The Exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.
ETFs offer both tax efficiency as well as lower transaction and management costs. More than US$2 trillion were invested in ETFs in the United States between when they were introduced in 1993 and 2015. By the end of 2015, ETFs offered “1,800 different products, covering almost every conceivable market sector, niche and trading strategy”.
As of January 2014, there were over 1,500 ETFs traded in the U.S., with over $1.7 trillion in assets. In December 2014, U.S. ETF assets went above $2 trillion. To help you get started, here are some of the best ETFs for 2019 which we have taken from US money news, provide a comprehensive menu of your investment options. Each portfolio is different, with uniquely personal goals. Also these funds have something to offer just about every investor.
Vanguard Total Stock Market ETF
If you want the best ETF to buy in 2019 for complete stock market coverage, look no further. Comprised of more than 3,500 U.S. companies, Vanguard Total Stock Market ETF (VTI ) is the simplest and most effective way to get broad exposure to Wall Street. Collectively, these components span the biggest corporations such as Apple (AAPL) to small-cap stocks worth only a few hundred million dollars in market capitalization. As is typical of a Vanguard fund, this ETF is a passively managed index fund that is incredibly cheap to access. VTI charges 0.04 percent in fees, or just $4 annually on every $10,000 invested, and is among the cheapest of all ETFs.
SPDR S&P 500 ETF
SPDR S&P 500 ETF or SPY fund is the go-to choice for many investors and boasts a staggering $250 billion in assets under management at present to represent the largest ETF and one of the oldest one which was launched in 1993. SPY is a cost-effective way to invest across the largest and most meaningful U.S. stocks including Microsoft Corp. (MSFT) and Johnson & Johnson (JNJ). It’s also remarkably cheap, with an expense ratio of 0.09 percent.
iShares Core S&P Mid-Cap ETF
iShares Core S&P Mid-Cap ETF or IJH fund that focuses on the S&P 400, the next 400 largest stocks in the U.S. after the 500 that make up the large-cap S&P 500 index of the prior fund. Think names like Dominos Pizza (DPZ) and utility Atmos Energy Corp. (ATO). Though some investors prefer scale, mid-sized stocks have their appeal because they are more agile and sometimes have more upside than entrenched giants.
Schwab U.S. Small-Cap ETF
Schwab U.S. Small-Cap ETF or SCHA is the fund comprised of some 1,750 smaller-sized stocks and commanding an impressive $7.6 billion under management. If you want to go small, this is one of the most effective ways to do so – and with an expense ratio of just 0.05 percent, it’s also one of the most affordable.
Vanguard High Dividend Yield ETF
Vanguard High Dividend Yield ETF or VYM fund biases toward substantial dividend payers like Johnson & Johnson and J.P. Morgan Chase & Co. (JPM), and is comprised of 397 large and mid-sized companies. Collectively, they provide an annual dividend yield of about 3.4 percent at present.
Global X SuperDividend ETF
The Global X SuperDividend ETF or SDIV offers a targeted list of 100 of the highest dividend yielding securities in the world. This moves you away from stable mega-caps like J&J. Instead, you’ll get little-known energy companies or embattled retailers like GameStop Corp. (GME) that have seen their yields soar as share prices dropped. However, the result is a yield significantly higher than the typical fund at around 8.4 percent annually.
Vanguard Information Technology ETF
Vanguard Information Technology ETF (VGT) with more than 300 holdings, will give you exposure to tech leaders like Amazon and Microsoft as well as smaller tech companies you may not have heard of with dominant mega-caps Microsoft regularly topping the list of best-performing stocks in the last few years.
Consumer Discretionary Select Sector SPDR Fund
Consumer Discretionary Select Sector SPDR Fund or XLY is = $12 billion consumer fund and one of the more popular ETFs generally, and far and away the most popular way to play the powerhouse that is the American consumer. XLY features some of the biggest brands, from home improvement retailer Home Depot (HD) to fast-food giant McDonald’s Corp. (MCD) to athletics icon Nike (NKE). As most investors know, consumer-driven categories represent about two-thirds of overall economic activity. Also given the 65 massive brands that make up this ETF, investors can be confident they are accessing the power of U.S. consumers.
SPDR S&P Biotech ETF
SPDR S&P Biotech ETF or XBI that focus more developing the next generation of cancer-fighting drugs, surgery tools or Alzheimer’s treatments. It has a higher risk profile, as its holdings include development-phase companies that can sometimes be operating at a deep loss as they focus on research instead of harvesting revenue from proven treatments. But with about 120 holdings and an “equal weight” methodology, it’s diversified enough to help smooth out some of the bumps along the road to next-generation cures.
