Exchange-traded funds (ETFs) are amazing investment tools, allowing long-term investors to pay low management fees while giving traders opportunities to make massive amounts of money in short periods of time — if they know what they’re doing.
If you’re not 100% confident in your stock trading abilities and lack full conviction in your positions, then your emotion will likely get in the way in your investments. If this describes you, then you’re much better off taking a passive approach to investing, which can be done through low-cost ETFs.
The seven ETFs covered below have some of the lowest expense ratios you will find throughout the entire ETF universe. While that doesn’t necessarily mean they’re the best investment options at this point in time, they will definitely cost you the least as you continually improve your investment strategy.
All numbers below are as of March 21, 2020.
1. iShares Treasury Floating Rate Bond (TFLO)
Net Assets: $457.99 million
Dividend Yield: 2.03%
Expense Ratio: 0.15%
1-Year Performance: 2.05%
Unless you’re interested in waiting very patiently to take advantage of mispricings or you have a substantial amount of capital and want to implement a professional trading strategy to pick up small returns, this run-of-the-mill fund is only advantageous in a bear market.
2. First Trust NASDAQ CEA Cybersecurity ETF (CIBR)
Purpose: The First Trust NASDAQ CEA Cybersecurity ETF (CIBR) tracks the performance of the CEA Cybersecurity Index.
Net Assets: $1.31 billion
Dividend Yield: 0.25%
Expense Ratio: 0.60%
1-Year Performance: 1.16%
This relatively new ETF launched in mid-summer 2015, yet while its three-year returns are promising, CIBR's return performed poorly in comparison to others in the technology category. The gamble is up to you: cybersecurity is going to continue to be important in the digital world, but will white-hat hackers continue to harness technology for good?
3. Schwab US Broad Market ETF (SCHB)
Purpose: The Schwab US Broad Market ETF (SCHB) tracks the Dow Jones Broad Stock Market Index – the largest 2,500 publicly traded companies in the U.S.
Net Assets: $14.85 billion
Dividend Yield: 1.96%
Expense Ratio: 0.03%
1-Year Performance: 6.84%
This ETF launched back in 2009. If you’re bullish, then it’s an option to consider, and the fund has considerably increased its volume in the past few years. This large blend ETF casts a wide net.
4. Vanguard Total Stock Market ETF (VTI)
Purpose: The Vanguard Total Stock Market ETF (VTI) tracks the performance of the CRSP U.S. Total Market Index, which is all stocks on the NYSE and NASDAQ.
Net Assets: $840.92 billion
Dividend Yield: 1.93%
Expense Ratio: 0.03%
1-Year Performance: 6.89%
VTI has many of the same top holdings as SCHB and these two ETFs trade in tandem most of the time. But VTI offers a lot more liquidity and a slightly higher yield.
5. Vanguard S&P 500 ETF (VOO)
Purpose: The Vanguard S&P 500 ETF (VOO) tracks the performance of the S&P 500 and is one of the best baseline S&P 500 baseline funds.
Net Assets: $500.87 billion
Dividend Yield: 2.05%
Expense Ratio: 0.03%
1-Year Performance: 8.30%
Trades along with SCHB and VTI despite a different design. It has many of the same top 10 holdings but VOO offers a high yield as well as plenty of liquidity.
6. Schwab International Equity ETF (SCHF)
Purpose: The Schwab International Equity ETF (SCHF) tracks the total return of the FTSE Developed ex-U.S. Index. In simpler terms, it tracks the performance of large-cap and mid-cap stocks in developed countries excluding the United States.
Net Assets: $19.04 billion
Dividend Yield: 3.31%
Expense Ratio: 0.06%
1-Year Performance: 0.20%
This fund, while attractive in concept, has not historically provided strong returns unless investors are looking specifically to diversity outside of the U.S. Otherwise, if you’re going to invest in a developed market, it might as well be the U.S.
7. iShares Core S&P 500 (IVV)
Purpose: The iShares Core S&P 500 (IVV) tracks the performance of the S&P 500.
Net Assets: $192.67 billion
Dividend Yield: 2.17%
Expense Ratio: 0.04%
1-Year Performance: 7.85%
Many of IVV’s top holdings are the same as SCHB, VTI, and VOO. So, while IVV trades the same as those ETFs, you should look at other factors as well. The yield for IVV and the expense ratio are very comparable to the other ETFs. I'd call it a wash.
The Bottom Line
These are several high-quality ETFs that would be good options in a bull market. Whether you’re a bull or a bear, you should strongly consider putting some of these ETFs on your watch list for future consideration.
At the time this article was written, Dan Moskowitz did not have any positions in TFLO, CIBR, SCHB, VTI, VOO, SCHF or IVV. He was long LABD.