ETF fund ( English Exchange Traded Fund ) – an investment portfolio of the fund, traded on the stock exchange. It is used for index and passive investment when investing in stocks that follow the movement of the index.
In this article, we’ll take a look at the best ETFs to invest in. Currently, the Russian investor has the opportunity to invest not only in domestic financial instruments, but also to carry out transactions in the global market. American ETFs provide ample opportunities for diversification and high returns. Many of them will include more than 1000 assets of various sectors, classes, countries. This allows you to make your own investment portfolios with a minimum level of risk.
TOP 9 ETFs by popularity (capitalization) in 2023 https://t.co/bSDlHJCHkB
— City Telegraph (@0xCitytelegraph) February 17, 2023
Let’s take a look at the 9 ETFs that have the most interest among investors↓
Content
- SPDR S&P 500 ETF
- iShares Core S&P 500 ETF
- Vanguard Total Stock Market ETF
- CRSP US Total Market Index
- Invesco QQQ
- Vanguard FTSE Developed Markets ETF
- iShares Core US Aggregate Bond ETF
- iShares Core MSCI EAFE ETF
- SPDR Gold Trust
- Building an investment portfolio from ETFs
SPDR S&P 500 ETF
It is one of the oldest US ETFs ( founded in 1993 ), following the S&P 500 index. It is often used as a benchmark when building your own investment portfolio to compare performance. It is also used by active traders to switch between active and passive trading. The fund is suitable for a long-term investment and includes US large cap stocks from the S&P500 index (includes Microsoft (MSFT) 5.36%, Apple (AAPL), etc.)
Fund Options Meaning
Ticker SPY
Type Large-Cap Equity Funds
Expense Ratio _ 0.09%
Number of assets
506
Profitability
Profitability for 5 years 70%
Profitability for 3 years 40%
Dividends 1.8%
Risk
Volatility (σ)* 20.58%
Beta coefficient (β)** 1
Multiplier score
P/E***
17.06
Explanation:
*Volatility is the standard deviation of the ETF price .
**beta coefficient – volatility relative to the S & P 500 index (if equal to 1, it completely copies its movement)
*** P / E among other Big Cap ETFs P / E < 10 undervalued fund, P / E >20 overpriced.
The SPY ETF is actively traded in the market. Capitalization over $283,809.7 million
iShares Core S&P 500 ETF
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The iShares Core S&P 500 ETF ( IVV , founded in 2000) tracks the movement of the S&P500 index. Includes US large cap stocks and includes stocks of: ExxonMobil, Apple, IBM, GE, etc. The main parameters of the fund are as follows:
Fund Options Meaning
Ticker IVV
Type Large-Cap Equity Funds
Expense Ratio _ 0.04%
Number of assets 505
Profitability
Profitability for 5 years 70%
Profitability for 3 years 41%
Dividends 2.27%
Risk
Volatility (σ) 20.72%
Beta coefficient (β) 1
Multiplier score
P/E
19.41
The figure below shows the dynamics of the fund’s value over the next 2 years. It can be seen that its movement is highly correlated with the SPY fund, as they both mimic the movement of the S&P 500 index.
Repeats the movement of the S&P 500 index
Vanguard Total Stock Market ETF
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The fund ( VTI, founded in 2001 ) invests in many large US companies in various industries. The fund follows the CRSP US Total Market Index , and includes stocks of companies such as: Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Alphabet (GOOG), Visa (V), etc. The fund parameters are as follows ↓
Fund Options Meaning
Ticker VTI
Type Large-Cap Equity Funds
Expense Ratio _ 0.03%
Number of assets 1599
Profitability
Profitability for 5 years 65.9%
Profitability for 3 years 38.8%
Dividends 1.7%
Risk
Volatility (σ) 10.9%
Beta coefficient (β) 1.03
Multiplier score
P/E 22
Due to its wide diversification, VTI has a flat uptrend with low volatility.
Widely diversified VTI fund. Popular among investors as a benchmark for evaluating the effectiveness of their own investment portfolios
CRSP US Total Market Index
The ETF is built on the basis of following the S&P 500 index (founded in 2010). Includes the largest US large-cap companies: Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Berkshire Hathawaw (BRK.B), Johnson & Johnson (JNK) and others. The table shows the fund’s key criteria ↓
Fund Options Meaning
Ticker VOO
Type Large-Cap Equity Funds
Expense Ratio _ 0.03%
Number of assets 504
Profitability
Profitability for 5 years 70.8%
Profitability for 3 years 40.8%
Dividends 1.8%
Risk
Volatility 18.9%
Beta coefficient (β) 1
Multiplier score
P/E 22.5
The figure below shows the dynamics of the value of the fund ↓
Very stable fund, maximum drawdown was 19%
Invesco QQQ
One of the oldest ETF funds ( founded in 1999 ) follows the movement of the NASDAQ index. It has large trading volumes on the stock exchange and is very popular with investors. Includes technology stocks: Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Intel (INTC), Cisco (CSCO), Adobe (ADBE) and others.
