More new investors are going public than ever before, and much of the credit goes to Robin Hood. The app-driven stock brokerage platform attracted many investors for the first time, and Robinhood made stocks and exchange-traded funds accessible to those who had never considered them in the past.
On Robinhood’s 100 Most Popular Stocks list, you’ll find five symbols that are actually ETFs. Below we will provide the basics of these five funds, with the aim of helping you decide if they are worth considering as part of your own investment portfolio.
1. Vanguard S&P 500 ETF
Vanguard S&P 500 ETF (NYSEMKT: VOO) has a very simple objective: to match the performance of the S&P 500 Index. It goes up and down based on the broader stock market, as the S&P 500 holds around 500 of the largest stocks in the US market.
The Vanguard ETF isn’t the only fund to follow the S&P 500; its many competitors include the SPDR fund mentioned below. However, the Vanguard fund charges expenses of just 0.03% per annum, making it one of the cheapest options.
For those looking to invest in a diversified portfolio of large cap stocks, Vanguard S&P 500 is a solid choice. It won’t beat the market, but it won’t disappoint you either.
2. SPDR S&P 500 ETF
An alternative to the Vanguard S&P 500 ETF is the SPDR S&P 500 ETF (NYSEMKT: SPY). The SPDR fund has exactly the same objective as its Vanguard counterpart, and the two ETFs are very similar in terms of performance.
The SPDR ETF has historical significance as the first major ETF to gain traction in the US market. It is also the largest fund currently, with $ 333 billion under management. Still, with an expense ratio of 0.09%, it is more expensive than the Vanguard S&P 500 ETF.
SPDR S&P 500 is one of the most traded ETFs on the market, giving it a level of liquidity that allows long-term investors and short-term traders to buy and sell stocks in large quantities without harming to the market. For typical Robinhood investors with small amounts to invest, the extra liquidity isn’t that much, but the slightly higher fees aren’t a big deal either, coming in at $ 0.60 per year for each. $ 1,000 invested.
3. ARK Innovation ETF
ARK Innovation ETF (NYSEMKT: ARKK) is a different type of exchange traded fund from the above S&P 500 trackers. It is an active ETF managed by ARK Invest, with budding investing legend Cathie Wood at the bar. Holdings change daily, with the fund disclosing its purchases and sales to investors after the close of each trading session.
ARK Innovation is The best ETF of ARK Invest, incorporating the best ideas from each of the other four actively managed ETFs in the fund family. With stocks focused on fintech, genomics, next-gen internet and industrial innovation, ARK Innovation has climbed 181% in the past year, absolutely crushing the returns of 20% of S&P 500 ETFs.
ETF charges a higher annual fee ratio of 0.75% to compensate Wood and ARK Invest for their management and other fees. However, for those looking for active management from a proven manager, ARK Innovation quickly gained importance.
4. Direxion Daily S&P Oil & Gas Exploration & Production Bull 2x ETF
The fourth ETF on the Robinhood list is a mouthful. Direxion Daily S&P Oil and gas exploration and production Bull 2x ETF (NYSEMKT: GUSH) is a leveraged ETF, which means it tracks an index but provides daily multiplied returns compared to traditional ETFs.
This ETF tracks a group of stocks that are all active in the exploration and extraction of oil and natural gas. You will find these same stocks in the traditional SPDR S&P Oil and Gas Exploration and Production ETF (NYSEMKT: XOP), and they include companies like ExxonMobil, Marathon Oil, and Diamondback Energy.
However, the ETF Direxion aims to produce double the daily movement of this index. So if oil and gas stocks would increase by 1% on any given day, that ETF would increase by 2%. The same is true on the downside, with daily losses also being magnified.
Leverage ETFs are riskier than regular ETFs, and Direxion has a high expense ratio of 1.04%. It is not as good a long term game as the above ETFs. It is best suited for short-term traders who expect to benefit from the rise in oil prices which, in turn, will increase the shares of these energy E&P companies.
5. iShares Money Trust
The last is iShares Silver Trust (NYSEMKT: SLV). This fund is a commodity ETF that tracks the price of silver.
iShares Silver owns nearly 20,000 tonnes of silver bullion, each of its shares corresponding to just under 0.93 ounces of silver at current levels. However, the ETF charges an annual expense ratio of 0.50%, and since its money does not generate cash, it takes a portion of the bullion and sells them at regular intervals. That’s why the initial target of 1 ounce per share has fallen to 0.93% in the 15 years since its inception in 2006.
For investors looking to gain exposure to silver, iShares Silver has the advantage of not requiring you to buy and store large bullion of metal. Many believe that money has great potential for appreciation, but unlike traditional equity ETFs, there is no underlying activity to generate profit or pay dividends on iShares Silver’s cash holdings.
Robinhood investors are smarter than you think
Robinhood investors have a bad reputation, but these ETF holdings are pretty nifty. The combination of strong S&P 500 index funds and some more aggressive strategies on specific themes is consistent with a strong asset allocation strategy. If you think energy and precious metals will do well, then adding an energy ETF and a silver ETF in moderation to a core of S&P index funds and a well-diversified active ETF is a perfectly reasonable way to go.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.