In the last 12 months the biggest ETF (Vanguard S&P 500 ETF (VOO)) gave 67.14% return.
What is an ETF?
An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.
An ETF is called an exchange traded fund since it's traded on an exchange just like stocks. The price of an ETF's shares will change throughout the trading day as the shares are bought and sold on the market. This is unlike mutual funds, which are not traded on an exchange, and trade only once per day after the markets close. Additionally, ETFs tend to be more cost-effective and more liquid when compared to mutual funds.
Types of ETFs
- Bond ETFs might include government bonds, corporate bonds, and state and local bonds—called municipal bonds.
- Industry ETFs track a particular industry such as technology, banking, or the oil and gas sector.
- Commodity ETFs invest in commodities including crude oil or gold.
- Currency ETFs invest in foreign currencies such as the Euro or Canadian dollar.
- Inverse ETFs attempt to earn gains from stock declines by shorting stocks. Shorting is selling a stock, expecting a decline in value, and repurchasing it at a lower price.
Advantages of ETFs
- Easy to trade – You can buy and sell any time of the day, unlike most mutual funds that trade at the end of the day
- Transparency – Many ETFs are indexed based; index-based ETFs are required to publish their holdings daily
- More tax efficient – ETFs typically generate a lower level of capital gain distributions relative to actively managed mutual funds
- Trading transactions – Because they are traded like stocks, investors can place a variety of order types (eg, limit orders or stop-loss orders) that can't be made with mutual funds
Disadvantages of ETFs
- Trading costs: If you invest small amounts frequently, there may be lower-cost alternatives investing directly with a fund company in a no-load fund
- Illiquidity: Some thinly traded ETFs have wide bid/ask spreads, which means you'll be buying at the high price of the spread and selling at the low price of the spread
- Tracking error: While ETFs generally track their underlying index fairly well, technical issues can create discrepancies
- Settlement dates: ETF sales are not settled for 2 days following a transaction; that means as the seller, your funds from an ETF sale aren't technically available to reinvest for 2 days.
TOP ETFs IN NORTH AMERCIAN OF EACH MARKET
- Vanguard Total Stock Market Index Fund ETF Shares (VTI) (Net Assets: 1.09T): The investment seeks to track the performance of a benchmark index that measures the investment return of the overall stock market. The fund employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable US stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. It invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full index in terms of key characteristics.
- Vanguard S&P 500 ETF (VOO) (Net Assets: 658.27B): The investment seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks. The fund employs an indexing investment approach designed to track the performance of the Standard & Poor's 500 Index, a widely recognized benchmark of US stock market performance that is dominated by the stocks of large US companies. The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.
- SPDR Dow Jones Industrial Average ETF Trust (DIA) (Net Assets: 25.79B): The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones Industrial Average. The Trust seeks to achieve its investment objective by holding a portfolio of the common stocks that are included in the DJIA, with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the DJIA.
- iShares Russell 2000 ETF (IWM) (Net Assets: 67.57B): The investment seeks to track the investment results of the Russell 2000Â® Index, which measures the performance of the small-capitalization sector of the US equity market. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index.
- Invesco QQQ Trust (QQQ) (Net Assets: 150.57B): The investment seeks investment results that generally correspond to the price and yield performance of the NASDAQ-100 Index. To maintain the correspondence between the composition and weights of the securities in the trust (the “securities”) and the stocks in the NASDAQ-100 Index, the adviser adjusts the securities from time to time to conform to periodic changes in the identity and/or relative weights of index securities. The composition and weighting of the securities portion of a portfolio deposit are also adjusted to conform to changes in the index .
Here is the 1-year comparison of all 5 ETFs:
Here is the 5-year comparison of all 5 ETFs:
Here is the 10-year comparison of all 5 ETFs:
Yellow line represents the Nasdaq Index
Purple line represents the all-US Market Index
Pink line represents the S&P 500 Index
Dark blue line represents the Russel 2000 Index
Light blue line represents the Dow Jones Index
|INDEX||1 YEAR RETURN||5 YEARS RETURN||10 YEARS RETURN|
|Invesco QQQ Trust (QQQ) (NASADAQ)||44.72%||192.57%||447.0%|
|iShares Russell 2000 ETF (IWM)||43.37%||97.95%||146.67%|
|SPDR Dow Jones Industrial Average ETF Trust (DIA)||18.86%||82.09%||144.15%|
|Vanguard S&P 500 ETF (VOO)||24.92%||90.80%||185.92%|
|Vanguard Total Stock Market Index Fund ETF Shares (VTI)||28.59%||96.02%||191.19%|
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