Best Exchange Traded Funds (ETFs)

Contributor, Benzinga

Want to jump straight to the best ETF broker? Check out Interactive Brokers.

In contrast to mutual funds, ETFs are generally known for their low fees. Ultimately, investors have flocked to ETFs in recent years (they actually arrived “on the scene” in 1993 as little-known investment options) but they’ve now become a big deal because of low costs, tax savings advantages and solid performance, as well as the fact that they’re usually centered around tracking a benchmark index.

Why is the benchmark index important? A benchmark will compare how well a fund is doing compared to its “peers,” so it gives you a point of reference for evaluating a particular fund’s success or performance.

ETFs Explained

An exchange-traded fund, or ETF, is traded on a major stock exchange and is an investment vehicle for investors to own shares of multiple securities using a single investment. An ETF contains assets such as stocks, commodities or bonds. In general, ETFs also trade commission-free.

They’re usually also less risky because they contain a collection of stocks and bonds, ensuring diversification. In addition, professional fund managers manage the fund for you so you don’t have to waste time and effort putting together your portfolio.

Be aware, however, that some ETFs could carry with them an element of risk. For example, leveraged ETFs have been created to multiply the daily returns of an index or asset class, which brings about more risk than others which simply track an index.

How to Choose ETFs

Your personal financial goals should be a major consideration in your decision to invest in an ETF. What is your time horizon?

When will you need your money? What is your investing style? Financial situation? Knowing the answer to these questions will help you make pointed decisions regarding the ETF(s) you’ll choose and also help you devise a consciously diversified portfolio.

Vanguard has a handy tool to help you determine in which ETFs you’ll want to invest. Check out Vanguard’s asset allocation tool/investor questionnaire.

Pros and Cons of ETFs

The pros and cons of ETFs should be heavily thought out before purchase. Pros include:

  • They’re liquid. Liquidity in this case simply means that you can buy or sell at any time during the trading day. Depending on the asset class you’re invested in, one may be more liquid than another. For example, real estate is less liquid than fixed income.
  • They can be less volatile than other types of investments. If you decide to invest in an ETF that tracks a broad segment of the U.S. stock market (such as the S&P 500), this would definitely be considered less volatile than investing in straight stocks. However, be absolutely sure that the ETF you’re considering investing in stays away from volatile stock indexes since they can be volatile. If you’re interested in really low volatility, you could consider investing in an ETF that tracks a bond index.
  • They trade like stocks. ETFs can be the best of both worlds, in that they offer diversification and can be purchased on margin like stocks and you can short sell them, too. They also trade at a price that is updated throughout the day, just like stocks. You’ll get real-time pricing every time you buy and sell.
  • There’s an ETF for everyone. Depending on what you’re interested in investing in, there are several different asset classes you can choose from, including real estate, fixed income, commodities, equities, and securities, etc.
  • More tax-efficient than mutual funds. If you need to sell an ETF, you can sell it just like a stock, right? Therefore, it’s sold and done, and there is no capital gains transaction for the ETF until the fund is redeemed.

Cons:

  • They may not actually be cheaper than mutual funds. You’ll want to do your research to find out if the ETF you’re considering is as cheap as others that are similar.
  • You’ll have to pay commissions to buy shares. ETFs trade like stocks; therefore, you’ll pay a brokerage commission every time you buy or sell shares.

Why ETFs Over Stocks?

In sharp contrast to trading one single stock, an ETF can showcase a broad range of securities, offering more diversification compared to one stock. ETFs can also trade like a stock, which means that certain features of stock trading are the same as with ETFs. Here are a few of those specific features they have in common:

  • You can purchase ETFs and stocks on margin.
  • You can trade futures and options with both.
  • You’ll trade both stocks and ETFs on a stock exchange, such as NYSE.
  • Prices change throughout the day, and shares can also be shorted in the event that either a stock or ETF price begins to fall.

Despite these similarities, many choose ETFs over stocks simply because of the diversification that’s inherently available in ETFs.

Commissions and Fees Associated with ETFs

Because ETFs trade like stocks, you’ll need to pay commission to a broker every time you buy or sell shares. Most brokers charge a small fee (typically under $10) to buy or sell an ETF.

However, there are certain families of ETFs that trade commission-free and those are worth looking into. For example, Fidelity doesn’t charge commissions for a specific group of its iShares ETFs. These types of commission-free ETFs are worth looking into; however, they’re typically not the best-performing ETFs by the various brokers.

