Dream ETFs: What Investors Wish Existed in 2025

Exchange-traded funds (ETFs) are undoubtedly having a moment, becoming a central topic of discussion among retail investors, particularly on platforms like Reddit. The appeal is clear: ETFs offer instant diversification by providing exposure to a broad basket of sectors and securities through a single investment. Instead of painstakingly researching and purchasing individual stocks like NVIDIA (NVDA), Microsoft (MSFT), or Apple (AAPL), investors can buy a share of an ETF and gain ownership in hundreds of major companies simultaneously. This built-in diversification is a critical defense against market volatility, making ETFs a cornerstone of modern portfolio strategy.

The performance of established ETFs underscores their value. Take the SPDR S&P 500 ETF Trust (SPY), one of the market’s most prominent funds. It has delivered a robust 13.67% return year-to-date and an impressive 21% over the last three years. Its composition is a testament to strategic diversification, with approximately 34.73% of its holdings in technology, 13% in financial services, and 9% in healthcare. This allocation includes heavyweight market movers like Tesla (TSLA) and Berkshire Hathaway (BRK.B), offering investors a slice of the market’s most influential names without the complexity of individual stock selection.

The concept of a ‘dream ETF’ is inherently personal, varying from investor to investor based on individual goals and risk tolerance. However, a recent thread on Reddit’s r/ETFs surfaced several compelling, universally appealing ideas. A leading proposal is an ETF capable of dynamic sector rotation—a fund that automatically shifts its holdings based on prevailing market conditions. The potential of such a strategy is staggering. One Redditor calculated that an ETF that rotated into energy stocks in 2022 would be up approximately 68% by 2025. Similarly, a fund heavily weighted in the defense industry this year would have seen gains around 75%, dramatically outperforming the broader market.

Beyond tactical shifts, investors dream of reliable income. An ideal ETF for many would be one that consistently generates a 6-8% yield annually, providing meaningful income without excessive risk. This could be achieved by combining asset classes known for stability, such as Real Estate Investment Trusts (REITs) and utilities, which have historically demonstrated resilience during economic downturns. The ultimate fantasy, of course, is an ETF that never loses money, automatically trading stocks as they rise and fall—a technological marvel that remains, for now, in the realm of imagination.

The dream ETF conversation also ventures into specialized thematic territories. With a growing global emphasis on sustainability, an ETF focused exclusively on companies leading the charge in environmentally and socially responsible practices presents a significant opportunity. Such a fund would tap into the transformative trends reshaping industries from electronics to energy.

Another popular concept is a dedicated dividend ETF. While dividend stocks carry their own risks, a carefully curated portfolio including established payers like Verizon (VZ), Coca-Cola (KO), and Chevron (CVX), alongside names like Target (TGT) and business development companies such as Oxford Square Capital (OXSQ) and Prospect Capital (PSEC), could deliver strong, income-focused results. Finally, investors envision a ‘global S&P 500’—an ETF that expands beyond U.S. borders to include the top 1,000 or 1,500 companies worldwide. Given the historical outperformance of the S&P 500, scaling this model globally could unlock new profit opportunities and further enhance diversification.

While the exercise of designing a dream ETF is engaging, the reality is that investors are not starved for excellent choices today. Mainstays like SPY, Invesco QQQ Trust (QQQ), and Vanguard S&P 500 ETF (VOO) provide strong, diversified exposure with proven track records. The exploration of hypothetical funds ultimately highlights investor desires for more adaptive, specialized, and potentially higher-performing products. It reflects a market that is increasingly sophisticated and eager for tools that can navigate complex economic landscapes. For now, the existing ETF universe offers a powerful toolkit for building wealth, even if the perfect, loss-proof dream fund remains just that—a dream.