These 64 funds are easy to trade and score near the top of their categories in cost efficiency.
Who’s got the best ETFs? Vanguard and BlackRock are tied on the Honor Roll, with 17 funds each. But if you take into account how big a fund family is, you may say that Schwab is the winner. Although its ETF operation has only a tenth the assets of BlackRock’s iShares, Schwab has landed 12 funds on the Honor Roll.
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Two things separate good ETFs from bad ones. One is cost: You want a fund that drains away as little as possible in overhead. The other is liquidity: You want to be able to get in and out without ketting killed by trading spreads.
The Honor Roll is a very select group of exchange-traded funds that score well in both of these dimensions. In cost efficiency they are near the top of one of the 55 categories into which the Best ETFs survey is divided. In liquidity they fall into the top half of the Best ETF universe.
Best ETFs: The Honor Roll
|Ticker||Exchange-Traded Fund||Holding Cost1||Liquidity Score2||Best ETF Chapter|
|FENY||Fidelity MSCI Energy||$146||B||Sector|
|FNCL||Fidelity MSCI Financials||143||B||Sector|
|FIDU||Fidelity MSCI Industrials||146||B||Sector|
|FTEC||Fidelity MSCI Information Tech||142||A||Sector|
|FMAT||Fidelity MSCI Materials||146||B||Sector|
|FUTY||Fidelity MSCI Utilities||145||B||Sector|
|GSLC||Goldman Sachs ActiveBeta US LgCp Eq||153||B||Factor|
|SLQD||iShares 0-5 Year Invmt Grade Corp Bd||82||B||Short-Term Bonds|
|STIP||iShares 0-5 Year TIPS Bond||97||A||TIPS|
|CLY||iShares 10+ Year Credit Bond||64||B||Long bonds|
|CSJ||iShares 1-3 Year Credit Bond||70||A||Short-Term Bonds|
|IEMG||iShares Core MSCI Emerging Markets||10||A+||Emerging Market|
|IJR||iShares Core S&P Small-Cap||-51||A+||Small-Cap|
|ITOT||iShares Core S&P Total US Stock Mkt||6||A||Large-Cap|
|IUSG||iShares Core S&P US Growth||63||A||Large-Cap|
|IUSV||iShares Core S&P US Value||63||A||Large-Cap|
|USRT||iShares Core US REIT||112||B||Sector|
|HYGH||iShares Interest Rate Hedged High Yield Bond||164||B||Junk|
|CIU||iShares Intermediate Credit Bond||37||A||Medium-Term Bonds|
|MUB||iShares National Muni Bond||116||A||Tax-Exempt|
|IWO||iShares Russell 2000 Growth||-23||A||Small-Cap|
|SUB||iShares Short-Term National Muni Bd||121||B||Tax-Exempt|
|IYZ||iShares U.S. Telecommunications||-168||B||Sector|
|CRED||iShares US Credit Bond||42||B||Medium-Term Bonds|
|FNDA||Schwab Fundamental US Small Company||276||B||Factor|
|SCHR||Schwab Intermediate-Term US Trs||101||A||Medium-Term Bonds|
|SCHC||Schwab International Small-Cap Eq||20||B||Small Foreign|
|SCHO||Schwab Short-Term US Treasury||102||A||Short-Term Bonds|
|SCHZ||Schwab US Aggregate Bond||68||A||Medium-Term Bonds|
|SCHB||Schwab US Broad Market||32||A||Large-Cap|
|SCHD||Schwab US Dividend Equity||118||A||Dividend|
|SCHG||Schwab US Large-Cap Growth||58||A||Large-Cap|
|SCHV||Schwab US Large-Cap Value||63||A||Large-Cap|
|SCHH||Schwab US REIT||112||A||Sector|
|SCHA||Schwab US Small-Cap||-61||A||Small-Cap|
|SCHP||Schwab US TIPS||85||A||TIPS|
|SPAB||SPDR Portfolio Aggregate Bond||65||A||Medium-Term Bonds|
|SPEM||SPDR Portfolio Emerging Markets||129||B||Emerging Market|
|SPTL||SPDR Portfolio Long Term Treasury||104||B||Long bonds|
|SPMD||SPDR Portfolio Mid Cap||16||B||Mid-Cap|
|SPYD||SPDR Portfolio S&P 500 High Div||116||A||Dividend|
|SPTS||SPDR Portfolio Short Term Treasury||102||B||Short-Term Bonds|
|SPSM||SPDR Portfolio Small Cap||-130||B||Small-Cap|
