Exchange-traded funds (ETFs) have taken over the investment world. Last year, investors poured $1.3 trillion into them…and more than 1,000 new ETFs were rolled out. Reason for their fast-growing appeal: ETFs generally offer lower fees, better tax benefits and greater liquidity than mutual funds.
“The biggest drawback is trying to select from the thousands now available,” says Neena Mishra, CFA, ETF research director at Zacks Investment Research. Want to invest in a fund that tracks the S&P 500 index? You have 33 to choose from. Interested in owning cryptocurrency fund? There are 25 Bitcoin ETFs.
To simplify investing in ETFs, Bottom Line Personal asked Mishra to reveal how she compares similar ETFs…and which ones are her favorites now…
An exchange-traded fund is a basket of investments that operates similarly to a mutual fund—but with a few key differences…
ETF shares can be bought and sold throughout the trading day, like stocks, at market prices that fluctuate based on supply and demand.
ETFs are more transparent than mutual funds because most reveal their current holdings on a daily basis.
ETFs’ unique redemption structure allows them to minimize capital-gains distributions to shareholders. Mutual fund redemptions can force the fund manager to sell underlying securities, creating taxable capital gains for all shareholders. ETFs avoid internal sales by using an “in-kind” process in which shares are swapped for securities. Taxes on ETFs usually are only triggered when an investor sells his/her shares on the open market.
How to Compare and Select ETFs
To choose among similar ETFs, ask these three questions…
How much does the ETF charge? ETF annual expense ratios typically range from 0.02% to more than 1% of the assets you invest. Comparing expense ratios is critical when evaluating similar ETFs because lower fees translate to higher annual returns.
Will the ETF stay in business? About 200 ETFs fail every year because they don’t attract enough investment money. You don’t lose your money if an ETF shuts down, but it’s still a hassle. Investors generally get back distributions equal to the net asset value of the underlying investments. Factors that put a fund at risk for shutting down: It has limited assets (less $50 million)…and low liquidity (an average trading volume over the past month of less than 50,000 shares daily)… and is a small ETF issuer—it’s safer to stick with deep-pocketed issuers with solid reputations such as iShares (BlackRock), Fidelity, State Street and Vanguard.
What’s under the hood? It’s important to understand the ETF’s strategy and what it invests in. About half of all ETFs passively track a benchmark index such as the S&P 500 index. Like index mutual funds, these ETFs tend to charge very low fees and mimic the returns of the index as closely as possible. The other half of ETFs are actively managed operating similarly to actively managed mutual funds. They give you a chance to outperform the broad market, but they often are more complex, riskier and charge higher fees. Make sure the manager of an actively managed ETF has a proven strategy and good performance to justify the higher fees. You can research and compare individual ETFs at Morningstar.com.
Best ETFs in Popular Categories Now
S&P 500 ETF
SPDR Portfolio S&P 500 ETF (SPYM) passively tracks the performance of the 500 largest and most influential companies in the US as determined by Standard & Poor’s. All the major fund companies including BlackRock and Vanguard offer nearly identical S&P 500 ETFs—but none charge fees as low as this fund from State Street, which has an annual expense ratio of just 0.02%, or $20 for every $100,000 invested. Performance: 15.06%.*
Large-cap stock ETF
Fundstrat Granny Shots US Large Cap ETF (GRNY). For investors who want to beat the broad market, this actively managed ETF may offer the best shot. It is managed by well-known analyst Tom Lee, founder of Fundstrat Global Advisors, which provides macroeconomic and thematic research and insights to institutional investors. Lee launched the fund in November 2024 and has already attracted $4 billion in assets and nearly doubled the return of the S&P 500 since inception. He has accomplished that by taking “Granny Shots,” a basketball reference to underhand-style shots taken at the free-throw line. Lee requires that every holding in his 40-stock portfolio align with at least two of seven basic themes he believes will drive earnings growth and dominate the stock market in the years ahead. The themes range from energy/cybersecurity…to the impact of millennials…to an artificial-intelligence grouping called “global labor suppliers.” Expense ratio: 0.75%. 2025 performance: 24.9%.
