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Despite a bad end to the year, the S&P 500 enjoyed another impressive year in 2024, up 25%. While the New Year is shrouded in uncertainty, the ever-present turmoil in tech stocks could drive the index through the roof again in 2025.
Investors can gain exposure to an index in a number of ways. They can buy individual stocks, or open a position in an exchange-traded fund (ETF) that tracks the S&P 500.
Alternatively, investors can focus on a specific group of stocks using an increasing number of sector or equity ETFs – a trend that is gaining significant traction.
Targeted ETFs like these have the potential to outperform traditional benchmarks like the S&P 500. In addition, they offer additional benefits tailored to an investor’s goals.
Here are two to consider today.
iShares S&P 500 Information Technology Sector ETF
As I say, the excitement surrounding technology stocks – and especially those contributing to the development of artificial intelligence (AI) – has powered the S&P 500’s smart gains in 2024.
This can be demonstrated by the remarkable performance of iShares S&P 500 Information Technology Sector ETF (LSE:IUIT). It’s up 42.3% year-to-date, driven by tech heavyweights like the chipmaker Nvidiathe social media giant Metaand e-marketplace Amazon.
As with any investment, returns like these leave the fund vulnerable to price adjustments. This can happen when excessive profits come in, or when investor confidence suddenly declines.
But I am sure that the fund can continue to perform very well in the long run. Along with AI, it provides exposure to other rapidly growing technologies such as cloud computing, cybersecurity, robotics, and autonomous vehicles.
This ETF has delivered an average annual return of 24.9% since 2019. I expect these strong returns to continue, which is why I currently hold it in my portfolio.
ProShares S&P 500 Dividend Aristocrats ETF
The US stock market is not famous for its profit culture. Dividend-seeking investors often turn to London, which has a wealth of reliable stocks that bring big and growing payouts.
But investors can still access these attributes Stateside with ProShares S&P 500 Dividend Aristocrats ETF (LSE: NOBL). As the name suggests, this thematic ETF is one that focuses on profit sharing.
It owns stocks that have grown dividends for 25 consecutive years or more. In total, it owns shares in 66 different businesses, with major stakes including household names Stanley Black and Decker, McDonald’sagain IBM.
paid a dividend of 2.25 %. But its ability to deliver reliable revenue growth still makes it worth a lot of attention.
In addition, with interest on the loan taken into account, this ProShares fund has delivered an annualized return of 10.9% over the past five years. That’s better than the 6.2% the FTSE 100 – most popular with equity investors – has delivered over the same period.
Its bias toward dividend stocks can see it underperform stock-focused ETFs during bull markets. However, the stable and rising income it offers still makes it worth a closer look, depending on the investor’s goals.
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