The world’s largest exchange-traded funds (ETFs) manage assets ranging into the hundreds of billions of dollars, making ETFs one of the most popular ways to invest. ETFs are a great way for even new investors to generate attractive returns, even without much investment knowledge.
Here are the world’s largest ETFs and whether you should invest in them.
The world’s largest ETFs by assets
| Fund (ticker symbol) | Assets under management | Cost ratio | Average annual returns over 10 years |
|---|---|---|---|
| Source: ETF.com, as of April 5, 2024 | |||
| SPDR S&P 500 ETF Trust (SPY) | $530.7 billion | 0.095% | 12.7% |
| iShares Core S&P 500 ETF (IVV) | $451.0 billion | 0.03% | 12.7% |
| Vanguard 500 Index Fund (VOO) | $434.3 billion | 0.03% | 12.7% |
| Vanguard Total Stock Market ETF (VTI) | $388.5 billion | 0.03% | 12.1% |
| Invesco QQQ Trust (QQQ) | $258.3 billion | 0.20% | 18.5% |
| Vanguard FTSE Developed Markets ETF (VEA) | $131.1 billion | 0.05% | 4.9% |
| Vanguard Growth ETF (VUG) | $118.1 billion | 0.04% | 14.9% |
These ETFs are all index funds, a special category of funds that invest in a preset index of securities rather than trying to actively pick investments. The goal of an index fund is to “be the market” rather than “beat the market” by actively picking stocks. The passive approach can work well – see the strong double-digit returns of most of these funds over the past decade – and also keeps costs low for investors, as evidenced by the low expense ratios here.
The three largest funds all track the Standard & Poor’s 500 Index, a collection of hundreds of top American companies. This index has risen an average of 10 percent over long periods, although it has exceeded that average recently. Other popular funds are based on indices that track the Nasdaq 100, international stocks and growth stocks. By purchasing these funds, you own a portion of the individual stocks that make up these funds.
All these funds also offer broad diversification and invest in many stocks from different sectors. This type of diversification helps reduce your risk as an investor, even though it can still fluctuate widely.
The big appeal for investors in owning large funds like these therefore lies in achieving attractive returns with low management costs. And you can do this without having to do a lot of research and analysis like you would have to do when investing in individual stocks.
Should you invest in the largest ETFs?
As you can see, the largest ETFs manage a lot of money, but their size doesn’t necessarily make them the best performers, even if they do quite well. For example, the Vanguard FTSE Developed Markets ETF has a 10-year return that drastically lags other names on this list.
You may be able to find other strong returns by looking at the best index funds or the best ETFs.
It’s also worth noting that these funds invest in the largest companies in the stock market, the large caps such as the Magnificent 7 stocks. If you want to invest in smaller companies – for example because you need to diversify your investments – then you may want to look elsewhere.
Other sources of attractive returns can be found in funds that invest in specific parts of the market, such as the best small-cap ETFs or the best mid-cap ETFs. These sectors – which include stocks that are smaller than most in the largest ETFs – can perform well when the larger stocks are out of favor, but you’ll have to do research to find the best-performing ETFs.
So the mere fact that these funds are large does not mean they are worth your investment. But the track records here are enviable and these funds own some of the strongest companies in the world. It’s not surprising, then, that legendary investor Warren Buffett has long recommended that most investors would be better off buying an S&P 500 index fund and then holding it over time.
The best brokers for ETFs can also help you find attractive funds with strong long-term returns.
In short
The world’s largest ETFs typically track some of the most popular stock indexes, such as the S&P 500 and the Nasdaq-100, making them excellent ways to gain exposure to these indices. But their size alone doesn’t make the funds attractive to buy, and investors should look at the funds’ long-term performance and costs to help determine whether they should invest their money.
Working with a financial advisor can help you find the best investments for your needs. Bankrate’s financial advisor matching tool lets you connect with qualified professionals in minutes.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
