The Best ETFs to Buy Now

Finding the best ETFs to buy in an uncertain market environment can seem like a tall task, but these five picks are a good place to start.

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Exchange-traded funds (ETFs) offer investors a variety of different strategies to prepare for whatever the market throws at them – Federal Reserve moves, election uncertainty, economic instability and just about everything else under the sun. We kept all of these in mind as we built this list of the best ETFs to buy now. 

Even as we near the end of the third quarter of 2024, there's still plenty of potential fireworks that could impact the direction of the stock market in the near term. Most economic statistics point to a robust economy. Real GDP (gross domestic product) showed the economy grew at a robust 3.0% clip in the second quarter, following the first quarter's healthy 1.4% pace. Unemployment remains near historic lows. 

Inflation remains elevated, albeit slightly, and it's trending lower. And the Federal Reserve is widely expected to start lowering interest rates at its September meeting. 

Yet risks remain, most notably in the labor market. Indeed, the August jobs report marked the second in a row that showed notable cooling in employment. Meanwhile, mortgage rates hover near 20-year highs, which has had the effect of trapping millions of Americans in their homes and putting existing home sales into a deep freeze. It's hard to justify selling a home financed at a sub-3% rate in order to buy one at a rate closer to 7%. 

Additionally, credit card balances topped $1 trillion for the first time last year, and millions of Americans have seen their budgets crimped by the resumption of student loan payments. 

And then, of course, there's the elephant in the room: The 2024 presidential election. There are strong feelings toward current Vice President Kamala Harris and former President Donald Trump, who are the nominees for their respective parties. This has the potential to spark volatility in the stock and bond markets in the lead-up to November, though the good news for investors is that election years tend to be positive for equities. 

So, how do you invest in an environment like this?

By sticking with quality. 

ETFs loaded with strong companies that have proven their ability to navigate an uncertain market make sense in this environment. 

How do you choose the best ETFs to buy?

Today we're going to take a look at five of the best ETFs to buy to buy. But this of course raises the question of what exactly defines a strong ETF and where we should go to look for them?

To start, it's generally a good idea to stick to relatively broad-market ETFs. You don't have to put your entire portfolio in an S&P 500 index fund, of course, though doing so isn't necessarily a bad idea, particularly if your account is modest in size and diversification is difficult. 

Sector ETFs and highly specialized single-strategy ETFs can add value under the right set of circumstances, and you may have your reasons for wanting targeted exposure. But it's generally going to make sense to keep those positions relatively small while leaving the bulk of your portfolio in more diversified, broader-market ETFs. 

Costs are also a consideration. It's not going to have a major impact on your long-term returns if you hold an ETF with an expense ratio of 0.08% vs 0.10%. Once you reach a certain low-cost threshold, it doesn't move the needle all that much to lower fees by an extra basis point. (A basis point = 0.01%.) But every dollar you pay in fees is a dollar you no longer have available to grow and compound. So, all else equal, it makes sense to buy low-cost ETFs rather than those with higher expense ratios. 

Charles Lewis Sizemore, CFA
Contributing Writer, Kiplinger.com

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.