different fast-growing applied sciences like cloud computing, cybersecurity, robotics, and autonomous autos.
This ETF’s delivered a mean annual return of 24.9% since 2019. I anticipate these robust returns to proceed, which is why I at present maintain it in my very own portfolio.
ProShares S&P 500 Dividend Aristocrats ETF
The US inventory market isn’t famed for its dividend tradition. Buyers looking for dividends typically flip to London, which boasts a wealthy collection of dependable shares delivering giant and rising payouts.
However traders can nonetheless faucet into these qualities Stateside with the ProShares S&P 500 Dividend Aristocrats ETF (LSE:NOBL). Because the title suggests, this thematic ETF is one which focuses on dividend progress shares.
It holds shares which have grown dividends for 25 consecutive years or extra. In complete, it holds shares in 66 totally different companies, with main holdings together with family names like Stanley Black & Decker, McDonald’s, and IBM.
The dividend yield right here isn’t the most important, at 2.25%. However its means to ship dependable passive earnings progress nonetheless makes it value critical consideration.
What’s extra, with capital beneficial properties additionally taken into consideration, this ProShares fund has delivered a mean annual return of 10.9% over the previous 5 years. That’s higher than the 6.2% the FTSE 100 — which is extra standard with dividend traders — has delivered over the identical timeframe.
Its bias in direction of dividend shares may see it underperform progress stock-focused ETFs throughout bull markets. Nonetheless, the secure and rising earnings it offers nonetheless makes it worthy of a detailed look, relying on an investor’s objectives.
