Do you want to beat the market? Most investors believe owning individual stocks is the only means of doing so. But there are other, safer ways to outperform market-based index funds like the SPDR S&P 500 ETF Trust (SPY -0.11%). Different indexes lead and lag stocks as a whole every year. The key is simply figuring out which areas of the market are positioned to outpace the broad market in the foreseeable future.
With that as the backdrop, here’s a closer look at four exchange-traded funds (ETFs) I suspect are poised to beat the S&P 500 in 2023. Note that in a couple of cases, much of this year’s likely strength is rooted in last year’s relative underperformance.
1. Vanguard Information Technology ETF
Last year was a bad one for most stocks, but it was a downright lousy one for tech stocks. The Vanguard Information Technology ETF (VGT -0.17%) tumbled to the tune of 30% in 2022, largely on fears of the unknown. Technology stocks tend to be highly sensitive to economic weakness, after all. Investors were just thinking defensively in front of what could have turned into a major meltdown.
In retrospect, though, the sellers overshot their target. Standard & Poor’s estimates the S&P 500‘s technology names still inched their way to a record collective profit last year, en route to yet another record earnings this year.
The index’s technology stocks are also priced below their historical average price/earnings ratio — something levelheaded thinkers are realizing now that some time has passed and inflation is starting to cool. Things just aren’t likely to devolve into the worst-case scenario that’s been priced in.
2. Invesco S&P 500 Pure Value ETF
While the technology sector may be in a unique position to outperform the broad market this year, that’s not necessarily the case for other growth sectors. This year may well be when we start seeing value stocks start dishing out the bigger gains, boding well for the Invesco S&P 500 Pure Value ETF (RPV -0.57%).
The key is interest rates. Growth stocks do…
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