The U.S. market is in decent shape as 2024 comes to a close thanks mainly to the Fed’s policy easing and Trump’s win in the Presidential election. The S&P 500, the Nasdaq and the Dow Jones are hovering around their all-time highs ahead of the Santa rally.

A month has passed after the Trump-bump on Wall Street and the rally has cooled a bit. The S&P 500 was off 0.3% past week, the Nasdaq gained 1.1% and the Dow Jones lost 1%. This indicates that volatility could be the name of the game as we embrace several new Government policies in the New Year.

President-elect Trump is likely to instigate a tariff war and push inflation in 2025. If he keeps his campaign promises, America could face an inflation shock even more severely than the one experienced in 2021, per some strategists (read: Is Cash King? Money-Market ETFs in Focus).

To weather potential market shocks, investors poured $136.4 billion into cash in the week through Dec. 4, 2024, the biggest weekly inflow since March 2023, when markets were rattled by a regional banking crisis, according to a report from Bank of America on Friday, per Reuters.

Against this backdrop, we highlight a few exchange-traded funds (ETFs) under $20 that can be good bets in 2025. At the present sky-high pricing and decent volatility levels, these cheap ETFs can be lucrative investing options.

Why Low-Priced ETFs Are a Good Option?

Low-priced stocks remain affordable, enabling investors to diversify more effectively compared to higher-priced stocks. The recent moderate market volatility has created an opportunity for investors to capitalize on these options. This preference extends beyond individual stocks and is also evident in the ETF market.

Low-priced stocks also offer the potential for substantial percentage gains. For instance, a stock priced at $25 that rises by $1 achieves a 4% gain, whereas a $100 stock would only experience a 1% increase for the same $1 price movement.

Further, low-priced stocks have high levels of liquidity, giving these stocks an added advantage. This means that cash can be converted quickly, and investors could easily get their money out of the securities. In fact, trading in higher average daily volumes keeps the bid/ask spread tight and does not lead to extra costs for investors.

However, low-priced stocks tend to be more volatile than higher-priced ones, potentially resulting in substantial losses if their value declines. They are also more vulnerable to price manipulation schemes. Plus, low-priced stocks, particularly penny stocks, are often associated with smaller, less-established companies.