8 Best ETFs Review: Overview, Facts, Features, Plans, Pros and Cons

These are the finest ETFs for diversifying your portfolio. Exchange-traded funds, or ETFs, are one of the most popular ways for investors to build diversified portfolios. Like mutual funds, ETFs hold dozens or many securities, letting investors buy shares in one thing to urge exposure to a wide variety of investments. They differ because investors can trade ETFs throughout the day instead of only at the end of trading, and ETFs tend to possess lower fees. There are ETFs that specialize in a variety of areas, such as index ETFs that mirror a market index, actively-managed funds that attempt to outperform the market, income and dividend funds, and funds for everything in between. If you’ve got a specific investment strategy, there’s likely an ETF out there for you. Note : Your investment decisions should align together with your financial goals. Consider your risk tolerance, whether you can afford to lose some or all of your investment, and how your investment selections fit into your broader financial strategy. To compile this list of the finest ETFs for this year, we examined a wide range of ETFs from various market sectors. We evaluated factors such as past performance, liquidity, and fees.

1. Best Overall: Vanguard Total stock exchange ETF

3-year return (as of December 31, 2021): 25.76%
Expense ratio: 0.03%
Assets under management (AUM as of December 31, 2021): $1.4 trillion
Inception date: Commonwealth Day, 2001

The Vanguard Total Stock Market ETF is the finest overall ETF for investors. This fund aims to duplicate the entire U.S. stock exchange returns at the cost of just 0.03%. It provides investors with immediate access to large-cap, medium-cap, and small-cap firms with no investment requirement. The ETF had 4,139 equities as of December 2021, with major holdings including Apple, Microsoft, Alphabet, and Amazon. Some investors prefer to build a simple, two-fund portfolio using this fund and a bond fund, letting them easily set their allocation between stocks and bonds.

2. Best No-Fee: SoFi Select 500 ETF

1- year return (as of December 31, 2021): 27.79%%
Expense ratio: 0.00%
Assets under management (as of February 11, 2022): $375.76 million
Inception date: April 11, 2019

This is a relatively new ETF with an uncommon feature: the fund’s financial adviser promised to waive management fees until June 2022. The fund operates similarly to an S&P 500 mutual fund, owning shares in about 500 of the most prominent companies in the United States. It modifies the weighting of those firms, investing more in companies that look to be positioned for growth rather than basing its holdings only on market capitalization.

3. Best for Active Traders: SPDR S&P 500 ETF

3-year return (as of Dec. 31, 2021): 25.88%
Expense ratio: 0.0945%
Assets under management (as of February 11, 2022): $400 billion
Inception date: January 22, 1993

SPY, or SPDR S&P 500 ETF, is one of the world’s most popular exchange-traded funds. It monitors the S&P 500 index in the United States, which includes 500 of the country’s top corporations. The First Trust Long/Short Equity ETF is one of the most intriguing actively managed ETFs on the market. Depending on the market’s overall performance, SPY is a good fund to employ if you want to day trade. It monitors the S&P 500 in real time and is extremely liquid, with approximately 30 million shares changing hands daily as of February 11, 2022.

4. Best for little Caps: iShares Core S&P Small-Cap ETF

3-year return (as of December 31, 2021): 20.6%
Expense ratio: 0.06%
Assets under management (as of February 11, 2022): $69.89 billion
Inception date: May 22, 2000

Small-cap companies are those with market capitalizations between $250 million and $2 billion. If you want to invest in a wide portfolio of smaller firms, the iShares Core S&P small-cap ETF is one of the finest ETFs to consider. The fund is large, with quite $74 billion under management, and cheap to invest in. As of February 11, 2022, its portfolio includes 676 holdings. Such diversification may help counteract the volatility that small-cap stocks may experience.

5. Best for giant Caps: Vanguard Mega Cap ETF

3-year return (as of December 31, 2021): 26.73%
Expense ratio: 0.07%
Assets under management (as of December 31, 2021): $4.7 billion
Inception date: December 17, 2007

The Vanguard Mega Cap ETF invests in a number of the largest companies in the United States that specialize in the businesses that make up roughly 70% of the country’s market capitalization. This fund frequently invests in large firms with long histories. Large-cap corporations are thought to be more stable than small-cap companies, and they often pay dividends and provide more consistent returns. They will, however, encounter volatility, which investors must be ready to endure before investing. As of December 31, 2021, the top holdings of this ETF are Apple Inc., Microsoft Corp., Alphabet Inc., and Amazon.com Inc.

