In this article, we discuss the 10 best index funds popular among Reddit investors. If you want to read about more index funds gaining attention on Reddit, go to the 5 Best Index Funds Popular Among Reddit Investors.
The popularity of index funds remains high among investors as they provide ownership of a broad range of equities like (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Tesla, Inc. (NASDAQ:TSLA), and reduce the level of risk due to diversification. Retirement accounts like individual retirement accounts and 401(k) accounts are heavily invested in index funds.
Warren Buffett, legendary investor, philanthropist, and CEO of diversified conglomerate Berkshire Hathaway Inc (NYSE:BRK-B), suggests index funds as a refuge for savings for the later stages of life. Instead of singling out stocks for investments, the Oracle of Omaha recommends picking out all the stocks from the S&P 500 Index at an economical cost through an index fund. In an interview in 2017 with CNBC’s On The Money, Warren Buffett advised investors to “consistently buy an S&P 500 low-cost index fund.”
Index funds often perform better than their actively managed alternatives, in large part due to fees. According to Morningstar, an index fund’s average asset-weighted fee in 2020 was 0.12% compared to the active funds charging 0.62%. To match the return of an average index fund, the average active fund must generate an additional 0.5% in returns. The Head of Product Development and Strategy at ICICI Prudential AMC, Chintan Haria, shared that while directly investing in stocks may seem alluring, the level of research that is necessary to pick stocks can be time-consuming. Hence, index fund investing can be seen as a staging post to entering the realm of stock investing.
Since reaching their lows of June 14, index funds have staged a recovery, as the Invesco QQQ Trust (NASDAQGM:QQQ), SPDR S&P 500 ETF Trust (NYSEARCA:SPY), and SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) have regained 17.2%, 12.6%, and 10.3%, respectively. The Invesco QQQ Trust (NASDAQGM:QQQ) tracks the performance of the NASDAQ Composite Index. The Trust even entered the bull market during this period, as it surpassed gains of 20%. It must be noted that the average stock in the NASDAQ Composite Index has clawed back over 30% from its lows. It is a significant development, as there was a time when the majority of the stocks were down 50% from their peak.
Improvement related to economic conditions could be a major reason for the change in sentiment. Inflation for July 2022 showed a year-over-year increase of 8.5% as opposed to the consensus forecast of 8.7%. The lower-than-expected number for inflation boosted consumer sentiment, as the University of Michigan’s preliminary consumer sentiment index reading for August 2022 was posted at 55.1. This was higher than the median estimate of 52.5, according to data polled from Reuters. The consumer sentiment index reached a record low of 50 in June 2022.
Source: pexels
Our Methodology
Let’s begin our list of the 10 best index funds popular among Reddit investors. Notable Reddit forums were scoured to see which index funds are attracting investors. We also looked at r/wallstreetbets, r/stocks, r/personalfinance, and other forums for stocks and ETFs trading analysis. Furthermore, we have discussed some of the popular stocks being held by these funds and their top 10 holdings. These index funds have been ranked in terms of their net assets as of August 24.
10 Best Index Funds Popular Among Reddit Investors
10. Fidelity ZERO Large Cap Index Fund (NASDAQ:FNILX)
Net Assets: $5.61 billion
The Fidelity ZERO Large Cap Index Fund (NASDAQ:FNILX) is a fund replicating the performance of large-cap stocks listed on the U.S. equity market through its 515 holdings. The ETF came into being in 2018.
The top 10 holdings of the fund represent 26.32% of the portfolio value. Some of the popular stocks included in the portfolio are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Tesla, Inc. (NASDAQ:TSLA). The Fidelity ZERO Large Cap Index Fund’s (NASDAQ:FNILX) average 3-year return stands at over 13.14% as of August 24.
The Fidelity ZERO Large Cap Index Fund (NASDAQ:FNILX) is popular among Reddit users as it does not charge any fees to its investors. This is done so that consumers will be attracted to other financial products offered by Fidelity. Although the fund tracks the performance of the S&P 500 Index, it has not included the term “S&P” in its name because Standard and Poor’s charges a licensing fee of 0.03% of funds under management along with a fixed charge of $600,000. By not keeping S&P in its name, the fund can bypass the 0.03% expense ratio. However, the fund still tracks the S&P 500 Index very closely.
9. ARK Innovation ETF (NYSEARCA:ARKK)
Net Assets: $9.34 billion
The ARK Innovation ETF (NYSEARCA:ARKK) is an exchange-traded fund that has at least 65% of its investments in the field of disruptive innovation.
