6 Requisites For A Healthy ETF Portfolio

To maintain a healthy portfolio, it is necessary to protect it from market gyrations. Ahead of the World Health Day, let us look at ways to nourish your ETF portfolio for better gains. We have also highlighted an ETF from each category and their price performance over the past five years.

Low Cost

Expense ratio is significant in determining the returns of an ETF. A fund with low expense ratio comfortably outperforms its more expensive counterparts if the other factors remain the same. And fortunately, expense ratio has drastically declined in recent years owing to an intensifying price war. iShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) is one of the cheapest choices in the space with an expense ratio of 0.03%.

This fund provides broad exposure to the U.S. equity market by tracking the S&P Total Market Index. Holding 3,554 securities, the fund is widely diversified across components with none accounting for more than 3.2% of assets. Notably, information technology is the top sector accounting for less than 21.1% while others sector make up for a nice mix. ITOT is one of the most popular liquid ETFs, with AUM of $19 billion and average daily volume of 2.9 million shares. The product has delivered returns of about 66% over a period of five years. It has a Zacks ETF Rank #3 (Hold).

Video length: 00:01:03

Higher Volume

An ETF should have enough liquidity in order to easily purchase and sell on the market. Volume, or the number of shares traded in a particular period, is definitely the most important consideration for determining the liquidity of a particular fund. A higher volume provides easy access to move in and out of the product, keeping the bid/ask spreads tight. Further, greater volume ensures easy creation and redemption of shares in the fund’s basket, which is a regular and vital mechanism.

While there are several ETFs that trade in higher volumes, SPDR S&P 500 ETF (SPY - Free Report) looks an attractive pick. This ETF provides exposure to 505 largest U.S. companies by tracking the S&P 500 Index. Information technology accounts for 21.4% of the assets, while healthcare, financials, consumer discretionary and communication services round off the next spots with double-digit exposure each. SPY is one of the largest and the most popular ETFs in the large-cap space with AUM of $269.1 billion and average daily volume of around 106.6 million shares. It charges investors 9 bps in annual fees and surged more than 67% over the past five years. The fund has a Zacks ETF Rank #2 (Buy).

1 2 3
View single page >> |

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.