The S&P 500 is on track to close its second consecutive year with over 20% gains, and this positive momentum is expected to continue into 2025.
According to BMO strategist Brian Belski, the benchmark index could reach 6,700 by the end of next year, representing a potential 14% upside.
However, for investors seeking alternatives with a history of outperforming the S&P 500, two exchange-traded funds (ETFs) stand out: the JPMorgan US Research Enhanced Index Equity ETF (JREU) and the Gotham Enhanced 500 ETF (GSPY).
JPMorgan US Research Enhanced Index Equity ETF (JREU)
This London-listed exchange-traded fund is accessible to most European investors and has outperformed the S&P 500 every year since 2019.
It’s on track to beat the benchmark index this year as well.
JREU manages a total of about $9.41 billion in assets and taps on a strategy called “research enhanced indexing”.
What it means is that the fund favors several small bets over a few big ones.
The overall composition of this ETF mirrors the benchmark but the REI strategy enables it to deliver excess returns. JPMorgan US Research Enhanced Index Equity fund is currently up more than 26% versus the start of 2024.
Gotham Enhanced 500 ETF (GSPY)
This actively managed New York-listed exchange-traded fund is available for US investors via most brokers.
It was founded in 2021 and has outperformed the benchmark ever since.
GSPY invests in every stock included in the S&P 500 but with a notable tweak.
It spends more on the S&P 500 stocks that it thinks are cheaper and less on others that it estimates to be more expensive.
This strategy enables it to deliver better returns for its investors than the S&P 500.
A few of the top holdings of Gotham Enhanced 500 ETF include Apple Inc., Microsoft, Nvidia, Amazon, and Google.
Why pick ETFs over individual stocks?
Investing in ETFs saves you from the hassle of picking individual stocks and managing your portfolio.
They typically hold a basket of stocks, reducing the impact of any single investment on your overall portfolio.
This diversification helps spread the risk.
Additionally, investing in individual stocks can incur high transaction fees, especially if you’re an active trader.
Exchange-traded funds lower such costs for you as well.
ETFs get you exposure to a wide range of sectors while also offering high liquidity.
This means you can buy and sell these funds throughout the trading day at market prices.
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