The ETF falls under the helm of Cathie Wood’s ARK Investment Management and defines disruptive innovation as a new product or service that is introduced due to advancement in technology and which modifies the way the world works. The ARK Innovation ETF (NYSEARCA:ARKK) has an annual management fee of 0.75% and is targeting industries focusing on automation, artificial intelligence, financial technology, and DNA technologies.
Retail investors are confident in the stock-picking ability of veteran investor and CEO of ARK Invest Cathie Wood. During a five-working-day period that ended on August 15, investors bought $54.2 million worth of ARK Innovation ETF (NYSEARCA:ARKK), according to VandaTrack. This was the fastest accumulation of the ETF during a five-working-day period since May 2022. Interestingly, the ARK Innovation ETF outperformed the shares of diversified conglomerate Berkshire Hathaway Inc (NYSE:BRK-B) during July, as it gained 9.5% as compared to the Omaha, Nebraska-based company’s rise of 8.3%.
8. SPDR Portfolio S&P 500 Growth ETF (NYSEARCA:SPYG)
Net Assets: $14.38 billion
The SPDR Portfolio S&P 500 Growth ETF (NYSEARCA:SPYG) is an ETF focusing on companies in the widely popular S&P 500 Index that offer the most stellar growth prospects. The SPDR Portfolio S&P 500 Growth ETF (NYSEARCA:SPYG) has around 240 stocks in its portfolio and has a heavy focus on the information technology sector, followed by consumer discretionary, healthcare, communication services, and seven other sectors. The ETF is popular among Reddit investors as it offers a significantly low annual expense ratio of 0.04% and has a healthy daily average trading volume of over 2.75 million shares.
According to the latest data available, Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Tesla, Inc. (NASDAQ:TSLA) take up over 38% of the ETF’s holdings as of August 19. Meanwhile, the ETF’s top 10 holdings represent more than 49% of the portfolio’s value. Although the ETF has underperformed the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) since the start of the year and in the last full year, it has outperformed the broader market over the past three and five years, respectively.
7. SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA)
Net Assets: $28.46 billion
The SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) looks to replicate the performance of the Dow Jones Industrial Average (DJIA), which comprises 30 blue-chip U.S.-based stocks.
The index has a long history of over a century and is one of the three leading market indices in the U.S. The SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) has an annual expense ratio of 0.16% as of August 24. The DJIA is a price-weighted index in which UnitedHealth Group Incorporated (NYSE:UNH), The Goldman Sachs Group, Inc. (NYSE:GS), The Home Depot, Inc. (NYSE:HD), and Microsoft Corporation (NASDAQ:MSFT) take up 29.42% of the fund’s holdings. Meanwhile, the top 10 holdings represent 55% of the ETF’s portfolio.
Redditors believe that the 30 blue-chip stocks in the SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) have strong fundamentals and can weather extreme economic uncertainty compared to average companies. Many of those 30 companies have a defensive business model and are known for making consistent dividend payouts to investors. The SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) offers a very different profile from the S&P 500 Index in terms of sector holdings.
6. Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD)
Net Assets: $36.75 billion
The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is an ETF that tracks the performance of the Dow Jones US Dividend 100 Index and offers a yield of nearly 3.2% as of August 24. The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD), founded in 2011, has a track record of outperforming during both bear and bull markets. Furthermore, the fund has even held its ground during recessions. However, the fund’s short history does not include any period reflecting the current circumstances of multi-decade-high inflation.
Cisco Systems, Inc. (NASDAQ:CSCO), The Home Depot, Inc. (NYSE:HD), PepsiCo, Inc. (NASDAQ:PEP), and Texas Instruments Incorporated (NASDAQ:TXN) are the four biggest holdings in the ETF. These companies represent a combined stake of 17.3%, while the top 10 holdings take up 40.96% of the fund’s portfolio.
The fund appears to be popular among Reddit investors as it includes stocks that have been paying out dividends for the past ten consecutive years, have a market capitalization of at least $500 million, and fulfill certain requirements related to fundamentals and liquidity. Furthermore, the ETF does not include any master limited partnerships or and real estate investment trusts.
Click the link below to discover several more index funds that carry stocks like (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Tesla, Inc. (NASDAQ:TSLA), and which are popular among Redditors.
Click to continue reading and see 5 Best Index Funds Popular Among Reddit Investors.
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Disclose. None. 10 Best Index Funds Popular Among Reddit Investors is originally published on Insider Monkey.