Vanguard Real Estate Index Fund
Vanguard Real Estate Index Fund or VNQ Real estate is another popular investment flavor. This Vanguard ETF looks beyond just residential trends, however, with commercial real estate giants including mall operator Simon Property Group (SPG) and medical office space provider Welltower (WELL). The result is a fund diversified across forms of real estate, but tied to the overall investment theme best described by Will Rogers: Invest in land, because they aren’t making any more of it.
Vanguard Total World Stock ETF
The Vanguard Total World Stock ETF or VT has a portfolio of more than 8,100 companies to create one of the most comprehensive lists of stocks available for retail investors in one place. There’s no avoiding U.S. mega-caps like Apple, and roughly half of the fund is allocated to American stocks. But with almost 20 percent of the fund in Europe there are many foreign multinationals on the list, and even emerging markets have a spot at the table with about 10 percent of the fund in fast-growing regions across Latin America and Asia.
iShares MSCI ACWI ex-U.S. ETF
iShares MSCI ACWI ex-U.S. ETF or ACWX fund fund excludes American corporations from its makeup, hence the ex-U.S. in the name. Also ACWI, stands for all-cap world index. The result for investors is broad exposure to other markets, making this ETF a great complement to any portfolio needing of geographic diversity. ACWX has more than 1,200 stocks, with the largest focus Japan at 16 percent of assets and the U.K. at 11 percent. This is a very diversified fund and a great way to add a global flavor to your investments.
iShares China Large-Cap ETF
iShares China Large-Cap ETF or FXi with more than $6 billion in total assets, this China-focused fund is the most popular single-country investment for those looking to play this hot region and cut out other emerging markets. Companies in this fund include tech powerhouse Tencent Holdings (TCHEY) and telecom behemoth China Mobile Ltd. (CHL). Though China’s annual growth rate has slowed to its weakest pace since the financial crisis, GDP expansion is still running at more than 6 percent annually – meaning many investors still see this region as a key part of any long-term growth portfolio.
Vanguard Long-Term Treasury ETF
Vanguard Long-Term Treasury ETF or VGLT will never set the world on fire with tremendous returns. However, with a portfolio of government bonds that have an average duration of about 17 years, the repayment of these debts is as sure a thing on Wall Street you can find. The current yield of this fund is about 3 percent annually.
Vanguard Short-Term Corporate Bond ETF
This Vanguard short-term bond or VCSH fund is focused on investment grade corporate debt from big-name companies such as brewing giant Anheuser-Busch InBev (BUD), so investors still have a high degree of certainty even if the bonds aren’t as safe as U.S. Treasurys. This fund yields 3.4 percent at present.
Pimco Active Bond ETF
Pimco bond ETF or BOND goes where it sees the opportunity, which may be the best strategy in a rising interest-rate environment where conditions are not fixed. The managers at Pimco can make decisions to avoid that pressure – for instance, right now allocating just 10 percent or so in Treasury bonds, and instead seeking out a fair amount of mortgage debt backed by the federal government instead. Current yield of this fund is 3.4 percent.
Invesco Preferred ETF
Preferred stock is a unique asset class different from common stock and kind of hybrid instrument between bonds and stocks. It’s called preferred stock for a reason, however, and most investors cannot easily access this asset class. ETFs like this Invesco fund or PGX pool investors’ resources to purchase preferred stock and unlock this investment and bigger income potential than many other funds. Currently, PGX yields 5.7 percent annually.
iShares Gold Trust
iShares Gold Trust or the IAU fund allows individuals to track gold bullion prices and it is much easier to buy and sell this way. Also at just 0.25 percent in annual fees, or $25 each year on every $10,000 invested, this gold fund could be cheaper than the cost of shipping, storing and insuring physical gold on your own.
IQ Hedge Multi-Strategy Tracker ETF
IQ Hedge Multi-Strategy Tracker ETF or QAI fund employs a hedge-fund like approach that deploys investments across all corners of the market from bonds to stocks to alternatives similar to private equity funds. For investors seeking a spicier option focused on total return, and who are willing to move wherever the fund’s managers see opportunity, QAI is an intriguing choice beyond conventional stock or bond ETFs. Just remember that the active nature of this fund means that if the managers miss they can do more harm than good.
Invesco BulletShares 2019 Corporate Bond ETF (BSJC)
Invesco BulletShares 2019 Corporate Bond ETF or BSJC fund, invests the vast majority of its resources in corporate debt from large corporations such as Microsoft and Morgan Stanley (MS) that is maturing in 2019. It’s not cash, but these investments are low risk. The yield of about 2 percent isn’t grand, but this ETF is worth a look for investors seeking safety.
Now choose the best ETF and start investing. To know which Australian ETFs are best to invest then read our next post.