Etfs: Smart Investment Choices For Your Portfolio

Exchange-traded funds (ETFs) are a popular investment choice due to their ease of access, diversification, lower minimum investment, and transparency. With thousands of ETFs to choose from, investors can gain exposure to a wide range of assets, including stocks, bonds, commodities, and currencies.

When deciding which ETFs to invest in, it is important to consider factors such as investment goals, risk tolerance, asset class, budget requirements, and whether you prefer an actively or passively managed fund. Actively managed funds, which involve a fund manager selecting investments based on their own research, tend to have higher fees than passively managed funds, which follow a predetermined index.

Some popular ETFs include the Vanguard S&P 500 ETF (VOO), iShares Core S&P 500 ETF (IVV), Invesco QQQ Trust (QQQ), and Vanguard Total Stock Market ETF (VTI). These ETFs offer broad exposure to the largest listed companies, providing investors with diversification and access to a wide range of sectors.

For those looking for more specific investments, there are ETFs focused on particular sectors or themes, such as clean energy, artificial intelligence, blockchain, and semiconductors. Additionally, investors can choose between market-cap-weighted ETFs, equal-weighted ETFs, and fundamental index ETFs, depending on their preferences for how weightings are allocated across holdings.

Ultimately, the best ETF to invest in will depend on an individual's financial goals, risk tolerance, and investment strategy. It is always recommended to conduct thorough research and consult with a financial advisor before making any investment decisions.

Top US market-cap index ETFs

When it comes to investing, exchange-traded funds (ETFs) are a great option due to their many benefits, including the ability to buy multiple assets in one fund, reduced risk through diversification, and generally low costs.

Vanguard S&P 500 ETF (VOO)

This ETF offers exposure to 500 large-cap US companies across various sectors, providing a diverse investment option. With an expense ratio of just 0.03%, it's a low-cost option for investors.

SPDR S&P 500 ETF Trust (SPY)

The SPDR S&P 500 ETF Trust is one of the most well-known ETFs, aiming to replicate the performance of the S&P 500 index. It offers broad exposure to 500 large-cap US companies, providing diversification and a relatively low-risk investment choice.

IShares Core S&P 500 ETF (IVV)

This ETF tracks the S&P 500 index, providing exposure to a diverse range of large-cap US companies. It has an expense ratio of 0.03%, making it a cost-effective option for investors.

Invesco QQQ Trust (QQQ)

The Invesco QQQ Trust focuses on large-cap US companies in the tech and growth sectors, including companies like Apple, Microsoft, and Amazon. This ETF is ideal for investors who want to invest in innovative, high-growth companies.

Vanguard Total Stock Market ETF (VTI)

With this ETF, you get exposure to a wide range of US companies, from large-cap to small-cap, providing a comprehensive investment option. It covers various sectors, including technology, healthcare, and financials.

Vanguard FTSE Developed Markets ETF (VEA)

For those looking to invest in international markets, the Vanguard FTSE Developed Markets ETF offers exposure to companies in developed countries outside the US. It provides diversification by investing in a range of sectors and countries.

These ETFs provide a solid foundation for investing in the US market, offering broad exposure to a diverse set of companies. Remember to do your own research and consult a financial advisor before making any investment decisions.

Top international ETFs

International ETFs can provide targeted exposure to international publicly traded companies either broadly or by specific geographic areas, such as Asia, Europe, or emerging markets. Here are some of the top international ETFs to consider:

Vanguard Total International Stock ETF (VXUS)

With nearly 8,000 stocks in its portfolio, VXUS is a great way to get broad international exposure from a single fund. It includes companies from 42 separate countries, the largest of which is Japan (16% of the portfolio), followed by the UK (10%), and others down to 0.1% exposure to Hungary. This ETF tracks the FTSE Global All Cap ex US Index, which represents companies of all sizes in developed and emerging markets, excluding the US. The fund has closely tracked its benchmark since its inception, returning 3.86% compared to 3.89% for the benchmark. The expense ratio is 0.07%.

