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Guide to the 25 Cheapest ETFs

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The ETF industry is seeing explosive growth piling up huge assets in recent years. As per ETFGI, total assets in ETFs and ETPs listed globally reached a record $5.12 trillion at the end of July from $1.16 trillion at the end of 2009. This is especially thanks to their unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and of course low cost.

While there are several types of cost associated with ETFs like trading commissions, bid/ask spreads, premiums and discounts, and tracking error, expense ratios has been the biggest crowd pullers into the ETF world as most of the popular ETFs has expense ratio below 0.05%. This is especially true as ETFs with low expense ratios significantly outperform their expensive counterparts when other factors remain constant. This can be explained by the following example (see: all the ETFs with Low Expense Ratios here).

Consider two funds with expense ratios of 0.10% and 0.50% and invest $10,000 in both. Now, both funds have delivered the same annual returns of 10% in 10 years. The fund with an expense ratio of 0.10% will grow to $25,703 in 10 years while the same fund with 0.50% in expense ratio will grow by a lower amount of $24,782 in the same time frame. Further, the difference in total returns (after expenses) becomes more significant if we increase the holding period. The same funds with expense ratio of 0.10% and 0.50% when invested for 30 years would have a value of $169,797 and $152,203, respectively, after 30 years.

Keeping the importance of expense ratio in mind, we have highlighted the 25 cheapest ETFs currently on the market:

Schwab U.S. Broad Market ETF SCHB – Expense ratio: 0.03%

This fund provides broad exposure to the U.S. equity market by tracking the Dow Jones U.S. Broad Stock Market Index. It holds a well-diversified portfolio of 2418 stocks with none accounting for more than 3.6% of assets. About one-fourth of the portfolio is allocated to information technology while financials, healthcare, consumer discretionary and industrials round off the top five with double-digit exposure each. SCHB is one of the popular and liquid ETF with AUM of $12.9 billion and average daily volume of 671,000 shares. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: U.S. Equity ETF Hits New 52-Week High).

Schwab U.S. Large-Cap ETF SCHX – Expense ratio: 0.03%

This fund targets the large-cap segment of the U.S. equity market by tracking the Dow Jones U.S. Large-Cap Total Stock Market Index. It holds 773 securities in its basket with none making up for more than 4% of assets. Here again, information technology is the top sector with one-fourth of the portfolio followed by financials, healthcare, consumer discretionary and industrials. The fund has amassed $14.5 billion in its asset base and volume is solid at over 953,000 shares. It has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares Core S&P Total U.S. Stock Market ETF ITOT – Expense ratio: 0.03%

Like SCHB, this ETF also offers broad exposure to the U.S. equity market but tracks the S&P Total Market Index and holds a relatively larger basket of 3439 stocks. While sector exposure is also almost same, it has amassed $15.2 billion and trades in average daily volume of 934,000 shares. The fund has a Zacks ETF Rank #3 with a Medium risk outlook (read: Cheapest ETFs in Focus as Fee War Heats Up).

SPDR Portfolio Large Cap ETF SPLG – Expense ratio: 0.03%

This fund follows the SSGA Large Cap Index and offers exposure to the U.S. large-cap market segment. It holds 755 stocks in its basket with none accounting for more than 4.3% of assets. Here also, information technology is the top sector with one-fourth of the portfolio. The product has $1.6 billion in AUM and trades in good volume of more than 469,000 shares a day on an average. It has a Zacks ETF Rank #3.

SPDR Portfolio Total Stock Market ETF SPTM – Expense ratio: 0.03%

This fund offers exposure to the broad market by tracking the SSGA Total Stock Market Index, holding 2,760 stocks in its basket with each accounting for less than 4% share. Like many others in the space, information technology is the top sector with one-fourth of the portfolio. The ETF has AUM of $2.4 billion and trades in average daily volume of 635,000 shares. It has a Zacks Rank #3.

Vanguard Total Stock Market ETF (VTI - Free Report) – Expense ratio: 0.04%

This ETF follows the CRSP US Total Market Index, offering broad exposure across growth and value styles. Holding 3654 stocks, it is well spread across components with none accounting for more than 2.9% of assets. Sector-wise also, the fund is diversified among technology and financials that make up for 19% of assets each, followed by consumer services, industrials and healthcare. It is the third largest and most popular fund with AUM of nearly $102.9 billion and average daily volume of nearly 2.2 million shares. VTI has a Zacks ETF Rank #3 with a Medium risk outlook (read: Vanguard Action to Make ETF Investing More Affordable).

