3 Top ETFs I'm Planning to Buy Hand Over Fist in 2025

Investing in individual stocks has always been my passion, and I believe that a well-thought-out stock portfolio can yield better results than the broader market. However, there's also significant value in investing some money into top-quality index funds to keep things straightforward.

Index fund ETFs allow investors to gain diversified access to a mix of stocks within one investment option and can achieve impressive returns over the long term. Keeping this in mind, while many of my favorite stocks, especially those with strong dividends, are quite appealing right now, I plan to gradually invest in three specific ETFs during 2025.

The Essential ETF for Every Investor

If I had to choose one investment to hold onto, it would undoubtedly be the Vanguard S&P 500 ETF (VOO). This fund tracks the S&P 500, which is regarded as one of the best indicators of U.S. stock market performance.

This ETF stands out because of its incredibly low expense ratio of 0.03%. This means that if you invest $10,000, only $3 will go towards annual expenses. Historically, the S&P 500 has offered average annual returns around 10%, suggesting that a $10,000 investment could potentially grow to approximately $175,000 over 30 years, with no extra management required.

My Leading ETF Choice for 2025

At the start of 2024, small-cap stocks were at their lowest price-to-book ratios compared to large caps since the late 1990s. Throughout the year, this gap has expanded further due to the success of larger tech stocks and rising interest rates.

Currently, the average company within the Russell 2000 small-cap index trades at a price-to-book ratio of 1.9, while the typical S&P 500 company stands at 4.7. With interest rates finally easing and a pro-growth trend anticipated, small-cap stocks may have considerable advantages. This makes the Vanguard Russell 2000 ETF (VTWO) my top ETF pick for 2025.

Investing in AI with Reduced Risk

I firmly believe that artificial intelligence (AI) represents a huge opportunity and could be one of the most transformative trends of our time. However, my expertise lies in evaluating certain sectors like banking, real estate, and e-commerce, and AI is outside my comfort zone.

Therefore, I plan to start investing in the Ark Autonomous Technology and Robotics ETF (ARKQ). Managed by Cathie Wood's Ark Invest, this fund comprises a carefully selected range of stocks poised to benefit from the AI boom, including well-known companies like Tesla and Nvidia, as well as lesser-known firms like Deere and Kratos Defense & Security.

It is important to note that this ETF has the highest expense ratio on this list at 0.75%, which aligns with the costs of specialized, actively managed funds.

Integrating These ETFs into My Portfolio

While I still predominantly invest in individual stocks, I am gradually shifting my strategy to incorporate more index funds that can provide a solid foundation for my portfolio. In 2025, and likely beyond, I plan to allocate 50% of any new investments in my brokerage account towards stocks and the other 50% into these three ETFs.

ETFs, Investing, Stocks