In general, it’s best to compare and research those ETFs you’re interested in and compare them to what you’d pay for regular stocks, mutual funds and more.

Related content: Best Utilities ETFs Right Now

Best ETFs

Benzinga has compiled a list of a few of the best ETFs, and they include the following:

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Gainers

Session: Jun 30, 2022 4:00 pm – Jul 1, 2022 11:07 am
Symbol Open Close Change Change % Volume
Buy W Stock – Trade for Free W
Wayfair
43.56 44.18 0.62 1.42% 98.63K

Losers

Session: Jun 30, 2022 4:00 pm – Jul 1, 2022 11:07 am
Symbol Open Close Change Change % Volume
Buy VEA Stock – Trade for Free VEA
Vanguard FTSE Developed Markets ETF
40.80 40.31 -0.50 -1.22% 7.02M
Buy PWV Stock – Trade for Free PWV
Invesco Dynamic Large Cap Value ETF
43.65 43.35 -0.30 -0.69% 10.20K
Buy SCHD Stock – Trade for Free SCHD
Schwab US Dividend Equity ETF
71.63 71.24 -0.40 -0.56% 70.34K
Buy QQQ Stock – Trade for Free QQQ
Invesco QQQ Trust, Series 1
280.28 278.76 -1.52 -0.55% 22.70M
Buy ITOT Stock – Trade for Free ITOT
iShares Core S&P Total U.S. Stock Market ETF
83.78 83.41 -0.37 -0.45% 44.90K
Buy VOO Stock – Trade for Free VOO
Vanguard S&P 500 ETF
346.88 345.50 -1.38 -0.40% 1.39M
Buy SPY Stock – Trade for Free SPY
SPDR S&P 500
377.25 375.91 -1.34 -0.36% 26.07M
Buy GLD Stock – Trade for Free GLD
SPDR Gold Trust
168.46 168.21 -0.25 -0.15% 6.11M
Buy IWM Stock – Trade for Free IWM
iShares Russell 2000 ETF
169.36 169.26 -0.10 -0.06% 7.15M

Best Online Brokers for ETFs

get started securely through Interactive Broker’s website
get started securely through TD Ameritrade’s website
Best For
Options Trading
N/A
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Best For
  • Novice investors
  • Retirement savers
  • Day traders
Pros
  • World-class trading platforms
  • Detailed research reports and Education Center
  • Assets ranging from stocks and ETFs to derivatives like futures and options
Cons
  • Thinkorswim can be overwhelming to inexperienced traders
  • Derivatives trading more costly than some competitors
  • Expensive margin rates
get started securely through Webull’s website
Best For
Intermediate Traders and Investors
N/A
1 Minute Review

Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.

Webull is widely considered one of the best Robinhood alternatives.

Best For
  • Active traders
  • Intermediate traders
  • Advanced traders
Pros
  • No account maintenance fees or software platform fees
  • No charges to open and maintain an account
  • Intuitive trading platform with technical and fundamental analysis tools
Cons
  • Does not support trading in mutual funds, bonds or OTC stocks
get started securely through Robinhood’s website
Best For
Beginners
N/A
1 Minute Review

Robinhood is a broker designed for traders who want a simple and easy-to-use platform. It takes out all the bells and whistles that can be confusing to the modern day trader, serving as the perfect place for beginners to learn the markets. The interface is intuitive and easy to master, streamlined to ensure you don’t get distracted as you build a portfolio. Though advanced traders might like more thorough analysis tools, Robinhood gives you everything you need to start trading and learn the ropes.

Best For
  • Beginner traders
  • Mobile traders
Pros
  • Streamlined, easy-to-understand interface
  • Mobile app with full capabilities
  • Can buy and sell cryptocurrency
Cons
  • Fewer analysis tools than most
  • Only taxable, non-retirement accounts are available

Final Thoughts on the Best ETFs

The beauty of an ETF is that there truly is something for everyone, and the other major advantage is that passively managed funds like ETFs can beat managed funds over time. If you’re interested in finding something that won’t eat up your money through expenses, or something you’d like to hold for the long term, seriously consider an ETF for your portfolio.

Frequently Asked Questions

Q

Why should you own ETFs?

1
Why should you own ETFs?
asked
A
1

ETFs offer numerous benefits to include liquidity, lower volatility and tax efficiency.

answered
Q

Can you purchase ETFs on margin?

1
Can you purchase ETFs on margin?
asked
A
1

ETFs can be bought and sold using margin.

answered

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