iShares Core S&P 500 ETF IVV – Expense ratio: 0.04%

This is the second-largest fund in the space with AUM of $155.2 billion and tracks the S&P 500 Index. It holds 505 securities in its basket with each taking less than 4.3% share while sector-wise, information technology takes the top spot at 26.1% share. The fund trades in heavy volume of 3.9 million shares per day on average and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Schwab U.S. Large-Cap Growth ETF (SCHG - Free Report) – Expense ratio: 0.04%

This product offers exposure to the growth segment of the large-cap space by tracking the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. It holds 418 stocks with slight tilt towards the top firm — Apple (AAPL - Free Report) — at 7.91% while other firms hold less than 5.9% share. Like many other funds in the space, the product is heavy on information technology at 33.4% while consumer discretionary, healthcare, and industrials receive double-digit exposure each in the portfolio. It is rich in AUM of 6.6 billion and average daily volume of around 362,000 shares. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Spread of ETFs to Taste Apple's Trillion Dollar Market Cap).

Schwab U.S. Large-Cap Value ETF SCHV – Expense ratio: 0.04%

This is also a large-cap centric fund but targets the value segment by tracking the Dow Jones U.S. Large-Cap Value Total Stock Market Index. It holds 357 stocks in its basket with highest allocation to Microsoft (MSFT - Free Report) at 6.5%, while others make up for no more than 3% of assets. Unlike others, financials is the top sector with 20% allocation while information technology, health care and consumer staples round off the next three spots. SCHV has amassed assets worth $4.6 billion so far and trades in volume of around 290,000 shares a day on average. It has a Zacks ETF Rank #2 with a Medium risk outlook (read: Value ETFs Regain Momentum: Will This Last?).

Vanguard S&P 500 (VOO - Free Report) – Expense ratio: 0.04%

This is another low-cost well-diversified, large-cap fund tracking the S&P 500 Index and holding 509 securities in its basket. Like IVV, it is well spread out across security with information technology being the top sector. The fund trades in volume of about 2.5 million shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook.

SPDR S&P 500 Value ETF (SPYV - Free Report) – Expense ratio: 0.04%

With AUM of $1.4 billion, this ETF tracks the S&P 500 Pure Value Index, holding 384 securities in its basket with none making up for more than 3.63% share. Like many other value funds in the space, about one-fourth of the portfolio is allocated to financials sector while energy and healthcare round off the next two spots. SPYV has amassed $1.4 billion in its asset base and trades in a solid average daily volume of 536,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.

SPDR S&P 500 Growth ETF SPYG – Expense ratio: 0.04%
 
This is another option targeting growth corner of the broad U.S. market. It follows the S&P 500 Growth Index, holding 296 stocks in its basket with higher concentration to the top three firms —Apple, Microsoft and Amazon (AMZN - Free Report) — that collectively make up for 15.1% share.  About 42.5% of the portfolio is allocated to information technology followed by healthcare and consumer discretionary. The ETF has AUM of $3.4 billion in its asset base and trades in average daily volume of 923,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: Is There a Bubble in FAANG? Buy These Tech ETFs).

Schwab U.S. Aggregate Bond ETF SCHZ – Expense ratio: 0.04%

This product offers broad exposure to the 3931 U.S. investment grade bonds by tracking the Bloomberg Barclays US Aggregate Bond Index. It has key holdings in U.S. Treasury accounting for 38.3% share, closely followed by Mortgage Pass-thru and U.S. corporate bonds with 27.8% and 21.8% share, respectively. With AUM of $5.2 billion, the fund has average maturity of 8.44 years and effective duration of 5.98 years. Volume is good, exchanging 369,000 shares in hand per day on average.

iShares Core S&P U.S. Growth ETF IUSG – Expense ratio: 0.04%

This is another ETF targeting growth space and tracks the S&P 900 Growth Index. It is a home to 543 stocks with a slight tilt toward Apple at 7.3%. Here again, information technology is the top sector accounting for 41.1% of the portfolio while healthcare and consumer discretionary round off the next two. The fund has accumulated $5 billion in its asset base and trades in solid volume of 446,000 shares a day on average. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 ETFs to Buy as Q2 GDP Growth Hits 4-Year High of 4.1%).

iShares Core S&P U.S. Value ETF (IUSV - Free Report) – Expense ratio: 0.04%

This product tracks the S&P 900 Value and is home to 678 stocks with none of the firms making up for more than 3.35% of assets. Financials is the top sector accounting for one-fourth of the portfolio while energy and healthcare also get double-digit exposure each. The fund has accumulated $4.1 billion in its asset base and trades in solid volume of 335,000 shares a day on average. It has a Zacks ETF Rank #3 with a Medium risk outlook.

