The first exchange-traded fund (ETF) came into the American financial markets in 1993 when State Street Global launched the SPDR S&P 500 (NYSE:SPY). With an average volume of over 200 million shares traded, this original ETF is still the most popular ETF traded today - but that doesn't mean it gives the best returns.

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One of the biggest advantages of ETFs is that an investor can create a diversified portfolio with a handful of different ETFs to cover the entire stock and fixed income market. Likewise, for investors who already have a sizable portfolio of individual stocks, more specialized ETFs can be a great way to augment holdings and provide entry into a wide variety of sectors, commodities, small-caps, and emerging markets. Buying an ETF to represent an entire sector of the stock market can also be a great idea to ride out a bullish trend on a specific sector.

SEE: Introduction To Exchange-Traded Funds

Sound appealing? Check out some of this year's hottest ETFs.

ETF Specialty 1Q Gain
iShares Silver Trust (NYSE:SLV) Silver +11.17%
Health Care Select Sector SPDR (NYSE:XLV) Health Care +7.40%
Vanguard Health Care ETF (NYSE:VHT) Health Care +9.46%
iShares Dow Jones US Healthcare (NYSE:IYH) Health Care +8.49%

Bottom Line
If you're looking to add a new twist to your portfolio, as well as reduce taxes on your ETF gains, dive into some additional research on these leading products.

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