The fourth quarter is proving to be a solid one for the stock market, which has been hitting a series of new highs on vaccine optimism. The skyrocketing market is leading to explosive growth and enough liquidity in the ETF world. This is especially thanks to its unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and of course low cost (read:
Sector ETFs to Gain the Most on COVID-19 Vaccine Rollout). The liquidity of the ETF is determined by its composition and trading volume of the underlying securities that make up its portfolio. Additionally, the trading volume of the ETF as well as the investment environment also depends on its liquid factor. The funds that can easily be purchased and sold on the market indicate enough liquidity. Volume, or the number of shares traded in a particular period, is definitely the most-important consideration for determining the liquidity of a particular fund. A higher number of shares provides easy access to move in and out of the product, keeping the bid/ask spread tight. Further, greater volume ensures easy creation and redemption of shares in the fund basket, which is a regular and vital mechanism in ETFs. This is especially true as authorized participants have the ability to create new baskets of ETF shares for underlying securities or redeem them when required. This phenomenon allows ETFs to trade in line with their net asset value. That said, we have highlighted 10 ETFs that have seen higher average volumes over the past three months and are thus the top 10 fund by trading volume, per etfdb.com. SPDR S&P 500 ETF ( SPY Quick Quote SPY - Free Report) This fund tracks the S&P 500 Index and holds 506 well-diversified stocks in its basket with each holding less than 6.8% of the assets. Zacks ETF Rank: #2 (Buy) Average Volume: 73.4 million shares AUM: $325.5 billion Expense Ratio: 0.09% Top Sector: Information Technology (27.8%) 3-Month Returns: 9.1% Financial Select Sector SPDR ( XLF Quick Quote XLF - Free Report) The fund targets the broad financial segment and follows the Financial Select Sector Index. It holds 65 stocks in its basket, with double-digit allocation to the top two firms. Zacks ETF Rank: #2 Average Volume: 58 million shares AUM: $22.9 billion Expense Ratio: 0.13% Top Sector: NA 3-Month Returns: 16.4% iShares MSCI Emerging Markets ETF ( EEM Quick Quote EEM - Free Report) This fund targets emerging markets and follows the MSCI Emerging Markets Index. It holds 1,212 stocks in its basket, with none accounting for more than 6.4% (read: Emerging Markets Hit Record High: 5 Top-Performing ETFs YTD). Zacks ETF Rank #4 (Sell) Average Volume: 44.3 million shares AUM: $27.1 billion Expense Ratio: 0.68% Top Sector: Information Technology (19.7%) 3-Month Returns: 13% Invesco QQQ ( QQQ Quick Quote QQQ - Free Report) This product provides exposure to the 103 largest domestic and international companies, excluding financial stocks, by tracking the Nasdaq-100 Index. It is concentrated on the top three firms that make up for a nearly double-digit percentage each in the portfolio (read: Ultra-Popular QQQ ETF Expands Its Family). Zacks ETF Rank: #1 (Strong Buy) Average Volume: 40.6 million shares AUM: $147.7 billion Expense Ratio: 0.20% Top Sector: Information Technology (47.5%) 3-Month Returns: 10.3% iPath S&P 500 VIX Short-Term Futures ETN ( VXX Quick Quote VXX - Free Report) This ETN focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months of VIX futures contract. Zacks ETF Rank: NA Average Volume: 34.3 million shares AUM: $998.1 million Expense Ratio: 0.89% Top Sector: NA 3-Month Returns: -29.8% The Energy Select Sector SPDR Fund ( XLE Quick Quote XLE - Free Report) The fund targets the broad energy segment and follows the Energy Select Sector Index. It holds 25 stocks in its basket, with double-digit allocation to the top two firms (read: Should You Buy Oil & Gas ETFs Now?). Zacks ETF Rank #4 Average Volume: 33.6 million shares AUM: $12.9 billion Expense Ratio: 0.13% Top Sector: N/A 3-Month Returns: 26% iShares iBoxx $ High Yield Corporate Bond ETF ( HYG Quick Quote HYG - Free Report) This ETF offers exposure to a broad range of U.S. high-yield corporate bonds by tracking the Markit iBoxx USD Liquid High Yield Index. It holds 1,248 securities with effective duration of 3.30 years and average maturity of 3.43 years (read: Is This the Time to Buy High-Yielding ETFs?). Zacks ETF Rank #3 (Hold) Average Volume: 29.2 million shares AUM: $27.7 billion Expense Ratio: 0.49% Top Sector: Consumer Cyclical (20.1%) 3-Month Returns: 4.1% iShares Silver Trust ( SLV Quick Quote SLV - Free Report) The fund offers exposure to the day-to-day movement of the price of silver bullion. Zacks ETF Rank #3 Average Volume: 28.4 million shares AUM: $13.2 billion Expense Ratio: 0.50% Top Sector: NA 3-Month Returns: -9.6% iShares Russell 2000 ETF ( IWM Quick Quote IWM - Free Report) This ETF targets the small-cap segment by tracking the Russell 2000 Index and holds 2,011 stocks with each holding less than 0.6% of the assets (read: 5 Small-Cap Sector ETFs Beating the Russell 2000). Zacks ETF Rank: #3 Average Volume: 26 million shares AUM: $52.5 billion Expense Ratio: 0.19% Top Sector: Healthcare (21%) 3-Month Returns: 27.8% iShares MSCI Brazil ETF ( EWZ Quick Quote EWZ - Free Report) This fund targets the Brazilian stock market, holding 54 stocks with heavy concentration on the top firm. Zacks ETF Rank: #4 Average Volume: 25.6 million shares AUM: $6.2 billion Expense Ratio: 0.59% Top Sector: Financials (21%) 3-Month Returns: 20.6% Want key ETF info delivered straight to your inbox?
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