The Ultimate Alternative ETF To Buy Now

Last month in The Juice, we introduced you to alternative ETFs. You can find the link to that installment in today’s Freshly Squeezed section. 

In it, we advised long-term investors and novice or otherwise inexperienced traders to stay away from leveraged ETFs that aim to multiply the return of a broad underlying index. These are complicated products that rebalance daily and are not meant as buy-and-hold investments. 

In the same installment, we suggested looking at what we consider an alternative ETF that our sister newsletter, The Spill, recommended. The Pacer US Small Cap Cash Cows 100 ETF (CALF) owns a selection of small cap stocks that pass muster on its primary metric of cash flow. 

Our rationale for considering CALF is similar to the case we make for owning the alt ETF we will introduce to you today. It’s a brand new ETF and — if you’re an aggressive, long-term investor — could make a ton of sense to round out your portfolio. 

Before we give you the lowdown on this ETF, consider our basis for using alternative products — be it ETFs or non-traditional/non-traded investments — in the first place:

They’re alts because they give you the chance to execute strategies you likely could not execute on your own. The type of stuff once only available to the big money.

This is really the key. And it’s why we include some ETFs in the broad alternative investment category. In our eyes, an alt can be anything as long as it’s unconventional and allows individual investors to do things that they never could never do previously or would have a difficult time doing due to lack of resources after they have proper exposure to the broad market via a low-cost, index fund. 

To this end, as we said in relation to CALF—

…we think CALF qualifies as an alternative ETF because it’s doing something fancy with an index that would be incredibly difficult for everyday investors to accomplish. It’s hard enough to own all of the stocks in a broad market ETF such as SPY or QQQ (obviously), but it’s a whole ‘nother ball game to effectively screen an index based on a metric such as cash flow and come up with a set of names that will not only keep you solvent, but generate impressive returns like CALF has.

Something similar applies to an ETF that iShares released just over a month ago. The iShares Top 20 U.S. Stocks ETF (TOPT) is brand spanking new. And, as its name makes clear, the ETF owns the broad stock market’s 20 biggest names. 

In fact, the top five holdings in TOPT — Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), Tesla (TSLA), Amazon.com (AMZN) — account for 53.6% of the fund. Along with a little bit of cash, the remaining 46.4% of TOPT sits in the next 15 top stocks, starting with Meta Platforms (META) at a 4.6% concentration and ending with the 20th holding, Abbvie (ABBV) at 1.7%. In between, you have companies such as Mastercard (MA), Visa (V) Home Depot (HD), Costco (COST), Exxon-Mobil (XOM) and JPMorgan (JPM). 

The obvious risk here is concentration risk. 

But maybe this isn’t a big deal to you if you want to own America’s top international conglomerates. 

As we said last week in another installment of The Juice that you can find the link to below, before you go too deep into alts you should—

Solidify(ing) a core long-term investing strategy first. One that’s probably anchored with broad market ETFs and maybe a few of your favorite individual stocks. Ideally, you throw in some income producers such as dividend payers and bonds.

But, as iShares says in their marketing material for TOPT—

Investors can gain exposure to the strength of these companies through one share of TOPT, which could cost more than $7,000 to purchase individually.

And these companies blow away the rest of the broad market and lead the economy. Are most individual investors able to buy all 20 of these companies in size? Of course not. But you can pick up one share of TOPT for around $25. 

And, at the moment, the expense ratio is a very reasonable 0.20%. 

The Bottom Line: If you own SPY, QQQ, maybe a dividend ETF and some other income-producing investments and you want additional exposure to the nation’s top companies, TOPT is a great way to do it. 

We absolutely consider it an alternative ETF that essentially helps you execute a traditional strategy that’s pretty impossible for most investors to execute on their own. Are you really going to build positions in the 20 names TOPT holds with the ease of getting them in one shot via an ETF you can grow your position in over time? 

The Juice thinks that for investors who check the above-mentioned boxes, TOPT represents a strong, long-term buy.

• What Are Alternative ETFs 
• Dive into Expert Picks – We Spill the Best Daily!
• Are Alternative Investment Options Only For ‘Professional’ Investors?
• Check Out The Juice’s Favorite ETF Screen