The Cheapest ETFs For Building A Core Portfolio

Investors love ETFs because of their low cost, tax efficiency, and transparency. It is now possible to build an ultra-low-cost, diversified portfolio using just a few ETFs. Expenses matter, particularly over the long term, so the lowest-cost ETFs are an excellent tool for building long-term wealth.

S&P 500 ETFs

An S&P 500 index fund is often a core holding in most portfolios because it gives investors exposure to almost the entire U.S. stock market in a single investment. The State Street SPDR Portfolio S&P 500 ETF (SPYM - Free Report) is now the cheapest in this group, with an expense ratio of just 0.02%, below the 0.03% fees charged by the Vanguard S&P 500 ETF (VOO - Free Report) and the iShares Core S&P 500 ETF (IVV - Free Report).

SPYM was recently selected as the default investment option for the new Trump Accounts. Meanwhile, VOO made financial history in June when it became the first ETF to surpass $1 trillion in assets.

Nasdaq-100 ETFs

Nasdaq-100 ETFs have also been extremely popular because of their outstanding performance over the past decade. The index provides exposure to many of the world's most innovative companies, leading advances in artificial intelligence and other cutting-edge technologies.

The ultra-popular Invesco QQQ Trust (QQQ - Free Report) has been around for more than 26 years. It remains a favorite among traders because of its focus on high-growth stocks and its deep trading liquidity. QQQ and its lower-cost sister fund, Invesco Nasdaq 100 ETF (QQQM - Free Report), now have some competition after Nasdaq decided to license its index to BlackRock (BLK) and State Street.

Both providers recently launched their own Nasdaq-100 ETFs. The iShares Nasdaq 100 ETF (IQQ - Free Report) has an expense ratio of 0.12%, with a temporary fee waiver reducing it to 0.10%. The State Street SPDR Portfolio Nasdaq 100 ETF (QNDX - Free Report) also charges 0.10%.

Is the 60/40 Portfolio Broken?

A traditional 60/40 portfolio does not make much sense, in my view, given rising life expectancies. Investors now need a more aggressive allocation to equities, although the appropriate allocation ultimately depends on their risk tolerance and investment horizon.

Correlations between stocks and bonds have increased over the past few years, so bonds no longer provide the diversification benefits they once did. 

Further, in the current environment of persistently elevated inflation and continued interest rate volatility, longer-duration fixed income ETFs are quite risky. That is why ultra-short Treasury bill ETFs, such as the iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report) and the Vanguard 0-3 Month Treasury Bill ETF (VBIL - Free Report), have become very popular. 

Does Gold Belong in Your Portfolio?

Gold seems to have lost some of its shine this year after an outstanding run over the past couple of years. I believe gold deserves a place in any diversified portfolio because of its low correlation with traditional asset classes. 

The SPDR Gold MiniShares Trust (GLDM - Free Report) and the iShares Gold Trust Micro (IAUM - Free Report) are excellent, low-cost options for long-term investors.

Video Length: 00:12:20