The Top ETFs to Watch

Vanguard S&P 500 UCITS ETF

Data as of 31 December 2023 (Distribution Yield as of 15 January 2024). Past performance is not a reliable indicator of future results.

The S&P 500 index plummeted more than 20% in 2022, but bounced back in 2023, gaining 24% by the end of the year. With the Fed signalling interest rate cuts may be on the way, the index could be set to enjoy another positive year.

The S&P 500 is a stock index which tracks the performance of 500 of the largest companies listed on the US stock exchanges. The long-term performance of this index has been exceptional, producing an average total annual return of around 10% for more than five decades.

Although 10% may not sound like a terribly striking figure, over the long-term, this kind of growth has the potential to create significant wealth for investors who contribute to their investments regularly.

This impressive long-term growth means that ETFs which track the S&P 500 are frequently touted amongst the top ETFs to buy and hold for the long-term. One such ETF is the Vanguard S&P 500 UCITS ETF, which boasts very low fees.

An investment in this S&P 500 ETF offers investors instant diversification over 500 successful US companies from a variety of industries. However, investors may want to consider that the index is becoming increasingly weighted towards technology stocks which could cause issues if this industry struggles in the future, as it did in 2022.

iShares NASDAQ-100 UCITS ETF

Data as of 31 December 2023 (Distribution Yield as of 15 January 2024). Past performance is not a reliable indicator of future results.

After struggling for most of 2022, technology stocks roared back to life in 2023. In fact, much of the S&P 500’s gains last year came from a handful of mega-cap tech stocks. So, what if you want to focus your investment more on the technology sector? What are the top tech ETFs?

The Nasdaq-100 index is composed of 100 of the largest non-financial companies listed on the Nasdaq Stock Exchange. Although the index spans a number of industries, it is heavily skewed towards technology.

Consequently, for those feeling bullish on the tech sector, an ETF tracking the Nasdaq-100 may be an option for 2024. The iShares NASDAQ-100 UCITS ETF is one such ETF.

After a year to forget in 2022, when the ETF fell more than 30%, the iShares NASDAQ-100 UCITS ETF soared more than 50%, placing it amongst the top performing ETFs in 2023.

However, if you are thinking of investing in this ETF in 2024, it is important to bear in mind that, as the Nasdaq-100 is a market capitalisation weighted index, the performance of this ETF is strongly influenced by just a handful of companies.

Although the Nasdaq-100 uses a modified market capitalisation weighting method, which limits the influence of the largest companies on the index, the following eight companies account for almost 43% of the entire fund.

• Microsoft
• Apple
• Amazon
• Broadcom
• Meta Platforms
• Nvidia
• Tesla
• Alphabet (Google)

As things stand then, the success of this ETF is heavily dependent on the continued success of these companies.

Whilst these stocks have been some of the top performing stocks in recent years and, consequently, have contributed to this being one of the top performing ETFs over the last decade, their continued growth is not guaranteed. Investors should, therefore, bear this in mind before investing in a Nasdaq-100 ETF.

iShares STOXX Europe 600 Banks UCITS ETF

Data as of 31 December 2023 (Distribution Yield as of 15 January 2024). Past performance is not a reliable indicator of future results.

One of the industries which have benefitted from rising interest rates over the last two years has been banking. After operating on record low interest rates since the financial crisis in 2008, higher rates have allowed banks to generate more from their lending operations.

However, whilst higher rates tend to lead to higher net interest income, they can also lead to an increase in bad debt, as customers struggle with repayments. Consequently, interest rates staying at restrictive levels for too long wouldn’t be beneficial for banks.

Despite hawkish rhetoric from the BoE and ECB, the markets currently anticipate that both will be forced to start cutting rates by summer 2024 in order to avoid an economic downturn.

As interest rates begin to fall, they may arrive at more of a “sweet spot” which allows banks to earn more money from lending than they have for much of the last decade, whilst lowering the risk of increased loan defaults.

The iShares STOXX Europe 600 Banks UCITS ETF tracks an index composed of European banks. However, it’s important to remember that the banking industry is cyclical. A recession in Europe would undoubtedly have a negative impact on this ETF.

SPDR S&P Global Dividend Aristocrats UCITS ETF

Data as of 31 December 2023 (Distribution Yield as of 15 January 2024). Past performance is not a reliable indicator of future results.

For those seeking additional income, the top ETF to watch in 2024 may be one which is composed of dividend paying stocks.

The SPDR S&P Global Dividend Aristocrats UCITS ETF tracks an index which is made up of companies from around the world which have increased or maintained dividend payments for at least 10 consecutive years.

There are other similar ETFs which track indices composed dividend aristocrats from more specific regions, such as the UK and Europe. However, the Global Dividend Aristocrats Index offers geographical diversification, which will reduce investors exposure to any particular region. Although, it should be noted that US stocks account for 50% of this ETF.

iShares MSCI India UCITS ETF

Data as of 31 December 2023. Past performance is not a reliable indicator of future results.

India is home to one of the world’s largest and fastest growing economies. For the year ending March 2024, India is estimated to record economic growth of 7.3%, which would represent the third consecutive year of economic growth exceeding 7%.

And economic growth is forecast to continue in the years ahead. By 2028, India is forecast to be the third largest economy in the world, overtaking Japan and Germany. Looking much further ahead, Goldman Sachs Research projects that India will have the second largest economy in the world by 2075.

Consequently, investors have been paying an increasing amount of attention to the country. Amidst this favourable sentiment and remarkable economic growth, the Indian stock market has performed well recently.

With the Indian economy forecast to record strong growth over the coming years, India ETFs may represent some of the top ETFs to buy and hold. The iShares MSCI India UCITS ETF tracks a stock index which is composed of large and mid-cap stocks which represent around 85% of the entire Indian stock market.