Have $1,000 to Invest? These Are the Two Best ETFs to Buy Right Now

Where to Invest Next?

The first half of 2025 was volatile, but as we stretch into summer, investors have greater clarity on how the year is shaping up. For those with $1,000 to invest, buying exchange-traded funds (ETFs) may be the best option. 

A clear view of the current economic landscape is essential to determining where the market is headed, but June’s data offers conflicting signals. Real GDP contracted 0.5% in Q1, driven by a $71.5 billion trade deficit as exports fell faster than imports, yet the U.S. has collected $100 billion in tariff revenue so far this year and could see as much as $300 billion for all of 2025. 

Unemployment fell to 4.1% in June, with the U.S. adding 147,000 non-farm payroll jobs, surprising economists and indicating a solid, still-growing economy. 

Despite inflation sitting at 2.4%, the Federal Reserve refuses to budge, keeping interest rates at 4.25% to 4.50%, though there is the potential for a 25-basis-point cut in September. While the Fed expects tariff-related inflation to appear, it is not a universally held view and some at the central bank want a rate in July. 

Despite the cross-messaging, certain sectors are poised to thrive, driven by innovation and policy tailwinds. ETFs offer diversified exposure to these opportunities, and two ETFs stand out for their alignment with 2025’s economic outlook, promising strong returns for investors.

Vanguard Financials ETF (VFH): Capitalizing on Rate Dynamics

The Vanguard Financials ETF (NYSEARCA:VFH) is a top pick for 2025, offering exposure to banks, insurers, and investment firms poised to benefit from the current interest rate environment. 

Trading at $128.46 with a 1.7% dividend yield, VFH has a low 0.10% expense ratio, making it cost-effective for investors with $1,000. Financials are gaining momentum due to sustained high yields from the Fed’s inflated interest rates. Goldman Sachs expect  the 10-year Treasury yield to end 2025 aat 4.2%, boosting net interest margins for banks like JPMorgan Chase (NYSE:JPM), the top VFH holding. 

Despite tariff-driven inflation risks and a projected unemployment increase next year, VFH’s diversified portfolio covering over 400 financial firms helps offset volatility. Strong corporate bond performance and expected rate cuts in September enhance its appeal. With an 8% year-to-date gain, VFH is well-positioned to outperform, leveraging financials’ sensitivity to economic cycles and policy shifts.

Vanguard Information Technology ETF (VGT): Riding the Innovation Wave

The Vanguard Information Technology ETF (NYSEARCA:VGT) is another standout ETF, offering exposure to tech giants driving AI, cloud computing, and quantum advancements. Priced at $685.92 with a 0.46% dividend yield and a 0.10% expense ratio, VGT is ideal for capturing tech’s growth potential. 

Despite concerns about tariff-driven economic contraction, tech remains resilient, due to  investor confidence in stocks like Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT), key VGT holdings. Analysts highlight tech’s leadership, with AI driving demand. Tariff risks may raise costs, but tech’s high margins and global reach cushion impacts. 

VGT’s 8% year-to-date return reflects its strength, and with AI’s projected market continuing to expand VGT’s diversified exposure to over 300 tech firms positions it to outperform in 2025’s innovation-driven economy.

Key Takeaway: Strategic ETF Picks for 2025

For investors with $1,000, VFH and VGT are the best ETF buys right now, aligning with 2025’s economic realities. VFH capitalizes on financials’ resilience amid high interest rates and expected Fed cuts, offering stability and yield with a low expense ratio. VGT taps into technology’s unstoppable innovation, delivering growth despite trade and economic headwinds. 

Both ETFs provide diversified exposure, mitigating risks from tariff-driven inflation and a potential fourth-quarter recession, though that is looking less likely now. VFH suits those seeking cyclical value, while VGT appeals to growth-oriented investors. Together, they offer a balanced approach to outperform in a challenging market, making them ideal for maximizing returns on a $1,000 investment.

 

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