9 Cheap ETFs for Cost-Conscious Investors

Cheap exchange-traded funds to buy now.

Many investors understand the benefits of cheap exchange-traded funds. Plenty of research shows that reducing your fees over the long-term is more important than chasing outperformance, particularly since low-cost index funds often do better than more expensive and actively managed offerings anyway. But even knowing this, many investors are surprised by just how cheap ETFs have gotten. In fact, Wall Street now offers a small list of funds that are darn near free, and believe it or not, a few funds that are literally available at no cost. The following nine cheap ETFs are among the least expensive vehicles out there, measured by net expenses and fee waivers.

iShares Core S&P 500 ETF (ticker: IVV)

This cheap ETF is what most investors likely think about when they consider a low-cost index fund. It’s not particularly interesting, as it’s benchmarked to the list of 500 stocks that make up the S&P 500 of the largest U.S. corporations. But it’s quite effective, and there is a reason that most pundits and investors consider the S&P as a key benchmark to watch over the 30-component list of the Dow Jones Industrial Average or the tech-heavy Nasdaq 100. In full disclosure, however, iShares isn’t the only provider of a cheap ETF benchmarked to the S&P 500. There’s also the Vanguard S&P 500 ETF (VOO), launched in 2010, and the SPDR Portfolio S&P 500 ETF (SPLG), launched in 2005. Both also charge 0.03% annually and have billions of assets under management, but IVV gets top billing here by virtue of being first in line; it was born more than two decades ago, in mid-2000, and has aggressively dialed down fees in the intervening years.

Assets under management (AUM): $248 billion
Annual expense ratio: 0.03%

BNY Mellon US Large Cap Core Equity ETF (BKLC)

Believe it or not, BNY Mellon has a fund or two out there that literally doesn’t take a penny in fees. So how do they make money on this scheme? The short answer: They don’t. Free products like this are “loss leaders” meant to simply get customers in the door, where they can be upsold and cross-sold into other things. As for specifics, BKLC will track the Morningstar Large Cap Index, which tracks the performance of U.S. large-cap stocks that represent the largest 70% of Wall Street. In other words, nearly 200 total stocks right now that represent a little under the top half of the S&P 500. It may not track this key benchmark exactly, but it’s pretty darn close, and, of course, it’s free of fees.

AUM: $226 million
Annual expense ratio: 0.00%

JPMorgan BetaBuilders U.S. Equity ETF (BBUS)

While not one of the popular S&P 500 funds out there, BBUS offers a rock-bottom expense ratio for a fund that is quite similar. Specifically, BBUS is benchmarked to the top 85% of the U.S. equity market to give it a total portfolio of about 600 stocks right now. In other words, the S&P 500 plus 100 slightly smaller names. The makeup is so similar that trillion-dollar tech stocks Apple (AAPL) and Microsoft Corp. (MSFT) still come in at No. 1 and No. 2, respectively, to command more than 10% of the portfolio. So while performance varies by a hair, this cheap ETF could be worth a look as a replacement if you’re paying too much or want a slightly deeper bench of stocks to build your U.S. holdings.

AUM: $339 million
Annual expense ratio: 0.02%

Schwab U.S. Large-Cap ETF (SCHX)

Another slightly different take on the S&P 500 is this Schwab large-cap fund that has nearly 770 total components right now. The lineup is roughly the same, and is just as top heavy as the standard S&P 500 fund, thanks to a focus on the biggest companies. In SCHX, about 25% of total assets are in the top 10 holdings while the S&P 500 has about 27%. That slight amount of variance may become meaningful in the very long term, but it’s unlikely that day-to-day you will see a significant difference in the performance of SCHX or the S&P 500. So if it’s your cheapest available option, why not just bank the savings from this cheap ETF rather than overthink things?

AUM: $27.7 billion
Annual expense ratio: 0.03%

iShares Morningstar U.S. Equity ETF (ILCB)

Here’s yet another large-cap fund that is similar but slightly different than those so far. ILCB has a list of more than 700 stocks. It’s a mid-to-large fund that is meant to dip into the smaller companies that may not fall in the S&P 500. But it’s not going so small as to increase the overall risk profile of this fund. It’s worth noting, however, that given the crowded nature of this space with all the S&P 500 funds and their look-alikes, this iShares fund may be getting squeezed out. It is one of the cheap ETFs, with the lowest amount of assets under management present, and just a fraction of the big-time funds with hundreds of billions under their belts.

