There are hundreds of exchange traded funds (ETFs) available these days. They come in all different shapes and sizes, but there are six that every investors should have memorized.
Ron Rowland for JutiaGroup lists these six ETFs that you must get to know. Rowland’s caveat is that he isn’t saying buy them right now. But know them. They’re among the largest and most liquid ones on the market today:
- SPDR S&P 500 (SPY): up 12.6% year-to-date; gives instant access to the S&P 500, an index of the 500 largest domestic stocks covering all industry sectors. This ETF was the first ETF, introduced in 1993, and is referred to as the “grandfather” of funds.
- PowerShares QQQ (QQQQ): up 34.8% year-to-date; viewed as a large-cap technology benchamark, this ETF tracks the Nasdaq 100 is a sub-set of the Composite, consisting of the 100 largest non-financial stocks in the index. Exposure to real estate, banks and insurance companies is not available in this fund.
- Diamonds Trust Series 1 (DIA): up 7.6% year-to-date; a 30-stock index that tracks Dow Jones Industrial Average, an index of the largest U.S. blue chip stocks. DIA excludes some key sectors like transportation and utilities. Despite criticisms of the Dow (it’s too narrow, it excludes certain key sectors), it does give access to mega-caps.
- iShares Russell 2000 Index (IWM): up 17% year-to-date; the Russell 2000 is an index of the 2,000 smallest companies ranked by U.S. market value. Small-caps often lead the way in a recovery, too. IWM can be a good way to hold hundreds of these small companies in one fund.
- iShares MSCI EAFE Index (EFA): up 15.2% year-to-date; An international fund based upon the Europe, Australasia and Far East Index published by Morgan Stanley Capital International. It includes Western Europe, Australia, Japan — the countries with modern stock markets and banking systems. The countries in the index can change as new ones are promoted to developed status.
- iShares MSCI Emerging Markets Index (EEM): up 45.7% year-to-date; markets like Brazil, Russia, India and China are represnted in this fund, along with markets that have recently made ties with the rest of the world. It can be challenging to buy stocks in emerging markets. This ETF, like so many others, simplifies the whole process.
If these or any other ETFs are appealing to you and right for your portfolio, watch the trend lines to spot any opportunities to get in. Be sure to have a sell point before you buy, too.
For more stories about ETFs, visit our ETF 101 category.
For full disclosure, Tom Lydon’s clients own shares of EEM, QQQQ and SPY.