How do I choose the best ETF to invest in?
Before purchasing an ETF there are five factors to take into account 1) performance of the ETF 2) the underlying index of the ETF 3) the ETF's structure 4) when and how to trade the ETF and 5) the total cost of the ETF.
Ultimately, investors choosing an ETF need to ask 3 questions: What exposure does this ETF have? How well does the ETF deliver this exposure? And how efficiently can I access the ETF? Look at the ETF's underlying index (benchmark) to determine the exposure you're getting.
- Nippon India ETF Nifty 50 BeES. ₹ 241.63.
- Nippon India ETF PSU Bank BeES. ₹ 76.03.
- BHARAT 22 ETF. ₹ 96.10.
- Mirae Asset NYSE FANG+ ETF. ₹ 84.5.
- UTI S&P BSE Sensex ETF. ₹ 781.
- Nippon India ETF Gold BeES. ₹ 55.5.
- Nippon India Etf Nifty Bank Bees. ₹ 471.9.
- HDFC Nifty50 Value 20 ETF. ₹ 123.2.
- Open a brokerage account. You'll need a brokerage account to buy and sell securities like ETFs. ...
- Find and compare ETFs with screening tools. Now that you have your brokerage account, it's time to decide what ETFs to buy. ...
- Place the trade. ...
- Sit back and relax.
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.
Both Fidelity and Vanguard have a wide variety of low-cost mutual funds and ETFs. If you're simply looking at the options offered by each firm, Fidelity has more options available.
Most investors on the ASX, and every fan of ASX exchange-traded funds (ETFs), would know of the popularity of Vanguard. Vanguard has the distinction of running the ASX's most popular ETF and index fund, the Vanguard Australian Shares Index ETF (ASX: VAS).
Symbol | Name | 5-Year Return |
---|---|---|
URA | Global X Uranium ETF | 22.32% |
PSI | Invesco Semiconductors ETF | 21.78% |
XLK | Technology Select Sector SPDR Fund | 21.28% |
SOXL | Direxion Daily Semiconductor Bull 3x Shares | 21.06% |
- Vanguard S&P 500 ETF (VOO 1.16%) ...
- Vanguard High Dividend Yield ETF (VYM 0.62%) ...
- Vanguard Real Estate ETF (VNQ 0.94%) ...
- iShares Core S&P Total U.S. Stock Market ETF (ITOT 1.24%) ...
- Consumer Staples Select Sector SPDR Fund (XLP 0.19%)
Fund (ticker) | YTD performance | Expense ratio |
---|---|---|
Vanguard S&P 500 ETF (VOO) | 10.4 percent | 0.03 percent |
SPDR S&P 500 ETF Trust (SPY) | 10.4 percent | 0.095 percent |
iShares Core S&P 500 ETF (IVV) | 10.4 percent | 0.03 percent |
Invesco QQQ Trust (QQQ) | 8.6 percent | 0.20 percent |
How much money should I put in one ETF?
You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.
The majority of individual investors should, however, seek to hold 5 to 10 ETFs that are diverse in terms of asset classes, regions, and other factors. Investors can diversify their investment portfolio across several industries and asset classes while maintaining simplicity by buying 5 to 10 ETFs.
You can put $500 in a stock ETF and $500 in a bond ETF to achieve a diversified two-asset-class portfolio which, though simple, can be a great start toward building a portfolio appropriate for your goals. ETFs can be a simple way to build incrementally toward your long-term plan.
Similarly, you should consider holding those ETFs with gains past their first anniversary to take advantage of the lower long-term capital gains tax rates. ETFs that invest in currencies, metals, and futures do not follow the general tax rules.
SPY, VOO and IVV are among the most popular S&P 500 ETFs. These three S&P 500 ETFs are quite similar, but may sometimes diverge in terms of costs or daily returns. Investors generally only need one S&P 500 ETF.
The one time it's okay to choose a single investment
You wouldn't ever want to load up your portfolio with a single stock. But if you're buying S&P 500 ETFs, this is the one scenario where you might get away with only owning a single investment. That's because your investment gives you access to the broad stock market.
Performance and Cost. As the innovator of index funds, Vanguard offers an impressive range of index funds today with low expense ratios. Fidelity has a comparable selection of funds, but its fees generally aren't as competitive as Vanguard's. That said, Fidelity does offer some zero-cost funds for its customers.
In most situations, you will find what you need at Fidelity. There are a few downsides. Fidelity does not offer cryptocurrency investing. The company is also missing some features found on other investment platforms, like futures trading and paper trading, where you can practice trading.
The choice comes down to what you value most. If you prefer the flexibility of trading intraday and favor lower expense ratios in most instances, go with ETFs. If you worry about the impact of commissions and spreads, go with mutual funds.
Their high level of diversification across geographies, sectors, styles, credit quality, maturities and market-cap sizes can help investors easily tailor a portfolio to their desired risk tolerance, time horizon and investment objective. Our pick for the best overall Vanguard ETF is Vanguard Total World Stock ETF.
How many different ETFs should I own?
Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation. When building a portfolio of ETFs, it is crucial to consider your investment strategy, objectives, and risk tolerance.
Vanguard S&P 500 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
Symbol | Name | Dividend Yield |
---|---|---|
TUGN | STF Tactical Growth & Income ETF | 12.10% |
PEX | ProShares Global Listed Private Equity ETF | 12.09% |
QYLD | Global X NASDAQ 100 Covered Call ETF | 12.03% |
SDIV | Global X SuperDividend ETF | 11.95% |
- Vanguard International High Dividend Yield ETF (VYMI) ...
- Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) ...
- WisdomTree U.S. SmallCap Dividend Fund (DES) ...
- FCF International Quality ETF (TTAI) ...
- Invesco High Yield Equity Dividend Achievers ETF (PEY)
Market risk
The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.