6. Best for Dividends: Schwab U.S. Dividend Equity ETF

3-year return (as of Dec. 31, 2021): 23.89%
0.06 percent expense ratio
Assets under management (as of February 11, 2022): $34 billion
Inception date: October 20, 2011

Dividends are a popular technique for investors to generate income from their assets. If you’re seeking for income, the Schwab U.S. Dividend Equity ETF is one of the finest funds to invest in. The fund invests in major firms that pay out steady dividends. It distributes those dividends to its shareholders, providing a yield of somewhat more than 2.8 percent while having a coffee expense ratio of just 0.06 percent as of January 31, 2022.

7. Vanguard Total International Stock ETF is the best choice for international stocks

3-year return (as of December 31, 2021): 13.73%
Expense ratio: 0.08%
Assets under management (as of December 31, 2021): $418.9 billion
Inception date: January 26, 2011

The Vanguard Total Overseas Stock ETF is one of the finest funds to invest in if you want exposure to international companies. Unlike other foreign stock funds, this one does not favor established or fast-rising markets. You’ll use it to get exposure to some of the top international companies while getting exposure to firms from fast-growing countries. This ETF featured a portfolio of about 7,700 equities from throughout the world as of December 31, 2021, with considerable exposure to corporations in Europe (40.9 percent) and developing regions (24.7 percent ).

8. The best actively managed ETF is the 8 First Trust Long/Short Equity ETF

3-year return (as of December 31, 2021): 12.51%
Expense ratio: 1.55%
Assets under management (as of February 11, 2022): $472.29 million
Inception date: September 8, 2014

The vast majority of the funds on this list are passively managed. The managers attempt to mimic a specific index rather than actively determining what to invest in. Actively managed funds are normally more expensive, but they may appeal to investors who wish to try to outperform the market. The First Trust Long/Short Equity ETF is one of the market’s most interesting actively managed ETFs. To achieve the highest potential return, it is necessary to take both long and short positions on equities. This suggests that, in theory, the fund could produce a positive return in both rising and falling markets. Higher costs, however, involve active management and a long/short strategy. The fund’s annual management cost is 0.95 percent, but when you factor in the margin and short sales charge, the total annual expenditures are 1.55 percent, which is much more than the majority of the funds on our list.

Pros and Cons of Investing in ETFs

Pros

Easily build a diversified portfolio
Trade shares throughout the day

Cons

Typically only stock whole share increments
ETFs charge fees

Pros Explained

Easily diversify your portfolio: ETFs make it simple for investors to diversify their portfolios. If you purchase shares in an ETF that holds hundreds of different stocks, you get exposure to all or any of those stocks. Trade shares throughout the day: you’ll trade ETFs whenever the market is open, making them more flexible than mutual funds.

Cons Explained

Unlike mutual funds, which normally allow you to invest any amount once you meet the minimum, you’ll only be able to buy shares in ETFs in whole share increments unless your broker expressly enables fractional share buying. ETF expenses: ETFs have fees known as expense ratios, which may affect your returns. While the funds we offer have fair costs (usually lower than mutual funds), there are numerous funds with significantly higher fees.

Is an ETF Right for You?

If you want to develop a diverse portfolio without buying hundreds of different assets, ETFs are one of the finest options. If you like, you may create a totally ETF-based portfolio. If you’re more of a lively trader or like to pick stocks, ETFs can still constitute the basis of your portfolio, but you may want to focus more on the particular firms in which you invest rather than buying ETF shares.

Frequently Asked Questions

How do ETFs function?

ETFs (exchange-traded funds) are securities that invest in a portfolio of other securities. When you purchase shares in an ETF, you have exposure to all of the securities in the ETF’s portfolio. The worth of the ETF will rise and fall as the values of the securities it holds rise and fall.

How am I able to invest in ETFs?

ETFs may be purchased using your brokerage account. Because many brokers run their own ETFs, you may want to choose your broker based on the ETFs you want to invest in. It is often very difficult to time the market, so it’s hard to decide when you should buy ETFs. Generally, investing is risky, and ETFs can experience volatility over the short term. Only consider investing if you can handle volatility and keep your shares for the long term. Always consider how your investments correspond with your financial goals, and take the time to discuss them with a financial counselor.