Fidelity International Value Factor ETF (FIVA)

FIVA is a diversified international ETF that spans Europe, Asia, and North America by tracking the Fidelity International Value Factor Index. It covers 10 different countries with 123 stocks, with more than half of the portfolio in Europe, particularly the UK and Germany. However, Japan represents the largest country exposure at over 23% of the portfolio, while Canada makes up 10% of the portfolio for North American exposure. The expense ratio is 0.39%.

FlexShares Emerging Markets Quality Low Volatility ETF (QLVE)

Emerging markets investments can be volatile, but FlexShares aims to mitigate this by focusing on the financial health of the companies within the fund. This results in a lower risk option than many other emerging markets funds, with a standard deviation of 12.04 versus nearly 18 for the Morningstar Diversified Emerging Markets category. The fund's roughly 200 holdings cover a dozen countries, from China (over one-fifth of the portfolio) to Peru (0.02%). As an added bonus, the international ETF pays a yield of more than 2%. The expense ratio is 0.40%.

Vanguard FTSE Developed Markets ETF (VEA)

VEA is one of the largest and most liquid international ETFs, providing exposure to nearly 1,100 stocks of companies based outside the US. The fund tracks the FTSE Developed All Cap ex US Index and includes large, mid, and small-cap stocks from both developed and emerging markets. The expense ratio is 0.07%.

IShares Core MSCI EAFE ETF (IEFA)

IEFA is a fund that focuses on large and mid-cap stocks in developed markets outside of North America. It tracks the MSCI EAFE Index, which includes stocks from Europe, Australia, Asia, and the Far East. The expense ratio is 0.08%.

Vanguard FTSE Emerging Markets ETF (VWO)

VWO is an ETF that provides exposure to emerging markets, tracking the FTSE Emerging Markets Index. It includes stocks from countries such as Taiwan, China, India, Brazil, and South Africa. The expense ratio is 0.10%.

Bond ETFs

2022

• VanEck CEF Muni Income ETF (XMPT): This ETF provides access to the municipal bond market and offers a high level of tax-exempt income. It had a one-year performance of 9.2%, an expense ratio of 2.32%, and an annual dividend yield of 4.13%.
• First Trust Municipal High Income ETF (FMHI): An actively managed fund that focuses on providing federally tax-exempt income, with a one-year performance of 7.9%, an expense ratio of 0.55%, and an annual dividend yield of 2.91%.
• VanEck Fallen Angel High Yield Bond ETF (ANGL): This ETF tracks below-investment-grade corporate bonds, with a one-year performance of 7.0%, an expense ratio of 0.35%, and an annual dividend yield of 4.43%.

2024

• Pimco Active Bond Exchange-Traded Fund (BOND): An actively managed ETF focused on generating income, with an average annual return of 3.81% over 10 years. It has an expense ratio of 0.45% and a dividend yield of 4.22%.
• Vanguard Intermediate-Term Treasury Index Fund ETF (VGIT): This ETF benefits from declining interest rates and offers capital appreciation and sustained interest income. It has an average annual return of 4.03% over 10 years, an expense ratio of 0.05%, and a dividend yield of 3.76%.
• Pimco Enhanced Short Maturity Active ESG ETF (EMNT): A high-yield, short-term bond ETF with stable value, offering a yield of over 5% and an average effective duration of roughly four months. It has an average annual return of 2.21% since its inception in December 2019.
• ProShares Investment Grade-Interest Rate Hedged ETF (IGHG): This ETF protects investors against rising interest rates by shorting U.S. Treasury futures. It has an average annual return of 4.25% over 10 years, an expense ratio of 0.30%, and a dividend yield of 4.05%.
• IShares National Muni Bond ETF (MUB): A municipal bond ETF suitable for investors in high tax brackets, offering income generally exempt from federal income tax and, in some cases, state and local taxes. It has an average annual return of 2.22% over 10 years, an expense ratio of 0.07%, and a dividend yield of 2.05%.
• IShares 0-5 Year TIPS Bond ETF (STIP): This ETF provides access to Treasury Inflation-Protected Securities (TIPS) with a low management fee, making it ideal for capital preservation and tax benefits in a taxable brokerage account. It has an average annual return of 0.65% over 10 years, an expense ratio of 0.19%, and a dividend yield of 3.16%.
• Vanguard Total International Bond ETF (BNDX): A low-cost, diversified international bond ETF with holdings from around the world, mainly from Europe and Japan. It has an average annual return of 1.33% over 10 years, an expense ratio of 0.08%, and a dividend yield of 4.10%.
• SPDR Portfolio Corporate Bond ETF (SPBO): A well-diversified corporate bond ETF with over 4,000 bonds and a negligible expense ratio. It has an average annual return of 3.54% over 10 years and a dividend yield of 4.53%.
• SPDR Portfolio High Yield Bond ETF (SPHY): This ETF offers a good income stream but comes with higher volatility due to its below-investment-grade credit rating. It has an average annual return of 3.20% over 10 years, an expense ratio of 0.07%, and a dividend yield of 9.02%.
• SPDR Portfolio Long Term Corporate Bond ETF (SPLB): With an average maturity of around 23 years, this ETF benefits from potential declines in interest rates. It has an average annual return of 4.24% over 10 years, an expense ratio of 0.07%, and a dividend yield of 6.24%.

