Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

2 ETFs For Investing Tax Returns In Order To Create Future Wealth

By Investing.com (Tezcan Gecgil/Investing.com )ETFsApr 18, 2022 04:02AM ET
www.investing.com/analysis/2-etfs-for-investing-tax-returns-in-order-to-create-future-wealth-200622341
2 ETFs For Investing Tax Returns In Order To Create Future Wealth
By Investing.com (Tezcan Gecgil/Investing.com )   |  Apr 18, 2022 04:02AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
CDNS
-3.46%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AAPL
-0.80%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
COST
-1.19%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
OXY
-2.71%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
JNJ
-0.06%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NKE
-2.30%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

April brings an array events worth noting. Spring generally begins to ramp up and on Wall Street a new earnings season starts. As well, for millions of Americans, mid-April is the filing deadline for tax returns. This year, it's today, Monday, Apr. 18.

The US Internal Revenue Service typically issues refunds to eligible taxpayers within 21 calendar days. As of Apr. 8, more than 70 million refunds have been issued by the IRS. The average tax return is over $3,100, up close to 10% from the prior year.

If you're getting a return, there are ways to make the most of this extra cash. Many Americans are likely to allocate some of that into long-term investment portfolios. For example, a recent LendingTree survey highlights:

“46% plan to put refund money in their savings accounts, compared with 41% in 2021 and 40% in 2020.”

Seasoned investors realize that time is on their side when it comes to investing for their future, particularly retirement years. For instance, let’s assume that an individual is now 25, with $1,000 in savings, and plans to retire at age 65.

Investing $1,000 and making an additional contribution of $3,000 per year for 40 years could add up to a substantial nest egg. If the annual return is 7%, compounded annually, at the end of 40 years, the investment pot grows to well over $650,000.

Meanwhile, if the annual rate is 8%, the total amount exceeds $850,000. Therefore, investing at least part of that tax refund could mean a substantial portfolio in retirement years.

With that said, today's article introduces two exchange-traded funds (ETFs) for building potential long-term wealth.

1. iShares MSCI USA Quality Factor ETF

  • Current Price: $130.25
  • 52-week range: $121.51 - $146.83
  • Dividend yield: 1.34%
  • Expense ratio: 0.15% per year

Our first fund, the iShares MSCI USA Quality Factor ETF (NYSE:QUAL), invests in US large- and mid-capitalization (cap) quality shares based on certain fundamental metrics. These stocks typically have high return on equity (ROE), stable year-over-year earnings growth as well as low financial leverage. The fund start trading in July 2013.

QUAL Weekly
QUAL Weekly

QUAL, which tracks the MSCI USA Sector Neutral Quality Index, has 124 holdings. In terms of sectors, we see information technology, IT, (27.86%), healthcare (14.46%), consumer discretionary (11.65%), financials (10.01%) and communication (8,99%), among others.

The top 10 stocks in the portfolio account for close to a third of the $22.6 billion in net assets. Johnson & Johnson (NYSE:JNJ), Apple (NASDAQ:AAPL), Nike (NYSE:NKE), Costco Wholesale (NASDAQ:COST), and Meta Platforms (NASDAQ:FB) are among those names.

The ETF is down 10.5% year-to-date, but still up 2.5% in the past 12 months. Trailing P/E and P/B ratios are 21.55x and 6.26x. A potential decline toward $125 would make QUAL even more attractive for buy-and-hold investors.

2. Vanguard Mid-CAP Index Fund ETF Shares

  • Current Price: $232.91
  • 52-week range: $216.62 - $261.53
  • Dividend Yield: 1.28%
  • Expense ratio: 0.04% per year

Those investors looking for low-cost ETFs typically consider funds offered by Vanguard. Our next fund, the Vanguard Mid-CAP Index Fund ETF Shares (NYSE:VO), invests in mid-cap stocks, which, according to Vanguard, may provide “superior long-term performance, higher risk-adjusted return, a compelling combination of attractive earnings growth and reasonable valuations, and access to companies at the peak of their growth cycle.”

VO Weekly TTM
VO Weekly TTM

VO, which has 380 holdings, tracks the returns of the CRSP US Mid Cap Index. The fund start trading in January 2004, and net assets are over $157 billion.

Technology shares have the highest slice with 16.40%. Next come industrials (14.20%), consumer discretionary (13.80%), financials (11.50%), and healthcare (11.00%). Almost all the companies are from the US.

As the top 10 holdings comprise about 6% of the portfolio, it is not a concentrated fund. Leading names include the software group Synopsys (NASDAQ:SNPS), which focuses on silicon design; Occidental Petroleum (NYSE:OXY); medical device company DexCom (NASDAQ:DXCM); Centene (NYSE:CNC), which offers healthcare plans; and semiconductor specialist Cadence Design Systems (NASDAQ:CDNS).

The fund has lost around 8.5% since the start of the year. VO hit a record high in November 2021. But since then, shares in the ETF have come under pressure. We believe long-term investors could consider buying the dip in VO.

2 ETFs For Investing Tax Returns In Order To Create Future Wealth
 

Related Articles

Tim Knight
ETF Focus: Commodities By Tim Knight - Nov 13, 2022 1

Let’s look at a few commodity ETFs together. In general, they have remained in an uptrend for two years. This channel needs to break in order for commodities to start a downtrend,...

2 ETFs For Investing Tax Returns In Order To Create Future Wealth

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
محمد فراری شاه بخشی
محمد فراری شاه بخشی Aug 20, 2022 2:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
okay good dear
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email