Most beginners might find buying and trading shares in funds challenging. It could also be intimidating because the available funds are numerous and have different asset groups and investment strategies. There are different funds; mutual funds, index funds, and traded funds which confuses most people. This article will cover traded funds, better known as ETFs or exchange-traded funds.
What is a traded fund?
An ETF refers to a kind of pooled investment security that operates similarly to a mutual fund. Ordinarily, an exchange-traded fund tracks a particular sector, commodity, index, or another type of asset. However, in contrast to mutual funds, you can purchase or sell ETFs on a stock exchange like a regular stock.
A traded fund can be structured to monitor anything from the cost of an individual commodity to huge, diverse securities collections. They can even track particular investment strategies. Here are some top trading funds to watch out for in 2022.
1. Fidelity ZERO Large Cap Index (FNILX)
This index mutual fund has no expense ratio, hence the ZERO moniker, and it does not track the S&P 500 officially. Technically, it follows the U.S Large Cap Index, but the difference is academic. The tangible difference is that Fidelity does not need to pay a licensing fee to utilize the S&P name, which lowers the costs for investors.
The expense ratio in Fidelity ZERO Large Cap Index is 0 percent meaning that investing $10,000 costs $0 annually.
2. Invesco QQQ Trust ETF (QQQ)
This ETF is another type of index fund to watch. It monitors how the largest non-financial corporations in the Nasdaq-100 Index perform. Invesco QQQ Trust ETF began trading in 1999, and this fund is managed by the fund giant Invesco. According to Lipper, it is the best-performing large-cap fund with regard to total returns over 15 years up to September 2021.
The fund has an expense ratio of 0.20%, which means that every $10,000 you invest comes to $20 annually.
3. SPDR S&P 500 ETF Trust (SPY)
This fund could be termed the grandfather of ETFs since it was established in 1993. SPDR S&P 500 ETF Trust helped trigger the ETF investing wave that is so popular nowadays. It has hundreds of billions of dollars and is among the leading ETFs. It is also sponsored by another industry heavyweight, State Street Global Advisors, and tracks the S&P 500.
Its expense ratio is 0.095%, meaning that an investment of $10,000 would cost you $9.50 annually.
4. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETFtracks the S&P 500 Index that represents the leading 500 companies in the U.S.A, all coming from diverse market sections. VOO invests in the stocks in the S&P 500 Index proportionate to the index. This fund can successfully reflect the index’s performance with a slight tracking error.
The Vanguard S&P 500 ETF has around 4.6 million shares in daily trading volume. Its expense ratio is one of the lowest, only 0.03%, making it a favorite among traders.
5. Shelton NASDAQ-100 Index Direct (NASDX)
The NASDX monitors the performance of the leading non-financial corporations in the Nasdaq-100 Index, which primarily includes tech companies. The Shelton NASDAQ-100 Index Direct fund started trading in 2000, and its record over the last five to ten years is solid and impressive. It has an expense ratio of 0.5 percent, meaning that investing $10,000 costs $50 annually.
6. iShares Core S&P 500 ETF (IVV)
This is a fund sponsored by BlackRock, one of the largest fund companies. iShares Core S&P 500 ETF is one of the biggest exchange-traded funds and, similar to some ETFs mentioned here, tracks the S&P 500. Founded in 2000, it is a long-tenured player that’s been tracking the index for years. Its exchange ratio is 0.03, which is impressively low. Investing $10,000 will cost you $3 annually.
7. Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF tracks and tries replicating the performance of the CRSP Total Market Index in the U.S. It incorporates micro-cap, small-cap, mid-cap, and large-cap stocks frequently traded on the NASDAQ and NYSE. VTI allows traders to bet on larger total markets that cover a broader spectrum of stocks spanning multiple market caps.
Its expense ratio is only 0.03%, and it boasts a daily trading volume of about 4.3 million shares. If you are a day trader, this traded fund would be perfect.
8. Schwab U.S. TIPS ETF (SCHP)
Schwab U.S. TIPS ETF is an excellent fit if you want to benefit from trading securities shielded from inflation. This fund tracks the Bloomberg Barclays U.S. Treasury Series-L Bond Index, a market-value weighted index with a remaining maturity of at least one year. It boasts a daily trading volume of around 2.2 million shares and has a low expense ratio of 0.05%. It is also great for day traders.
The Bottom Line
These eight are the leading traded funds to watch out for currently. Before investing in any of them, do your research to understand what you funnel your hard-earned cash into, even if you have a capable financial investor.