Exchange traded funds are known for low fees, especially for long term, buy-and-hold investors. Forbes recently compiled a list of ETFs aimed at helping investors preserve wealth through lower investing costs.
“Good news for savers: There’s a price war in exchange traded funds. If you know where and how to get your hands on the bargains, you can enhance your wealth by tens of thousands of dollars. This annual survey of all-star ETFs, our second, will steer you to the best deals,” William Baldwin wrote for Forbes.
Forbes ranked the ETFs based on a measure of cost-efficiency that considers expense ratios, securities lending revenue and trading spreads. In fact, some of the ETFs are so cost-effective they have a negative cost – meaning one is better off holding the ETF than component stocks. [Charles Schwab Grabs for ETF Market Share]
The most popular segment of the market that is tracked is the S&P 500. However, the first ETF ever launched and the largest and most popular SPDR S&P 500 (NYSEArca: SPY) did not make Forbe’s list. The “Best ETFs” list is focused on long term savers, and not traders or hedgers. [Schwab ETF Fee Cuts to Save Investors $4 Million]
The top-rated ETFs within their categories:
- U.S.Large-cap stocks : Vanguard Total Stock Market (NYSEArca: VTI)
- U.S.Small-cap stocks: Vanguard Small-Cap Growth (NYSEArca: VBK)
- Specialized: SPDR S&P Oil & Gas Exploration & Producers (NYSEArca: XOP)
- Diversified global: Vanguard MSCI EAFE (NYSEArca: VEA)
- Specialized global: Vanguard FTSE Europe (NYSEArca: VGK)
- Commodities: iShares Comex Gold Trust (NYSEArca: IAU)
The top-rated fixed-income ETFs:
- Short term: Schwab Short-Term U.S. Treasury (NYSEArca: SCHO)
- Medium term: Schwab US Aggregate Bond (NYSEArca: SCHZ)
- Long Term: Vanguard Long Term Bond Index (NYSEArca: BLV)
- Inflation-Protection: Schwab U.S. TIPS (NYSEArca: SCHP)
- Municipal Bonds: SPDR Nuveen Barclays Capital S/T Muni (NYSEArca: SHM)
The screening process of the ETFs were based on the total cost of investing $10,000.00 over the course of a decade, with a 5% price appreciation. The total cost considered was made up of the expense ratio, trading spreads and stock lending revenue. Trading commissions were not factored into the results since they differ from ETF to ETF and from each broker. Over a long term time period they do not matter that much. [Six Popular Commission Free ETF Trading Platforms]
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.