|SPTM||SPDR Portfolio Total Stock Market||32||A||Large-Cap|
|SPDW||SPDR Portfolio World ex-US||-11||A||Large Foreign|
|SLYV||SPDR S&P 600 Small Cap Value||63||B||Small-Cap|
|XRT||SPDR S&P Retail||50||A||Sector|
|VOX||Vanguard Communication Services||-200||B||Sector|
|VDC||Vanguard Consumer Staples||155||A||Sector|
|VXF||Vanguard Extended Market||-28||A||Mid-Cap|
|VSS||Vanguard FTSE All-Wld ex-US SmCp||-223||B||Small Foreign|
|VEA||Vanguard FTSE Developed Markets||-9||A||Large Foreign|
|VGK||Vanguard FTSE Europe||49||A+||Regional Foreign|
|VPL||Vanguard FTSE Pacific||34||A||Regional Foreign|
|VNQI||Vanguard Global ex-US Real Est||71||A||Sector|
|VGT||Vanguard Information Technology||147||A||Sector|
|VGIT||Vanguard Intmdt-Term Trs||116||A||Medium-Term Bonds|
|VOT||Vanguard Mid-Cap Growth||110||B||Mid-Cap|
|VOE||Vanguard Mid-Cap Value||116||A||Mid-Cap|
|VBK||Vanguard Small-Cap Growth||16||B||Small-Cap|
|VBR||Vanguard Small-Cap Value||59||A||Small-Cap|
|BNDX||Vanguard Total International Bond||181||A||International Bonds|
|VTI||Vanguard Total Stock Market||35||A+||Large-Cap|
1 Cumulative cost of holding a $10,000 position for a decade. Incorporates annual expense ratio, bid/ask spreads and cost offset from securities lending. 2 Reflects bid/ask spreads and trading volume. A = easy to trade.
Data sources: Morningstar; Bloomberg; fund distributors.
Categorization is more fine-grained this year than in previous ETF surveys. This time we have 15 separate listings for sector funds, for example, and we distinguish diversified medium-term bond funds from government-only medium-term bond funds.
Within a giant category (as measured by combined assets) there can be up to four funds whose holding costs are low enough to make them candidates for the Honor Roll. In a small category there will be one or none. Any fund that treats its investors to negative costs–possible through the magic of securities lending–is automatically eligible on the cost score. No fund with a holding cost higher than $300 is on the Honor Roll.
The other hurdle to get on the Honor Roll fund is a B or better grade for liquidity. We measure liquidity by looking at trading spreads and trading volume. A fund that sees both $2.5 million a day in trades and an average spread between bid and ask of 0.1% will be comfortably within reach of an honor grade for liquidity.
To see how an Honor Roll fund compares with its peers, go to the ETF survey chapter indicated in the table. The differences will surprise you.
Consider the category for funds whose portfolios are dominated by large U.S. companies. That category includes both S&P 500 funds and funds tracking the entire U.S. stock market. The winner is iShares Core S&P Total U.S. Stock Market (ITOT), with a ten-year holding cost, per $10,000 invested, of only $6.
On that score ITOT is a 25-fold better deal than the better-known SPDR S&P 500 (SPY), and 100-fold better than the fund at the bottom, Inspire 100 (BIBL). Bear in mind that a fund won’t even appear in the survey unless it has a net expense (expense less offset from securities lending) of 0.4% or less.
The category for mid- and small-cap foreign stocks is another one with eye-opening differences. Honor Roll member Vanguard FTSE All-World ex-U.S. Small Cap (VSS) has a cost of -$223 and Schwab International Small-Cap Equity (SCHC) is listed here with $20. The category laggard, from Hartford, will run you $673.
Originally published at Forbes