The Smartest ETFs to Buy with $1,000 Right Now

You don’t have to be a rocket scientist to make money in the stock market. There are smart moves everyday investors can make to become wealthier.

If you have about $1,000 and don’t need it for living expenses or to pay off debt and want to invest, here are two exchange-traded funds (ETFs) that are particularly smart buys today.

A core index fund with a smart approach to equity weightings

Large-cap stocks serve as excellent foundational investments for many investors’ portfolios. An index fund that tracks S&P 500which is comprised of 500 of America’s biggest and best businesses, can be a great way to gain exposure to this wealth-creating asset class.

The Invesco S&P 500 ETF Equal Weight (RSP 0.96%) go one step further. Unlike most S&P 500 index funds, which are weighted by market capitalization, the Invesco ETF, as its name suggests, equally weights the stocks it buys.

For investors who want to own large-cap stocks but are concerned that megacap stocks Nvidia, Appleand Microsoft have grown too large and represent too large a portion of many index funds, the Invesco S&P 500 Equal Weight ETF could be an excellent choice.

By equally weighting its holdings, the Invesco fund reduces concentration risk. In this way, the ETF provides a greater level of diversification for its shareholders, which it maintains by rebalancing its holdings quarterly.

Rather than being overloaded with tech stocks like many large-cap index funds, the result is that Invesco’s ETF holdings are more broadly allocated across sectors. Information technology was actually the fourth largest sector as of September 10, behind industrials, financials and healthcare.

Image source: Invesco.

Finally, Invesco’s fees are reasonable. The Invesco S&P 500 Equal Weight ETF has an expense ratio of 0.20%. That’s just $2 per $1,000 invested per year.

Smaller companies, bigger potential rewards

If you want to add even more growth and diversification potential to your investment portfolio, take a look at Vanguard Russell 2000 ETF (VTWO 2.48%). The Vanguard ETF gives you a low-cost way to invest in a broad collection of small- and mid-cap stocks. These smaller businesses tend to have vast potential for expansion.

The Vanguard Russell 2000 ETF holds holdings in more than 2,000 stocks with an average market value of $3 billion. That’s quite different from the median market capitalization of stocks held by the Invesco S&P 500 Equal Weight ETF, which stood at nearly $100 billion as of June 30. The two funds are thus complementary. Together, they can add both ballast and strong growth to your portfolio.

In particular, small businesses tend to be very sensitive to interest rates. In the current economic environment, this could be a very good thing. With inflation slowing, the Federal Reserve has indicated it may begin cutting rates as soon as this month. This could be an advantage for owners of small-cap stocks. Small businesses often rely on loans to expand their operations, so they tend to become more profitable when interest rates fall.

With an annual expense ratio of just 0.1%, the Vanguard Russell 2000 ETF can give you a simple and low-cost way to take advantage of a rate cut-fueled rally in small-cap stock prices.