January 2022 could be a good time to review financial goals and start investing regularly. Long-term investors know that time is always on their side.
Here’s why: Let’s assume you are now 30 years old, with $10,000 in savings and that you plan to retire at age 65. You decide to invest that $10,000 in a fund now, and make an additional $3,000 of contributions annually at the start of the year.
You have 35 years to invest. And the annual return is 7%, compounded once a year. At the end of 35 years, the total amount saved will be over $550,000.
Saving $3,000 a year would mean being able to put aside less than $9 a day. And if you were to increase the amount of annual contributions from $3,000 to $4,000, the total amount saved comes in closer to $700,000. In other words, time and compound interest would work together to help an individual save for their retirement years.
Today's article introduces two exchange-traded funds (ETFs) that could appeal to investors who are not looking to time the market in the short-run but instead have long-term goals.
1. Invesco NASDAQ Next Gen 100 ETF
- Current Price: $31.79
- 52-Week Range: $29.91 - $36.24
- Dividend Yield: 0.26%
- Expense Ratio: 0.15% per year
Most of our readers would know that the NASDAQ 100 index comprises 100 of the leading non-financial companies listed on the NASDAQ Stock Exchange based on their market capitalizations (caps). Those who want to track the returns of the index typically buy the Invesco QQQ Trust (NASDAQ:QQQ), one of the most traded ETFs in the US. In the past year, QQQ returned about 27%.
On the other hand, our first fund, the Invesco NASDAQ Next Gen 100 ETF (NASDAQ:QQQJ), invests in the 101st to the 200th largest names on the NASDAQ. Therefore, we could regard them as the next generation of non-financial companies listed on the exchange. The fund started trading in October 2020.
The top 10 holdings in QQQJ account for close to 18% of net assets of $1.21 billion. In terms of the sub-sectors, we see information technology (36.18%), health care (21.47%), communication services (13.70%), consumer discretionary (12.44%) and industrials (10.64%).
Less-than-truckload (LTL) freight name Old Dominion Freight Line (NASDAQ:ODFL); Trade Desk (NASDAQ:TTD), which operates a cloud-based advertising platform; biopharma group AstraZeneca (NASDAQ:AZN); document database firm MongoDB (NASDAQ:MDB); and Zebra Technologies (NASDAQ:ZBRA), which is well-known for barcode scanners, lead the names on the roster.
In the past 12 months, the ETF is up about 6.7%, and hit a record high in November 2021. However, since then, many of the names in the fund have come under pressure, and QQQJ has lost about 9.5%. Forward P/E and P/B ratios stand at 32.42x and 5.63x.
We like the fund as it invests in mid-cap growth names across various sectors. Interested readers could consider buying the dips.
2. ProShares S&P MidCap 400 Dividend Aristocrats ETF
- Current Price: $73.39
- 52-Week Range: $61.77 - $75.67
- Dividend Yield: 2.48%
- Expense Ratio: 0.4% per year
Many investors rely on dividend shares for building a passive income stream. The ProShares S&P MidCap 400 Dividend Aristocrats (NYSE:REGL) focuses on mid-cap names that have been growing their dividends for well over a decade. Analysts highlight that stable dividend payers typically have strong fundamentals with solid earnings growth.
REGL, which has 53 holdings, tracks the S&P MidCap 400 Dividend Aristocrats Index. The fund started trading in February 2015.
Financials have the highest slice with 28.07%. Next in line are industrials (21.08%), utilities (20.19%), materials (11.03%) and consumer staples (8.82%). The leading 10 names make up about 22% of the fund’s net assets of $1.05 billion.
Nu Skin Enterprises (NYSE:NUS), which develops personal care products and wellness products; Renaissancere Holdings (NYSE:RNR), which provides insurance and reinsurance products; utility group ONE Gas (NYSE:OGS) and Essential Utilities (NYSE:WTRG); and manufacturer of coatings, sealants as well as building materials RPM International (NYSE:RPM) are among the leading names in the ETF.
In the past 52 weeks, REGL returned 18.6% and saw a record high in May 2021. P/E and P/B ratios are 17.26x and 2.11x. A potential decline toward the $72 level would improve the margin of safety for buy-and-hold investors.