Small-cap stock ETF
Avantis US Small Cap Value ETF (AVUV). Small-caps are an area of the stock market where active management can have an advantage. This fund takes a low-cost, highly disciplined and diversified approach, and ranks at the top of its category in performance. The ETF uses quantitative models to sift through the small-cap universe looking for stocks that are cheap but that have strong cash flow and profitability. The resulting portfolio of 779 stocks has a high-quality, deep-value tilt that offers excellent downside protection. In the last bear market in 2022, the Avantis ETF dropped just 5% vs. 20% for the Russell 2000 small-cap index. Expense ratio: 0.25%. Five-year performance: 10.4%.
International stock ETF
Vanguard FTSE Developed Markets Index Fund ETF (VEA). This is Vanguard doing what it does best. The ETF delivers rock-bottom fees and comprehensive exposure to both small and large companies in foreign-developed markets. The passively managed offering, which tracks the FTSE Developed ex US All Cap Index, owns nearly 4,000 stocks spread across 24 countries. Unlike many competitors, the fund includes stocks from Canada and South Korea, improving its diversification. No one position accounts for more than 2% of the overall portfolio. VEA offered a recent yield of 2.9%. Expense ratio: 0.03%. Performance: 9.8%.
Fixed-income ETF
iShares Flexible Income Active ETF (BINC). A good active bond manager often can beat the performance of bond indexes. Most bond indexes are poorly constructed and allocate a lot of weight to the most indebted issuers or to illiquid, hard-to-price securities. This ETF is managed by BlackRock chief investment officer Rick Rieder, arguably the best fixed-income manager in the country. He takes a nimble multisector approach with more than 4,000 holdings spread among investment-grade corporate bonds, high-yield and emerging-market debt, and securitized assets. The $17 billion fund has provided consistent income and reduced volatility even when the bond market is chaotic. Expense ratio: 0.40%. Performance since 2024 inception: 8.14%.
Dividend stock ETF
Schwab US Dividend Equity ETF (SCHD) has a simple strategy to identify high-quality stocks at reasonable prices. It passively tracks the Dow Jones US Dividend 100 Index, which selects 100 US stocks that have paid high dividends for at least 10 consecutive years and boast the financial health to extend that streak. The fund limits each stock’s weighting to 4% of the portfolio and each sector’s weighting to 25%, muffling the impact of the riskier, higher-yielding holdings. This defensive approach stands out among its peers, allowing the fund to navigate drawdowns but remain competitive during most rallies. Its 0.06% expense ratio is significantly cheaper than its dividend-focused ETF peers. Recent yield: 3.5%. Performance:12.7%.
Technology Stock ETF
Invesco NASDAQ 100 ETF (QQQM). Most tech ETFs have a glaring shortcoming—they exclude “tech-related” industries and companies such as Alphabet, Amazon, Meta Platforms and Tesla. This passively managed ETF tracks the top 100 largest nonfinancial companies listed on the Nasdaq Stock Exchange and weights them according to market capitalization. While the ETF is not a pure technology fund, it is more comprehensive than most, contains all the names above, and taps into major tech trends including artificial intelligence (AI), cloud computing and e-commerce. QQQM has compiled a superb track record, and its 0.15% expense ratio adds to its attractiveness. Five-year performance: 15%.
Spot Bitcoin ETF
iShares Bitcoin Trust ETF (IBIT). There are numerous “spot” Bitcoin funds, which all own Bitcoin directly and whose shares rise and fall in sync with the price of Bitcoin. This ETF, run by BlackRock the global investment firm, makes the most sense for small investors. It’s the largest and most reputable Bitcoin ETF. Since its 2024 launch, the fund has attracted $53 billion in assets, nearly four times as much as the closest competitor. The fund’s massive trading volume creates extremely tight spreads, lowering the transaction costs of buying and selling Bitcoin. Recently, one Bitcoin was worth about 1,769 IBIT shares. Annual expense ratio: 0.25%. Performance since inception: 20.4%.
*All performance figures are for 10-year annualized through March 10, 2026, unless otherwise noted.
