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Written by: Hal Cook | Hargreaves Lansdown
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HL’s experts have picked ETFs for investors to watch in 2024
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Bond yields are compelling – as are some equity valuations
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Our ETFs to watch for 2024 reflect where we see the best opportunities
What should investors expect in 2024? With bond yields at current levels and two notable headwinds to prices seemingly coming to an end, it looks like now might be a good time to invest in bonds. With the potential of a recession in 2024, high quality bonds with a limited potential for default are appealing. For equities, growing corporate earnings will be challenging. Slow economic growth and still high inflation mean lower margins. However, valuations are below average in most global markets and offer upside for long-term investors. With these market trends in mind, the experts on our investment research team have picked five ETFs to watch for 2024 and beyond, three of which are shared below, the others can be found on our website.
Vanguard Global Aggregate Bond ETF
The Vanguard Global Aggregate Bond ETF provides exposure to a range of fixed income investments. Its benchmark, the Bloomberg Global Aggregate Index Hedged GBP, is made up of a mixture of around 28,300 global bonds. The index has a bias towards global government bonds, while the remainder invests in bonds issued by companies. These are all investment grade bonds that are deemed to be more likely to pay off their debts than some higher-risk bonds, such as high yield bonds.
The ETF invests in around a third of the number of constituents in its benchmark, which is known as partial replication. This helps to keep costs down as the ETF doesn’t buy and sell every bond that is added to, or removed from, the index. The ETF also invests in higher risk emerging markets in line with the benchmark.
This ETF could provide a different type of return and help diversify an investment portfolio that already has exposure to company shares or overseas currencies.
iShares core GBP Corporate Bond ETF
The iShares core sterling corporate bond ETF offers a low-cost option for tracking the performance of the Market iBoxx GBP liquid corporates large cap index. The index offers diverse exposure to investment grade bonds issued in GBP. There are bonds from sectors including industrials, utilities and financials.
This ETF could provide bond exposure for an investment portfolio focused on company shares, or bring some diversification to an investment portfolio that is already invested in government bonds.
Vanguard FTSE All-World High Dividend Yield
The Vanguard FTSE All-World High Dividend Yield UCITS ETF offers a low-cost solution for tracking the performance of the FTSE All-World High Dividend Yield Index. The index is comprised of large and medium-sized company stocks from around the world, in developed and higher risk emerging markets that pay dividends that are generally higher than average.
Real estate investment trusts are removed from the index, as are stocks that are forecast to pay a zero dividend over the next 12 months. With the income focus, there’s a high weighting to the financial sector, which makes up around 25% of the ETF followed by consumer staples, energy and health care. In terms of regional exposure, the US, Japan and UK are the three largest country weightings.
This ETF could be used to increase the income potential from an investment portfolio, or to diversify a portfolio focused on capital growth.
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