These Bond ETFs offer a range of options for investors seeking stable and consistent returns, with different maturities, credit ratings, and geographic focuses.

Commodity ETFs

• Invesco DB Commodity Index Tracking Fund (DBC): This ETF is a one-stop shop, tracking futures contracts on 14 of the most heavily traded and important physical commodities in the world, including wheat, copper, gold, silver, natural gas and soybeans. It has a 3-year return of 4.01% and an expense ratio of 0.87%.
• IShares S&P GSCI Commodity-Indexed Trust (GSG): This ETF offers instant diversification, attempting to replicate the performance of the S&P GSCI Total Return Index, which consists of metals, agriculture, livestock and other commodities. It has a 3-year return of 11.34% and an expense ratio of 0.75%.
• IShares Silver Trust (SLV): This ETF is a pure play on the silver market, holding silver bullion and tracking price movements in the market. It is one of the largest and most liquid of all commodity ETFs. It has a 3-year return of 3.94% and an expense ratio of 0.50%.
• Invesco DB Agriculture Fund (DBA): This ETF provides investors with exposure to a wide range of agricultural raw materials, from sugar and corn to cattle, soybeans, wheat and others. It has a 3-3-year return of 10.52% and an expense ratio of 0.93%.
• SPDR Gold Shares (GLD): This ETF is a great way for retail investors to own gold, as it can be difficult and cumbersome to buy and store individual gold bars or coins. It has a 3-year return of 11.01% and an expense ratio of 0.40%.
• United States 12 Month Oil Fund LP (USL): This ETF tracks the price movements of West Texas Intermediate light, sweet crude oil. It has a 3-year return of 9.88% and an expense ratio of 0.79%.

It is important to note that commodities can be highly volatile and unpredictable investments, and investors should consult with a financial advisor to assess their risk tolerance and investment objectives before investing in commodity ETFs.

Currency ETFs

• Invesco DB US Dollar Index Bullish Fund (UUP): This fund tracks the value of the US dollar relative to a basket of six major world currencies, including the euro, Japanese yen, and British pound. It has an expense ratio of 0.75%.
• WisdomTree Bloomberg US Dollar Bullish Fund (USDU): This ETF provides exposure to the US dollar against a basket of foreign currencies and aims to exceed the performance of the Bloomberg Dollar Total Return Index. It has an expense ratio of 0.50%.
• Invesco CurrencyShares Japanese Yen Trust (FXY): This fund tracks the price of the Japanese yen in US dollars, which is one of the most widely traded currencies in the world. It has an expense ratio of 0.40%.
• Invesco CurrencyShares Euro Trust (FXE): This ETF tracks the price of the euro in US dollars and is suitable for investors who believe the euro could benefit from a weakening US dollar. It has an expense ratio of 0.40%.
• Invesco CurrencyShares British Pound Sterling (FXB): This fund is designed to track the price of the British pound, the official currency of the United Kingdom. It has an expense ratio of 0.40%.
• Invesco CurrencyShares Swiss Franc (FXF): This ETF tracks the price of the Swiss franc, the national currency of Switzerland and Liechtenstein. It has an expense ratio of 0.40%.

Frequently asked questions