Here Are My 2 Favorite ETFs for October

Here Are My 2 Favourite ETFs for October

If you are seeking to buy a couple of ETFs in Oct 2024, looking beyond Canadian markets and sectors is a good idea.

Adam Othman

Adam is a value investor who is always on the hunt for fantastic undervalued companies that he can share with Motley Fool readers. He follows Warren Buffett and Charlie Munger's investment advice and has completed the Canadian Securities Course. When he's not investing, Adam can usually be found traveling or skiing.

Published October 7, 2024 7:00 pm EDT

| More on: XIUXQQ

Not all investors are comfortable directly investing in individual stocks. They would rather have exposure to entire markets, sectors, or select pieces of the market, and one of the easiest ways to get that exposure is to invest in Exchange-Traded Funds (ETFs).

While ETFs may not move as rapidly as individual stocks do, there are time constraints and time-related benefits that make buying certain ETFs and avoiding others in particular markets wise investment decisions.

ETF chart stocks — Image source: Getty Images

A TSX ETF

iShares S&P/TSX 60 Index ETF (TSX:XIU) is one of the oldest ETFs in Canada and the world. It started in 1990 and is one of the largest and highly liquid ETFs trading in the Canadian markets. As the name suggests, it exposes investors to the S&P/TSX 60 Index, which tracks the performance of the 60 largest companies in Canada.

This makeup gives its investors exposure to almost all the “leaders” in the Canadian market across multiple sectors. This means all the big six bank stocks, two railway giants, tech giants, and so on. It has a very modest Management Expense Ratio (MER) – that is, the cost of ownership associated with the ETF – of 0.18%.

Most importantly, it has been very rewarding. If you had invested in the fund about 10 years ago, you would have grown your capital by about 125% by now. The trend has been bullish for the last 12 months, and it is unlikely to experience any major shift in the near future.

An American ETF

iShares NASDAQ 100 Index ETF (TSX:XQQ) is the perfect fund for people wanting consolidated exposure to American tech stocks. The index tracks the performance of the 100 largest NASDAQ companies, including all the global tech giants and many emerging giants.

The era of AI is upon us, and with the growth of Nvidia, we already have precedents for how particular tech companies can soar thanks to AI’s momentum.

This is the CAD-hedged version of the ETF, allowing Canadian investors to enjoy a slight edge when the USD weakens. It has been around for a long time, and its growth has been phenomenal. An investment of $10,000 in this ETF 10 years ago would be $47,000 right now.

That’s more growth than most modest growth stocks manage to provide. It’s slightly costlier and relatively risky compared to the Canadian ETF, but the rewards make it worth the risk.

Foolish takeaway

The two ETFs can be excellent buys this month. Both are strong long-term holdings ready to take advantage of the momentum in their respective markets right now. This is particularly true for NASDAQ, which may soar on the combined positive catalysts of rate cuts and existing AI momentum.