Bigger can be better — and cheaper.
Bigger isn’t always better, but when it comes to the largest exchange-traded funds (ETFs) on Wall Street, there are certainly some tangible benefits that come with being the biggest option. With a huge share of assets under management, it’s easier for the largest ETFs to lower their fees and pass on savings to investors. Furthermore, a “liquid” market with millions of buyers and sellers provides efficient pricing, and even small-time investors don’t have to worry about someone else front-running their order or creating disruptions in trading. The following nine funds are the biggest ETFs on Wall Street right now, each holding more than $70 billion or so in assets, and they are among the most popular and efficient ways to invest.
SPDR S&P 500 ETF Trust (ticker: SPY)
Current assets: $325 billion
The gold standard of index funds, SPY was formed in 1993 and is one of the most established and respected ETFs on the planet. It’s hands-down the leader, even among the largest ETFs, towering above competitors with a staggering $325 billion in assets and average trading volume of more than 70 million shares in a single session. Benchmarked to the popular S&P 500 index, the fund’s size and liquidity make SPY the simplest and most effective way to play U.S. stocks in a single position. The index ETF has an annual expense ratio of 0.095%, or $9.50 for every $10,000 invested.
iShares Core S&P 500 ETF (IVV)
Current assets: $235 billion
Of course, there are other S&P 500 funds out there among the largest ETFs. In fact, No. 2 on the list is this iShares S&P 500 fund that is pretty much the exact same investment as SPY in terms of recent performance and current holdings. The difference, other than assets under management of course, is that IVV charges just 0.03% in annual expenses. That doesn’t sound like a big difference, but it can add up over time or if you have a large nest egg invested. Furthermore, it’s even cheaper than a year ago, when IVV charged 0.04% — which shows iShares’ commitment to low-cost index funds.
Vanguard Total Stock Market ETF (VTI)
Current assets: $200 billion
While S&P 500 funds surely expose you to a wide swath of the U.S. stock market, VTI is benchmarked to a much deeper list of stocks with more than 3,500 total positions at present. Granted, it’s weighted toward the biggest U.S. stocks as about 20% or so of the portfolio is in familiar megacap names such as Apple (AAPL) and Johnson & Johnson (JNJ) that dominate S&P ETFs. That said, there is a bit more diversification here. And with a rock-bottom expense ratio of 0.03% and a massive size, this broader list of stocks doesn’t really come with any structural drawbacks.
Vanguard S&P 500 ETF (VOO)
Current assets: $174 billion
We’re not done with S&P 500 funds, however, as Vanguard’s VOO offers a third flavor of this index fund. Now that iShares has met VOO with its 0.03% expense ratio, you may well wonder why there are three funds that do exactly the same thing and two of which offer the exact same fee structure. Well, depending on your investment platform, these ETFs may actually be “free” to trade in either your individual retirement account or taxable investing account depending on what perks your broker offers. Even if VOO is “only” No. 4 on this list, with more than $170 billion in assets, the ETF dwarfs many other funds out there.
Invesco QQQ ETF (QQQ)
Current assets: $150 billion
Finally getting beyond the S&P 500, the QQQ fund is the largest ETF offered by Invesco. This fund is benchmarked to the Nasdaq-100 — that is, the top 100 firms listed on the technology-focused exchange. For those who don’t care much about stodgy manufacturers in the Dow Jones Industrial Average or S&P 500, this fund is perfect. And considering that the Nasdaq-100 will finish 2020 with gains of about 45% compared with just 15% for the S&P, the appeal of QQQ should be obvious. Just be aware that this outperformance is thanks to a heavy reliance on tech stocks, with more than 30% of the portfolio in trillion-dollar Nasdaq-listed standouts Apple (AAPL), Microsoft Corp. (MSFT) and Amazon.com (AMZN) alone. The fund comes with a 0.2% expense ratio.
Vanguard FTSE Developed Markets ETF (VEA)
Current assets: $86 billion
This international Vanguard fund is the first globally focused name on this list of the largest ETFs, offering access to the entirety of the “developed” marketplace (excluding the United States). That means a large number of established European and Japanese firms, plus some in Canada and Australia, too. You’ll recognize many of the nearly 4,000 names in this fund, such as Novartis (NVS) or Toyota Motor Corp. (TM), which are known in America but happen to be headquartered overseas. The ETF’s expense ratio is 0.05%.
iShares Core U.S. Aggregate Bond ETF (AGG)
Current assets: $85 billion
The largest ETFs aren’t simply focused on stocks, with this “aggregate” bond fund commanding a massive amount of attention. In layman’s terms, AGG holds all manner of debt instruments including U.S. Treasury notes, local government and municipal bonds, corporate debt and mortgage-related debt. That strategy, coupled with its portfolio of more than 8,000 total holdings, makes this a simple and diversified fixed-income bet for any portfolio. The fund has an expense ratio of 0.04%.
iShares Core MSCI EAFE ETF (IEFA)
Current assets: $83 billion
A similar fund to the prior VEA offering from Vanguard, this iShares ETF has a global footprint across Europe, Australasia and the Far East — that’s the EAFE acronym you see in its name. The fund has fewer holdings, but it still spans more than 2,600 individual stocks from around the world. It’s also an “ex-U.S.” ETF, meaning it excludes America-based stocks to provide an easy way for investors to diversify without duplicating positions they own in domestic funds. IEFA comes with an expense ratio of 0.07%.
Vanguard FTSE Emerging Markets ETF (VWO)
Current assets: $69 billion
Looking beyond the developed world, VWO offers an emerging markets focus to ensure investors have access to faster-growing regions, including China and Brazil. While you may recognize some of the bigger names in the portfolio, such as Alibaba Group Holding (BABA), many positions on the list of some 5,000 names are not easily accessed by U.S. investors. Considering how challenging it can be to identify and research opportunities in emerging markets, this diversified and low-cost ETF is appealing for obvious reasons. It has an expense ratio of 0.1%.
Nine of the largest ETFs to buy:
— SPDR S&P 500 ETF Trust (SPY)
— iShares Core S&P 500 ETF (IVV)
— Vanguard Total Stock Market ETF (VTI)
— Vanguard S&P 500 ETF (VOO)
— Invesco QQQ ETF (QQQ)
— Vanguard FTSE Developed Markets ETF (VEA)
— iShares Core U.S. Aggregate Bond ETF (AGG)
— iShares Core MSCI EAFE ETF (IEFA)
— Vanguard FTSE Emerging Markets ETF (VWO)
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Update 12/30/20: This story was published at an earlier date and has been updated with new information.