All these funds are great choices.
Investors looking to buy exchange-traded funds have a pretty big sea to navigate, as the ETF world includes literally thousands of options. One path you can take is investing in some of U.S. News & World Report’s top-ranked ETFs. U.S. News ranks funds based on four criteria — expense ratio, tracking error, bid/ask ratio and diversification. The full ETF ranking methodology can be found here, but suffice to say, this system is designed to help investors find the most faithful and inexpensive options on the market. The system also covers a broad swath of categories, from domestic stocks to bonds to even alternative investments.
Vanguard Total Stock Market (ticker: VTI)
You can’t ask for a much larger blend than the 3,575 U.S. stocks in Vanguard’s VTI fund. VTI is a “total stock market” fund that invests in small-, mid- and large-cap stocks, with an average market cap of nearly $60 billion. Top holdings including Apple (AAPL, 2.89 percent) and Microsoft Corp. (MSFT, 1.95 percent) merely confirm this. If you’re looking to own every type of U.S. stock in one fund, VTI does the trick.
Type: Large blend
Expenses: 0.04 percent, or $4 annually for every $10,000 invested
Vanguard S&P Small-Cap 600 Growth ETF (VIOG)
Investors looking to add a bit more oomph to their portfolio can weed out the value stocks, as well as the large caps and the mid-caps, and invest in the VIOG. This ETF holds the 351 companies in the Standard & Poor’s 600 small-cap index that are viewed as having growth (instead of value) characteristics. That includes the likes of top holdings MKS Instruments (MKSI), an advanced manufacturing instrument and subsystems solution provider, and cloud software firm Blackbaud (BLKB). Naturally, the VIOG tends to be more volatile than larger-cap funds, but it packs a performance punch.
Type: Small growth
Expenses: 0.2 percent
iShares Core MSCI Total International Stock ETF (IXUS)
If the VTI is a one-stop shop for U.S. stock market longs, iShares’ IXUS is the place to go for all of your international needs. Total International Stock invests in 3,320 companies in developed and emerging markets alike, offering extremely broad exposure to stock markets across the world. Developed markets like Japan (16.7 percent) and the U.K. (10.6 percent) make up the lion’s share of this fund, but a few emerging markets such as China (6.7 percent) provide growth potential. IXUS is heaviest in financial stocks at a nearly 21 percent weight, though top holdings right now include Swiss consumer staples giant Nestle SA and South Korean tech conglomerate Samsung Electronics.
Type: International stock
Expenses: 0.11 percent
Vanguard Financials ETF (VFH)
Sector funds own stocks of companies that participate in various slices of the U.S. economy — utilities, technology stocks, industrials. But VFH is centered around the financial sector. VFH holds 396 stocks across various industries, most heavily concentrated in diversified banks (30.5 percent) such as JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC). Regional banks (15.2 percent) make up another significant portion of the fund, and VFH also features another dozen industries, including property and casualty insurers, investment banks and consumer finance companies. Vanguard’s fund is unsurprisingly one of the cheapest ways to buy the sector, and according to the rankings, it’s also the best.
Type: Sector
Expenses: 0.1 percent
Fidelity MSCI Real Estate ETF (FREL)
Fidelity’s FREL leads the exchange-traded world of real estate funds. But investors should note that “real estate” category funds don’t actually own land — they own real estate investment trusts, which are tax-advantaged companies that own and/or operate properties spanning commercial, residential, industrial and more. FREL’s top holdings list, for instance, includes mall owner/operator Simon Property Group (SPG), as well as self-storage giant Public Storage (PSA). Also, those tax advantages require REITs to pay out 90 percent of taxable income as dividends, so they tend to throw off sizable yields as well. FREL’s yield isn’t particularly lofty, but still nice at 3.5 percent.
Type: Real estate
Expenses: 0.084 percent
iShares MSCI Global Metals & Mining Producers (PICK)
While a number of commodities ETFs actually invest directly in assets such as gold or silver, or through instruments such as oil and natural gas futures, iShares’ PICK stands out as a global mining-stock fund. However, unlike many global funds in which the U.S. takes up half the holdings or more, PICK is just 12.3 percent weighed to America, and includes nearly a quarter-weight in Australian stocks, as well as significant Japanese and Swiss exposures. Top holdings include a pair of Aussie multinational miners, BHP Billiton (BHP) and Rio Tinto (RIO).
Type: Commodities
Expenses: 0.39 percent
iShares Core 10+ Year USD Bond ETF (ILTB)
The iShares Core 10+ Year USD Bond ETF provides dirt-cheap exposure to a wide basket of bonds — a key source of relatively secure, diversified income. But while the name might imply that most of its bonds are close to 10 years in maturities, nearly three-quarters of the fund is invested in bonds with maturities of 20 years or more. ILTB’s biggest weights are dedicated to Treasurys and industrial corporate bonds, but it also offers up other sovereign bonds, agency debt, financial corporates and a few other types of bonds. The high duration of ILTB results in a nice 3.7 percent SEC yield.
Type: Long-term bond
Expenses: 0.08 percent
SPDR Nuveen S&P High Yield Municipal Bond ETF (HYMB)
At a 3.8 percent SEC yield, SPDR’s HYMB wouldn’t seem to have any sort of income advantage over ILTB. However, a closer look reveals otherwise. See, HYMB is a municipal bond fund, so instead of federal government debt, you’re talking about bonds from smaller entities such as cities and states. The kicker here is that munis are exempt from federal (and sometimes state and city) taxes, thus their practical yields are much higher. In the case of HYMB, that’s a “taxable equivalent yield” of 6.73 percent. Yes, municipal bonds aren’t as safe as Treasurys, which is why they need to offer better income, but held in a diversified fund, they’re plenty secure.
Type: High-yield muni
Expenses: 0.45 percent (includes 5-basis-point fee waiver)
VanEck Vectors Emerging Markets High Yield Bond ETF (HYEM)
Another way to get your high-yield jollies would be to delve into junk-rated debt from emerging markets. While that sounds like a one-way trip to Riskville, funds like VanEck’s HYEM allow you to do this without cracking a sweat. For one, HYEM invests in 350 different issues across a couple dozen countries, helping to diversify away some risk. Average portfolio maturity is also somewhat low, at just five years, avoiding the higher interest-rate risk of longer-dated bonds. And while HYEM invests in junk, roughly two-thirds of its bonds are BB, just one step below investment-grade, so you’re getting “high-quality” junk. And an SEC yield of 5.6 percent.
Type: Emerging markets bond
Expenses: 0.4 percent (includes 10-basis-point fee waiver)
VanEck Vectors Preferred Securities ex-Financials ETF (PFXF)
Preferred stocks are so-called “hybrid” securities that are indeed stocks in that they trade on an exchange and represent company ownership, but they’re also like bonds in that they pay a fixed (and high) amount of regular income and typically don’t carry voting rights. VanEck’s PFXF, which excludes preferreds from the financial sector, was a response to the 2008-09 financial crisis … but the blend of utility, REIT, telecom and other preferreds has resulted in strong performance, and at a cheap price. PFXF isn’t just the best preferred ETF — it’s one of the best ETFs on the market.
Type: Preferred stock
Expenses: 0.41 percent (includes 8-basis-point fee waiver)
More from U.S. News
How to Invest in Esports: 7 Winning Stocks
9 of the Best High-Yield ETFs on the Market
7 Horrendous Dividend Stocks to Actively Avoid
U.S. News & World Report’s 10 Top-Ranked ETFs originally appeared on usnews.com
