Here Are My 2 Favorite ETFs in November
Investing in these two ETFs can expose investors to growth stocks and dividend stocks.
One of my favorite ways to invest is through exchange-traded funds (ETFs). They may not get the same attention as individual stocks, but they can be just as effective at helping you build wealth, often with much less stress along the way.
Instead of picking individual stocks, dealing with company-specific risks, and making dozens of investments to achieve diversification, you can invest in a broad ETF and check off multiple boxes at once. It’s a win-win, if you ask me.
Below are my two favorite ETFs for November. One is growth-focused, and the other is dividend-focused. They’re a great one-two punch.
Image source: Getty Images.
1. Vanguard S&P 500 Growth ETF
The S&P 500 is one of three major U.S. stock market indexes, alongside the Nasdaq Composite and Dow Jones. It tracks the performance of the 500 largest public U.S. companies. The Vanguard S&P 500 Growth ETF (VOOG 0.84%) is somewhat of a subset of the S&P 500, focusing solely on the growth stocks within the index.
Many people think of growth stocks as small and emerging companies, but the “growth” label has nothing to do with size. It’s all about a company being able to increase its earnings at a higher rate than its industry average and the broader market.
This ETF is a great example of combining stability and growth. Being in the S&P 500 means the companies have reached a certain level of maturity and market fit, which is key to sustained growth. It doesn’t exempt them from down periods or volatility, but it does add a certain level of reliability.
The ETF is market-cap-weighted, so you’ll notice major tech stocks make up a lot of it, and the tech sector in general is heavily represented. Here’s how the sectors of this ETF compare to the broader S&P 500:
| Sector | VOOG | S&P 500 |
|---|---|---|
| Communication services | 12.30% | 8.90% |
| Consumer discretionary | 13.80% | 10.10% |
| Consumer staples | 2.60% | 5.90% |
| Energy | 1.20% | 3.30% |
| Financials | 5.20% | 12.90% |
| Health care | 6.80% | 11.60% |
| Industrials | 6.10% | 8.50% |
| Information technology | 49.80% | 31.70% |
| Materials | 1.20% | 2.20% |
| Real estate | 0.70% | 2.30% |
| Utilities | 0.30% | 2.50% |
| Other | N/A | 0.10% |
Data source: Vanguard.
Typically, you’d want more diversification from a 234-stock ETF, but when you’re focusing on growth, the tech sector has been the go-to place for the past decade or two, and rightfully so. Below are the five top-performing sectors over the past decade:
2. Vanguard High Dividend Yield ETF
Growth stocks have been the darlings of the stock market for a while now, but dividend stocks hold a special place in my heart. The stock market is infamously irrational and volatile at times, so having dividends and guaranteed income coming is a way to counter the madness a bit.
One of my preferred ways to invest in dividend stocks is through a dividend-focused ETF, such as the Vanguard High Dividend Yield ETF (VYM -0.27%). This ETF focuses on large-cap companies with above-average dividend yields, so it has a respectable payout.
Its current dividend yield is around 2.8%, which is less than its 10-year average but still attractive nonetheless — especially compared to the S&P 500.
VYM Dividend Yield data by YCharts
Assuming the yield continues to hover around 3% long term, every $1,000 invested could pay investors $30 annually. It’s not life-changing money by any means, but it adds up and can compound — especially if you use a dividend reinvestment plan (DRIP).
Since this ETF focuses on companies with above-average dividends, its holdings are more equally spread across sectors than S&P 500 ETFs or growth ETFs. Below are its sectors and how much of the ETF they make up:
| Sector | Percentage |
|---|---|
| Basic materials | 2.10% |
| Consumer discretionary | 10.40% |
| Consumer staples | 11.10% |
| Energy | 9.50% |
| Financials | 20.80% |
| Health care | 11.80% |
| Industrials | 12.80% |
| Technology | 10.00% |
| Telecommunications | 4.20% |
| Utilities | 7.30% |
Data source: Vanguard.
You won’t receive ultra-high dividend yields from a broad ETF like this one, but its yield is routinely better than other dividend-focused ETFs. If you’re looking for consistent income without worrying about the stability of the dividend, this ETF is for you.
Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.