The table shows the key criteria of the fund ↓
Fund Options Meaning
Ticker QQQ
Type Large cap equity fund
Expense Ratio _ 0.02%
Number of assets 104
Profitability
Profitability for 5 years 131% *
Profitability for 3 years 72%
Dividends 0.68%
Risk
Volatility 16.8%
Beta coefficient (β) 1.03
Multiplier score
P/E 25.5
Note:
*the fund has one of the highest returns among all large cap stock funds (max. 148% for the FDN fund)
The QQQ fund has grown by 131% over the past 5 years. You can see that it has a fairly high P/E ratio, which shows high overbought among peers.
One of the highest yields among similar funds. For 10 years, the fund has increased its capital by 5.6 times!
Vanguard FTSE Developed Markets ETF
The fund ( VEA , founded in 2007) provides an opportunity to invest in large-cap stocks not only in US companies, but also in developed foreign markets, including Western Europe, Japan and Australia. Follows the MSCI EAFE Index.
The fund, like Vanguard, includes more than 1,000 stocks in combination with country diversification. VEA includes shares of such companies: Nestle (NESN), Roche Holding (ROG), Samsung Electronics (005930), Novartis (NOVN), Toyota Motor (7203) and others.
The table shows the key criteria of the fund ↓
Fund Options Meaning
Ticker VEA
Type Equity funds of large capitalization foreign companies
Expense Ratio _ 0.05%*
Number of assets 1845
Profitability
Profitability for 5 years 16.06%
Profitability for 3 years 6.8%
Dividends 3.2%
Risk
Volatility 3.5%
Beta coefficient (β) 0.93
Multiplier score
P/E 15.9
Note:
*one of the lowest management fees among similar funds.
The figure below shows the price dynamics of the VEA ETF ↓ The fund has sufficient stability ( low drawdowns ) during a crisis and is suitable for a conservative investor.
The fund allows for a wide diversification into stocks of developed markets
iShares Core US Aggregate Bond ETF
The Fund ( AGG, founded in 2003 ) provides an opportunity to invest in US bonds with maximum reliability. The fund includes various US national and corporate bonds. The ETF follows the Barclays Capital US Aggregate Bond Index. More than 40% is occupied by US government bonds.
The table shows the key criteria for a bond ETF fund ↓
Fund Options Meaning
Ticker AGG
Type Bonds
Expense Ratio _ 0.05%*
Number of assets 8899
Profitability
Profitability for 5 years 21%
Profitability for 3 years 15.4%
Dividends 2.48%
Risk
Volatility 2.75%
Beta coefficient (β) -0.03%
Note:
*one of the lowest management fees among comparable bond funds.
The figure below shows the dynamics of the market value of AGG. The fund is suitable for conservative investors as a tool for distributing part of the assets into the most reliable fixed income financial instruments.
One of the most trusted ETFs
iShares Core MSCI EAFE ETF
The fund ( IEFA, founded in 2012 ) follows the MSCI EAFE Investable Market Index. The ETF includes, in addition to shares of American companies, shares of large-cap companies in developed markets: Nestle (NESN), Roche Holding (ROG), Novartis AG (NOVN), ASML Holding (ASML), SAPE SE (SAP) and others. In total, more than 2,500 shares.
The table shows the main characteristics of the fund ↓
Fund Options Meaning
Ticker IEFA
Type Equity funds of large capitalization foreign companies
Expense Ratio _ 0.07%
Number of assets 2514
Profitability
Profitability for 5 years 16.8%
Profitability for 3 years 6.8%
Dividends 3.47%
Risk
Volatility 5.23%
Beta coefficient (β) 0.9
Multiplier score
P/E 13.73
The figure below shows the evolution of the IEFA value. Investing in this fund is suitable for increasing portfolio diversification with a focus on dividend yield, because. the growth of the ETF itself is not expressed.
The Developed Fund allows you to invest in more than 2,500 foreign companies
SPDR Gold Trust
Fund ( GLD, founded 2004 ) based on following the price of gold. GLD is used as a hedging asset in a portfolio. Includes one single asset – gold.
The table below shows the main characteristics of the fund ↓
Fund Options Meaning
Ticker GLD
Type Commodity (precious metals)
Expense Ratio _ 0.4%
Number of assets 1
Profitability
Profitability for 5 years 42.4%
Profitability for 3 years 30.4%
Risk
Volatility 9.5%
Beta coefficient (β) -0.08
The fund follows the only asset – gold. Suitable for reducing portfolio risks and as a savings asset
Building an investment portfolio from ETFs
I made a portfolio out of 9 largest ETFs. As a result, the following indicators were obtained with historical modeling for 7 years. The best value in terms of the Sharpe ratio (profitability/risk) was shown by a portfolio composed of only 2 assets: QQQ and AEG. They have the maximum difference in the asset class (stocks, bonds).
Asset distribution
The graph below shows the dynamics of the simulated ETF portfolio from 2013 to 2020 ↓
Profitability of the investment portfolio 70%
Final yield: 70%
Maximum portfolio drawdown: -3.7% ( which is very low despite the crisis of 2014 and 2020 )
Sortino coefficient 3.01 (very good performance). see → Sortino coefficient. Formula. Example. Application
Conclusion
The use of ETF funds allows you to widely diversify assets and select them for your investment portfolio, maximizing profitability or reducing risks, depending on the investment strategy.
