ETFs are now one of the most popular investment vehicles. They offer diversification, liquidity, and low costs. So, they are a good way for both new and seasoned investors to build wealth. With so many options, every investor wonders: Which is the best ETF in the U.S.?
To help answer this, we analyzed the top U.S. ETFs. We looked at their performance, fees, assets, and fit for different goals. Below, we will explore a wide range of ETFs to help you make an informed decision.
What makes a great ETF?
To find the best US ETFs, several key factors. They affect an ETF’s performance and suitability.
- Expense Ratio: The cost of owning the ETF.
- Performance: historical returns over various time frames.
- Liquidity: The volume of shares traded daily and how easy it is to buy or sell.
- Underlying Assets: The assets or indices the ETF tracks. They are stocks, bonds, and commodities.
- Risk: The level of volatility associated with the ETF’s underlying assets.
Best Broad Market ETFs
For investors seeking broad exposure to the U.S. market, these ETFs are excellent choices:
1: Vanguard Total Stock Market ETF (VTI)
VTI offers exposure to the entire U.S. stock market, from small-cap to large-cap stocks. This ETF is one of the most diversified, tracking over 3,500 stocks across various sectors. It’s ideal for those seeking long-term growth. They must be willing to hold their investment through market cycles.
- Expense Ratio: 0.03%
- Dividend Yield: 1.45%
- Holdings: Apple, Microsoft, Amazon, Alphabet, Tesla
VTI has a low expense ratio and is well-diversified. It is a great choice for investors who want to reduce risk while investing in the U.S. stock market. It suits both beginners and seasoned investors. They seek a solid core holding in their portfolios.
2: SPDR S&P 500 ETF Trust (SPY)
SPY is the oldest and one of the largest ETFs. It tracks the S&P 500 Index, which has 500 of the largest U.S. companies. It offers exposure to blue-chip stocks. So, it’s a top choice for investors seeking stability and steady growth.
- Expense Ratio: 0.09%
- Dividend Yield: 1.34%
- Holdings: Apple, Microsoft, Amazon, Facebook, Berkshire Hathaway
SPY has unmatched liquidity. It is an excellent choice for traders and long-term investors. Its size, stability, and performance make it a top choice for a simple, reliable investment in the U.S. stock market.
Best Sector-Specific ETFs
Investors can choose from many sector-specific ETFs to focus on certain sectors. Here are some of the top options:
1. Technology Select Sector SPDR Fund (XLK)
For investors who believe in the long-term growth of the technology sector, XLK is a top choice. This ETF tracks the Technology Select Sector Index. It provides exposure to top tech companies that drive global innovation.
- Expense Ratio: 0.10%
- Dividend Yield: 0.98%
- Holdings: Apple, Microsoft, NVIDIA, Visa, and PayPal
With tech’s dominance in the economy, XLK lets investors profit from its growth. It holds some of the world’s most influential companies.
2. Vanguard Health Care ETF (VHT)
The healthcare sector is another key growth area. Recent advances in biotech, pharmaceuticals, and medical devices drive this. VHT provides exposure to various healthcare firms. They range from big pharma to small biotech.
- Expense Ratio: 0.10%
- Dividend Yield: 1.29%
- Holdings: Johnson & Johnson, Pfizer, UnitedHealth Group, Merck, Thermo Fisher Scientific
As healthcare becomes more vital due to aging populations and technological advances, VHT is a good long-term growth option in a defensive sector.
Best Bond ETFs
For low-risk, income-focused investors, bond ETFs are a must for a balanced portfolio. Here are two of the most popular bond ETFs in the USA.
1. iShares Core U.S. Aggregate Bond ETF (AGG)
AGG tracks the Bloomberg Barclays U.S. Aggregate Bond Index. It offers exposure to a wide range of U.S. investment-grade bonds. These include Treasury bonds, corporate bonds, and mortgage-backed securities.
- Expense Ratio: 0.04%
- Dividend Yield: 2.33%
- Holdings: U.S. Treasury Bonds, Government National Mortgage Association, Freddie Mac
This ETF is perfect for investors seeking steady income and lower risk. It is often a defensive allocation in portfolios during economic uncertainty.
2. Vanguard Total Bond Market ETF (BND)
Like AGG, BND holds a range of U.S. investment-grade bonds, from government to corporate debt. However, BND focuses on stability and income. So, it’s ideal for conservative investors.
- Expense Ratio: 0.03%
- Dividend Yield: 2.15%
- Holdings: U.S. Treasury Bonds, corporate bonds, mortgage-backed securities
BND is a staple in many portfolios. It diversifies and reduces risk.
Best International ETFs
U.S. investors seeking to diversify should use international ETFs. They are a great way to access global markets.
1. Vanguard FTSE All-World ex-US ETF (VEU)
VEU tracks the FTSE All-World Ex-US Index. It includes large- and mid-cap companies from developed and emerging markets worldwide. This ETF is ideal for investors who want to diversify globally and reduce U.S. market risk.
- Expense Ratio: 0.08%
- Dividend Yield: 2.70%
- Holdings: Nestle, Tencent, Roche, Alibaba, and Samsung
VEU, focused on non-U.S. equities, provides global growth and diversification.
2. iShares MSCI Emerging Markets ETF (EEM)
EEM offers exposure to high-risk, high-reward emerging markets like China, India, and Brazil. These markets present opportunities for significant growth but come with increased volatility.
- Expense Ratio: 0.68%
- Dividend Yield: 1.51%
- Holdings: Taiwan Semiconductor Manufacturing, Alibaba, Tencent, Samsung, Meituan
EEM is a great choice for investors. It offers growth in emerging markets.
Conclusion: Which ETF is Best in the USA?
The best USA ETF depends on your goals, risk, and time. For broad market exposure, VTI and SPY are the best. They are diversified, low-cost, and have great track records. For sector-specific plays, XLK and VHT are great options. They let you profit from long-term trends in tech and healthcare. For income-focused or conservative investors, AGG and BND are best. They provide stable returns with low risk. VEU and EEM are for those seeking international diversification.
Choosing the right ETF is about aligning with your investment strategy. The key is to have a balanced portfolio. It should reflect your goals: growth, income, or capital preservation.