SPDR Portfolio Aggregate Bond ETF SPAB – Expense ratio: 0.04%

Like SCHZ, this ETF also offers exposure to the U.S. investment grade bond market and tracks the same index. Holding 4526 stocks, it has key holdings in Treasury at 37.8% followed by mortgage backed securities (27.9%), and industrial corporates (15.3%). Average maturity and effective duration come in at 8.46 years and 6.01 years, respectively. The fund has been able to manage $3 billion in its asset base and trades in a solid volume of 582,000 shares a day.  

SPDR Portfolio Developed World ex-US ETF SPDW – Expense ratio: 0.04%

This fund offers broad exposure to developed international equities outside the United States by tracking the S&P Developed Ex-U.S. BMI Index. It holds a well-diversified basket of 1718 stocks with none accounting for more than 1.25% share. Sector-wise too, the ETF is well spread across financials, industrials, consumer discretionary and consumer staples with double-digit exposure each. It has AUM of $2.8 billion and trades in volume of 476,000 shares a day on average. The product has a Zacks ETF Rank #3.

Invesco PureBeta MSCI USA ETF PBUS – Expense ratio: 0.04%

This is the newly debuted fund in the space having accumulated $2.8 million so far since its inception in last September and sees meager volume of under 1,000 shares. It follows the MSCI USA Index, holding 625 stocks with each making up for less than 4.3% of assets. Here again, information technology takes the top sector with 26.7% allocation, followed by healthcare, financials and consumer discretionary. The product has a Zacks ETF Rank #3.

Vanguard Total Bond Market ETF BND – Expense ratio: 0.05%

This is another option targeting the broad U.S. investment grade bond market with one bp higher fees. It follows the Bloomberg Barclays U.S. Aggregate Float Adjusted Index, holding 8557 securities in its basket with Treasury taking the top spot at 42.7%. Government mortgage-backed     bond and industrial corporates account for 21.8% and 16.7%, respectively. Average maturity and average duration come in at 8.4 years and 6.1 years, respectively. BND is the second-largest bond ETF with AUM of $36.3 billion and average daily volume of 2.2 million shares.

iShares Core U.S. Aggregate Bond ETF AGG – Expense ratio: 0.05%

This ETFs tracks the same index with identical portfolio that of SCHZ but comes with one bps higher in annual fees. It has average maturity of 8.15 years and effective duration of 5.81 years. AGG is the largest and most liquid bond ETF with AUM of $56.3 billion and average daily volume of 3.6 million shares (read: Fearing a Market Slump? Take Flight to Corporate Bond ETFs).

Vanguard Large-Cap ETF (VV - Free Report) – Expense ratio: 0.05%

This is another large-cap ETF that follows the CRSP US Large Cap Index and holds a well-diversified 612 stocks in its basket with none accounting for more than 3.40% of assets. Sector-wise also, it is well spread across information technology, financials, consumer services, healthcare and industrials. The fund has AUM of $13.2 billion and trades in average daily volume of 360,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.

Vanguard Growth ETF VUG – Expense ratio: 0.05%

This ETF target the growth segment but follows the CRSP US Large Cap Growth Index, holding 306 stocks in its basket with heavy concentration on Apple and Amazon. Technology and consumer services are the top two sectors with 28.6% and 20.6% share, respectively. The fund has AUM of $36.5 billion and average daily volume of 802,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook (read: Growth ETF Hits New 52-Week High).

Vanguard Value ETF (VTV - Free Report) – Expense ratio: 0.05%

This value ETF tracks the CRSP US Large Cap Value Index, holding 339 stocks in its basket with Microsoft taking the largest allocation at 6.1%. Like other value funds, financials make the top sector followed by technology and healthcare. VTV has AUM of $42.2 billion and average daily volume of 1.5 million shares. It has a Zacks ETF Rank #3 with a Medium risk outlook.

Vanguard Mid-Cap ETF (VO - Free Report) – Expense ratio: 0.05%

This fund offers exposure to the mid-cap segment of the broad U.S. stock market by tracking the CRSP US Mid Cap Index and holds 362 stocks with each accounting for no more than 0.70% of assets. Financials, industrials, technology, consumer goods and consumer services are the top five sectors. The ETF has amassed $24.1 billion in its asset base while trades in average daily volume of 358,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.

Vanguard Small-Cap ETF (VB - Free Report) – Expense ratio: 0.05%

This ETF targets the small-cap segment of the broad U.S. stock market by tracking the CRSP US Small Cap Index. Holding a broad basket of 1414 stocks, none accounts for more than 0.30% of assets. Financials dominates the return with one-fourth share while industrials, consumer services, technology, and healthcare round off the next spots with double-digit exposure each. The ETF has AUM of $24.5 billion in its asset base and trades in average daily volume of 568,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.

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