Exchange traded funds (ETFs) are popular because they offer diversification, tax efficiency, lower costs and lower expense ratios than most investment tools. ETFs trade on an exchange like a single stock, but beware that too many trades can cut away returns, reports Rich Duprey for The Motley Fool. ETF assets totaled $588 billion as of October 2007.

Duprey lists some of the most cost-effective ETFs around, and all of them have at least a three-year performance track record.:

  • Vanguard Total Stock Market (VTI), expense ratio 0.07%; three-year return of 13.98%
  • Vanguard Large-Cap (VV), expense ratio 0.07%; three-year return of 13.94%
  • SPDRs (SPY), expense ratio 0.08%; three-year return 13.04%
  • Vanguard Extended Market Index (VXF), expense ratio 0.08%; three-year return 16.25%
  • iShares S&P 500 (IVV), expense ratio 0.09%; three-year return 13.10%
  • Vanguard Small-Cap (VB), expense ratio 0.10%; three-year return 14.84%
  • Vanguard Value (VTV), expense ratio 0.11%; three-year return 15.49%

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.