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Kip ETF 20: The Best Cheap ETFs

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The past year has been huge for exchange-traded funds (ETFs) – those increasingly popular low-cost securities that hold baskets of assets and trade like stocks.

And it's against this backdrop that we review the Kiplinger ETF 20, which is our list of our favorite ETFs.

Assets in U.S.-listed ETFs reached a record $6.3 trillion at the end of May 2021, up from $4.3 trillion around this same time last year. ETF inflows have recently surged past $500 billion, eclipsing inflows for the entirety of 2020 – itself a record year for inflows. Helping fuel the surge in ETF buying has been the elimination of commissions to trade shares in ETFs (and stocks, too), as well as the market's roaring recovery.

But as assets in ETFs swell, so too do the number of products investors must sift through. If you don't have time to rifle through literally thousands of funds, we can help simplify your search with the Kiplinger ETF 20: our favorite exchange-traded funds. This list of equity and bond ETFs alike can help you build a core portfolio, as well as make tactical plays depending on which way the market winds are blowing.

Read on for more analysis of our Kip ETF 20 picks, which allow investors to tackle various strategies at a low cost.

Data is as of July 28, 2021. Dow Jones, fund companies, Morningstar, MSCI, YCharts. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

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Courtesy of iShares

As a portfolio mainstay, you can't go wrong with iShares Core S&P 500 ETF (IVV, $441), which tracks the S&P 500. The fund holds all 505 stocks in the benchmark. That represents 80% of the U.S. stock market, giving you broad exposure.

Most of the companies, such as Apple (AAPL) and Microsoft (MSFT), are giant-size; portfolio holdings have an average market value of $200 billion.

Information technology, financial services and healthcare sectors make up half of the portfolio, in step with the benchmark.

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Courtesy of iShares

iShares Core S&P Mid-Cap ETF (IJH, $267) tracks midsize companies (firms with a market value between $2.4 billion and $8.2 billion at the time of inclusion, which represent 7% of the U.S. stock market).

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And midsize companies are on a roll. IJH has delivered a 44% total return (price plus dividends) over the past 12 months, which beat the large-cap S&P 500's 38%.

We like to match up this fund and iShares Core S&P Small-Cap with iShares Core S&P 500, because there's no overlap among the portfolios.

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Courtesy of iShares

Small-cap stocks have been the place to be of late. The iShares Core S&P Small-Cap ETF (IJR, $109) has returned 55% over the past 12 months, and many market watchers expect the run to continue.

IJR offers exposure to the smallest firms in the U.S. – companies with a market value between $600 million and $2.4 billion at the time of inclusion, which make up roughly 3% of the U.S. stock market.

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Courtesy of iShares

There's a dizzying array of ESG U.S. stock funds available these days, and it can be hard to parse their differences. But iShares MSCI USA ESG Select ETF (SUSA, $98) is still our favorite.

SUSA holds stocks in more than 200 companies, ranging from midsize firms to mega-caps, that are mindful of their environmental impact; treat customers, employees and their community well; and boast a diverse pool of ethical managers who consistently act in the best interests of shareholders. These characteristics, among others, define high-quality companies that should perform better over time.

So far, so good, for MSCI USA ESG Select ETF. It held up much better than the S&P 500 and its ESG US stock fund peers........

© Kiplinger

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