AUM: $842 million
Annual expense ratio: 0.03%

SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)

The S&P 500 is benchmarked to the top 500 stocks. After you cut that out comes the S&P 400, a list of midcap stocks that are effectively No. 501 to No. 900 when you rank all U.S. corporations by size. Bringing up the rear is the S&P 600 small-cap index, which is No. 901 through No. 1,500 on the list. What SPTM does, then, is a mash-up of these three different flavors of indexes to give you a holistic view at the top 1,500 U.S. stocks by size. It’s still weighted toward the trillion-dollar tech giant Apple, which remains at more than 5% of the portfolio all by itself. But the list is undoubtedly longer for those who want a bit more diversification.

AUM: $4.4 billion
Annual expense ratio: 0.03%

Vanguard Total Stock Market ETF (VTI)

If you want to get even broader, then this “total stock market” fund from Vanguard is the cheap ETF for you. The name is exactly what it sounds like, with a massive list of almost 3,700 companies to account for (almost) every stock that is publicly traded in the U.S. right now. Though the list may be long, VTI follows the same weighting strategy as S&P 500 funds. That means the bigger stocks like Apple and Microsoft command more of the total portfolio. Right now, AAPL and MSFT represent just more than 9% between them. So while you can expect a slight variance, thanks to the performance of the thousands of smaller names on this list, the dominance by a few big names still remains to create a firm foundation for VTI. Note: The iShares Core S&P Total U.S. Stock Market ETF (ITOT) also has more than 3,600 stocks and charges 0.03% for a similar approach. But with more than $34 billion in assets, the Vanguard fund is getting top billing here.

AUM: $34.3 billion
Annual expense ratio: 0.03%

Schwab U.S. Broad Market ETF (SCHB)

Splitting the difference between a small list of U.S. stocks and the whole enchilada, this Schwab fund has more than 2,500 stocks to create a much more diversified list of holdings than the standard S&P 500 funds, but not quite so many really small or really young firms. But “megacap tech” stocks still dominate, with the usual suspects of Apple, Microsoft and Amazon.com (AMZN) in the top spots. Furthermore, about 22% of assets are in the top 10 positions. So while there is a bit of difference whether a fund has 500 or 3,500 components, the fact remains most of these cheap ETFs rely on the same shortlist of companies.

AUM: $19.5 billion
Annual expense ratio: 0.03%

iShares 0-3 Month Treasury Bond ETF (SGOV)

Last but not least, iShares offers a bond fund that is a super cheap ETF option for those looking to play short-term Treasurys. There’s not a lot of complexity here, as SGOV buys government debt that will mature in three months or less. That means it’s almost risk-free and nearly as certain as cash to hold its value. However, as there isn’t a lot of risk here, there’s also not a very big premium that’s paid to investors as an incentive. The current yield is a paltry 0.2%, a bit better than your checking account, but certainly not a rate that will grow your nest egg significantly. This cheap ETF is more for capital preservation than anything else.

AUM: $735 million
Annual expense ratio: 0.03%

Cheap ETFs to consider:

— iShares Core S&P 500 ETF (IVV)

— BNY Mellon US Large Cap Core Equity ETF (BKLC)

— JPMorgan BetaBuilders U.S. Equity ETF (BBUS)

— Schwab U.S. Large-Cap ETF (SCHX)

— iShares Morningstar U.S. Equity ETF (ILCB)

— SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)

— Vanguard Total Stock Market ETF (VTI)

— Schwab U.S. Broad Market ETF (SCHB)

— iShares 0-3 Month Treasury Bond ETF (SGOV)

More from U.S. News

7 Best Actively Managed ETFs

7 Electric Vehicle ETFs to Buy

5 Cloud Computing ETFs to Buy Now

9 Cheap ETFs for Cost-Conscious Investors originally appeared on usnews.com

Related Categories:

Latest News

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up