2 ETFs For Investors Looking To Build A Portfolio During Heightened Volatility

 | Aug 05, 2020 08:26

Given the current market volatility which is expected to continue for much of this year, exchange-traded funds (ETFs) offer new as well as seasoned investors a variety of advantages over shares of individual companies.h2 Why ETFs?/h2

An ETF is a basket of securities that can be easily bought or sold on a stock exchange during market hours, just like any other stock. ETFs typically offer diversification over asset classes, industries or global regions—all of which come with unique advantages and disadvantages.

One benefit of investing in ETFs: they spread capital among a wider range of companies. Therefore, the possible underperformance of one company, say during earnings seasons, does not necessarily result in extreme losses for the ETF as a whole.

As a result, ETFs make it easier to weather short-term choppiness in the markets, enabling long-term investors to pursue a more passive buy-and-hold strategy. 

However, in the case of global ETFs, it's valuable to remember that the fundamentals of a given region or country, as well as currency fluctuations, will also likely affect the fund's returns.

With all that in mind, here are two exchange-traded funds with long-term growth potential for new investors even during this period of heightened volatility:

h2 1. Schwab US Large-Cap Growth ETF /h2
  • Current Price: $110.79
  • 52-Week Range: $67.25 - 110.92
  • Dividend Yield: 0.66%
  • Dividend Distribution Frequency: Quarterly
  • Expense Ratio: 0.04% per year, or $4 on a $10,000 investment

Schwab U.S. Large-Cap Growth ETF™ (NYSE:SCHG), which has 350 holdings, follows the Dow Jones U.S. Large-Cap Growth Total Stock Market index. Growth companies are typically defined as those whose earnings or revenues increase at higher-than-average rates. Many such companies do not pay a dividend or provide only a small payout. They also usually trade at relatively high price-to-earnings valuations.

The five most important sectors by weighting for SCHG make up around 86% of the fund. They include Information Technology (38.31%), Consumer Discretionary (15.38%), Communication Systems (13.75%), Healthcare (12.84%) and Financials (5.85%). 

The top ten holdings make up 42% of total net assets, which are currently close to $12 billion. SCHG's top three companies are Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN).