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The ETF industry is seeing explosive growth, piling up huge assets in recent years due to their unique strategies, creativity, transparency, diversification benefits, enhanced tax competencies, low turnover, and, of course, low costs.
While there are several types of costs associated with ETFs, such as trading commissions, bid/ask spreads, premiums and discounts, and tracking errors, expense ratios have been the biggest crowd pullers in the ETF world. This is especially true as ETFs with low expense ratios significantly outperform their expensive counterparts when other factors remain constant. This can be explained by the following example (see: all the ETFs with Low Expense Ratios here).
Consider two funds with expense ratios of 0.10% and 0.50% and invest $10,000 in both. Now, both funds have delivered the same annual returns of 10% in 10 years. The fund with an expense ratio of 0.10% will grow to $25,703 in 10 years, while the same fund with a 0.50% expense ratio will grow by a lower amount of $24,782. Further, the difference in total returns (after expenses) becomes more significant if we increase the holding period. The same funds with an expense ratio of 0.10% and 0.50%, when invested for 30 years, would have a value of $169,797 and $152,203, respectively, after 30 years.
Keeping the importance of the expense ratio in mind, we have highlighted the 25 cheapest ETFs currently on the market, which have an AUM of more than $50 million:
BNY Mellon US Large Cap Core Equity ETF (BKLC) – Expense ratio: 0.00%
BNY Mellon US Large Cap Core Equity ETF provides investors with broad exposure to large-capitalization stocks and tracks the Solactive GBS Unites States 500 Index TR. It holds 195 stocks in its basket and has amassed $1.9 billion in its asset base. The product trades in an average daily volume of 41,000 shares a day.
SoFi Select 500 ETF offers exposure to the 500 largest U.S. companies as measured by market capitalization and uses a composite growth score to adjust companies’ weightings. It follows the Solactive SoFi US 500 Growth Index. SoFi Select 500 ETF has amassed $560.8 million in its asset base and trades in an average daily volume of 147,000 shares.
BNY Mellon Core Bond ETF (BKAG) – Expense ratio: 0.00%
BNY Mellon Core Bond ETF provides investors with broad exposure to the overall U.S. bond market by tracking the Bloomberg US Aggregate Total Return Index. It holds 3,442 bonds in its basket and trades in an average daily volume of 1 million shares. BNY Mellon Core Bond ETF has amassed $583 million in its asset base.
SoFi Next 500 ETF follows the Solactive SoFi US Next 500 Growth Index, focusing on the 501st through the 1000th largest domestic companies. It currently holds 494 stocks in its basket and has accumulated $63.7 million in its asset base. SoFi Next 500 ETF trades in a volume of 28,000 shares per day on average and has a Zacks ETF Rank #3 (Hold).
SPDR Portfolio S&P 500 ETF offers exposure to the US large-cap segment by tracking the S&P 500 Index. Holding 503 stocks in its basket, it is the lowest-cost large-cap blend S&P 500 ETF offering. SPDR Portfolio S&P 500 ETF has an AUM of $23.4 billion and trades in a solid volume of 5.4 million shares a day, on average. It carries a Zacks ETF Rank #2 (Buy).
JPMorgan BetaBuilders U.S. Equity ETF (BBUS) – Expense ratio: 0.02%
JPMorgan BetaBuilders U.S. Equity ETF offers exposure to 591 U.S. large and mid-cap equities by tracking the Morningstar US Target Market Exposure Index. It has an AUM of $2.4 billion and trades in an average daily volume of 88,000 shares.
iShares Core S&P 500 ETF is the second-largest fund in the space, with an AUM of $378.5 billion and an average daily volume of 4.2 million shares. It tracks the S&P 500 Index and holds 503 securities in its basket. IVV has a Zacks ETF Rank #2 (read: 5 Stocks That Powered S&P 500 ETF This Year).
Vanguard Total Stock Market ETF follows the CRSP US Total Market Index, offering broad exposure across growth and value styles. Holding 4028 stocks, it is the third-largest and most popular fund with an AUM of $330.4 billion and an average daily volume of nearly 3 million shares. VTI has a Zacks ETF Rank #2.
Vanguard S&P 500 is another low-cost, well-diversified large-cap fund tracking the S&P 500 Index and holding 507 securities in its basket. It trades in a volume of 4.4 million shares a day and has an AUM of $355.6 billion. Vanguard S&P 500 has a Zacks ETF Rank #2.
iShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) ) – Expense ratio: 0.03%
iShares Core S&P Total U.S. Stock Market ETF also offers the total U.S. stock market, ranging from some of the smallest to largest companies and tracks the S&P Total Market Index. It holds a larger basket of 2,771 stocks and has an AUM of $46.6 billion. ITOT trades in an average daily volume of 1.6 million shares and has a Zacks ETF Rank #3.
Schwab U.S. Large-Cap ETF (SCHX) – Expense ratio: 0.03%
Schwab U.S. Large-Cap ETF follows the Dow Jones U.S. Large-Cap Total Stock Market Index, holding 756 securities in its basket. It has amassed $35.1 billion in its asset base and trades in a volume of 2 million shares. Schwab U.S. Large-Cap ETF has a Zacks ETF Rank #3.
This fund provides broad exposure to the U.S. equity market by tracking the Dow Jones U.S. Broad Stock Market Index. It holds a well-diversified portfolio of 2,463 stocks. SCHB is one of the most popular and liquid ETFs, with an AUM of $23.9 billion and an average daily volume of 840,000 shares. It has a Zacks ETF Rank #2.
SPDR Portfolio Developed World ex-US ETF (SPDW) – Expense ratio: 0.03%
SPDR Portfolio Developed World ex-US ETF offers broad exposure to developed international equities outside the United States by tracking the S&P Developed Ex-U.S. BMI Index. It has a well-diversified basket of 2,443 stocks, with an AUM of $17.1 billion and an average daily volume of 4.1 million shares. SPDR Portfolio Developed World ex-US ETF has a Zacks ETF Rank #3.
Vanguard Total Bond Market ETF (BND - Free Report) ) – Expense ratio: 0.03%
Vanguard Total Bond Market ETF targets the broad U.S. investment grade bond market by tracking the Bloomberg U.S. Aggregate Float Adjusted Index. It holds 10,707 securities in its basket, with an average maturity of 8.6 years and an average duration of 6.1 years. BND is the largest bond ETF, with an AUM of $100.9 billion and an average daily volume of 7.2 million shares.
iShares Core U.S. Aggregate Bond ETF (AGG - Free Report) ) – Expense ratio: 0.03%
iShares Core U.S. Aggregate Bond ETF also offers broad exposure to U.S. investment-grade bonds and follows the Bloomberg Barclays US Aggregate Bond Index. It holds a broad basket of 11,305 bonds, with an average maturity of 8.57 years and an effective duration of 6.16 years. AGG is the largest and most liquid bond ETF, with an AUM of $96.4 billion and an average daily volume of 9.5 million shares.
Schwab Short-Term U.S. Treasury ETF targets the short-end of the Treasury market by tracking the Bloomberg US Treasury 1-3 Year Index. It holds 98 bonds in its basket, with an average maturity of 1.96 years and an average duration of 1.88 years. Schwab Short-Term U.S. Treasury ETF has an AUM of $11.8 billion and trades in an average daily volume of 1.8 million shares. It has a Zacks ETF Rank #3.
Schwab U.S. TIPS ETF (SCHP) – Expense ratio: 0.03%
Schwab U.S. TIPS ETF tracks the Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L), holding 50 securities in its basket. It has an effective duration of 6.40 years and an average maturity of 7.00 years. SCHP is among the cheapest options in the TIPS space, with an AUM of $11.6 billion and an average daily volume of 1.5 million shares.
iShares 0-5 Year TIPS Bond ETF (STIP - Free Report) ) – Expense ratio: 0.03%
iShares 0-5 Year TIPS Bond ETF offers exposure to short-term TIPS, with an effective duration of 2.36 years and an average maturity of 2.46 years. The fund holds 25 securities in its basket and follows the ICE US Treasury 0-5 Year Inflation Linked Bond Index. STIP has amassed $8.9 billion in its asset base and trades in an average daily volume of 680,000 shares.
SPDR Portfolio Aggregate Bond ETF (SPAB) – Expense ratio: 0.03%
With an AUM of $7.5 billion, SPDR Portfolio Aggregate Bond ETF tracks the Bloomberg U.S. Aggregate Bond Index, with an adjusted duration of 6.22 years and an average maturity of 8.66 years. It offers comprehensive exposure to U.S. dollar-denominated investment-grade bonds, including government bonds, corporate bonds, mortgage pass-through securities, commercial mortgage-backed securities and asset-backed securities. SPDR Portfolio Aggregate Bond ETF trades in an average daily volume of 3 million shares.
Schwab U.S. Aggregate Bond ETF (SCHZ - Free Report) ) – Expense ratio: 0.03%
Schwab U.S. Aggregate Bond ETF offers exposure to the U.S. investment grade, taxable bond market, holding 9,851 bonds in its basket. It tracks the Bloomberg US Aggregate Bond Index, with an effective duration of 5.90 years and an average maturity of 8.30 years. Schwab U.S. Aggregate Bond ETF has amassed $7.2 billion and trades in a volume of 1 million shares a day on average.
SPDR Portfolio S&P 1500 Composite Stock Market ETF offers exposure to the broad market by tracking the S&P Composite 1500 Index, holding 1,516 stocks in its basket. It has an AUM of $7 billion and trades in an average daily volume of 521,000 shares. SPDR Portfolio S&P 1500 Composite Stock Market ETF has a Zacks ETF Rank #2.
SPDR Portfolio S&P 400 Mid Cap ETF targets the broad mid-cap segment of the broad U.S. market. It tracks the S&P MidCap 400 Index and holds 401 stocks in its basket. SPDR Portfolio S&P 400 Mid Cap ETF has accumulated $7.3 billion in its asset base while trading in a volume of 836,000 shares per day on average. It has a Zacks ETF Rank #2.
SPDR Portfolio S&P 600 Small Cap ETF (SPSM) – Expense ratio: 0.03%
SPDR Portfolio S&P 600 Small Cap ETF offers exposure to the small-cap segment by tracking the S&P Small Cap 600 Index. It holds 606 stocks in its basket. SPDR Portfolio S&P 600 Small Cap ETF has been able to manage $8.7 billion in its asset base and trades in a good volume of 1.5 million shares a day on average. It has a Zacks ETF Rank #2 (read: Are Small-Cap ETFs Too Cheap to Ignore?).
SPDR Portfolio Long-Term Treasury ETF offers exposure to US Treasuries with remaining maturities of 10 or more years and tracks the Bloomberg Barclays Long U.S. Treasury Index. It holds 87 bonds in its basket, with an average maturity of 22.75 years and an adjusted duration of 15.55 years. SPTL is one of the popular choices in the long-term Treasury space, with an AUM of $7.8 billion and an average daily volume of 6 million shares.
SPDR Portfolio Short Term Treasury ETF (SPTS) – Expense ratio: 0.03%
SPDR Portfolio Short Term Treasury ETF offers exposure to U.S. Treasuries with a remaining maturity between 1 and 3 years, and follows the Bloomberg 1-3 Year U.S. Treasury Index. It holds 104 bonds in its basket, with an average maturity of 1.96 years and an adjusted duration of 1.87 years. SPDR Portfolio Short Term Treasury ETF has an AUM of $5.5 billion and an average daily volume of 2.3 million shares. It has a Zacks ETF Rank #3.
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A Guide to the 25 Cheapest ETFs
The ETF industry is seeing explosive growth, piling up huge assets in recent years due to their unique strategies, creativity, transparency, diversification benefits, enhanced tax competencies, low turnover, and, of course, low costs.
While there are several types of costs associated with ETFs, such as trading commissions, bid/ask spreads, premiums and discounts, and tracking errors, expense ratios have been the biggest crowd pullers in the ETF world. This is especially true as ETFs with low expense ratios significantly outperform their expensive counterparts when other factors remain constant. This can be explained by the following example (see: all the ETFs with Low Expense Ratios here).
Consider two funds with expense ratios of 0.10% and 0.50% and invest $10,000 in both. Now, both funds have delivered the same annual returns of 10% in 10 years. The fund with an expense ratio of 0.10% will grow to $25,703 in 10 years, while the same fund with a 0.50% expense ratio will grow by a lower amount of $24,782. Further, the difference in total returns (after expenses) becomes more significant if we increase the holding period. The same funds with an expense ratio of 0.10% and 0.50%, when invested for 30 years, would have a value of $169,797 and $152,203, respectively, after 30 years.
Keeping the importance of the expense ratio in mind, we have highlighted the 25 cheapest ETFs currently on the market, which have an AUM of more than $50 million:
BNY Mellon US Large Cap Core Equity ETF (BKLC) – Expense ratio: 0.00%
BNY Mellon US Large Cap Core Equity ETF provides investors with broad exposure to large-capitalization stocks and tracks the Solactive GBS Unites States 500 Index TR. It holds 195 stocks in its basket and has amassed $1.9 billion in its asset base. The product trades in an average daily volume of 41,000 shares a day.
SoFi Select 500 ETF (SFY - Free Report) ) – Expense ratio: 0.00%
SoFi Select 500 ETF offers exposure to the 500 largest U.S. companies as measured by market capitalization and uses a composite growth score to adjust companies’ weightings. It follows the Solactive SoFi US 500 Growth Index. SoFi Select 500 ETF has amassed $560.8 million in its asset base and trades in an average daily volume of 147,000 shares.
BNY Mellon Core Bond ETF (BKAG) – Expense ratio: 0.00%
BNY Mellon Core Bond ETF provides investors with broad exposure to the overall U.S. bond market by tracking the Bloomberg US Aggregate Total Return Index. It holds 3,442 bonds in its basket and trades in an average daily volume of 1 million shares. BNY Mellon Core Bond ETF has amassed $583 million in its asset base.
SoFi Next 500 ETF (SFYX) – Expense ratio: 0.00%
SoFi Next 500 ETF follows the Solactive SoFi US Next 500 Growth Index, focusing on the 501st through the 1000th largest domestic companies. It currently holds 494 stocks in its basket and has accumulated $63.7 million in its asset base. SoFi Next 500 ETF trades in a volume of 28,000 shares per day on average and has a Zacks ETF Rank #3 (Hold).
SPDR Portfolio S&P 500 ETF (SPLG) – Expense ratio: 0.00%
SPDR Portfolio S&P 500 ETF offers exposure to the US large-cap segment by tracking the S&P 500 Index. Holding 503 stocks in its basket, it is the lowest-cost large-cap blend S&P 500 ETF offering. SPDR Portfolio S&P 500 ETF has an AUM of $23.4 billion and trades in a solid volume of 5.4 million shares a day, on average. It carries a Zacks ETF Rank #2 (Buy).
JPMorgan BetaBuilders U.S. Equity ETF (BBUS) – Expense ratio: 0.02%
JPMorgan BetaBuilders U.S. Equity ETF offers exposure to 591 U.S. large and mid-cap equities by tracking the Morningstar US Target Market Exposure Index. It has an AUM of $2.4 billion and trades in an average daily volume of 88,000 shares.
iShares Core S&P 500 ETF (IVV - Free Report) ) – Expense ratio: 0.03%
iShares Core S&P 500 ETF is the second-largest fund in the space, with an AUM of $378.5 billion and an average daily volume of 4.2 million shares. It tracks the S&P 500 Index and holds 503 securities in its basket. IVV has a Zacks ETF Rank #2 (read: 5 Stocks That Powered S&P 500 ETF This Year).
Vanguard Total Stock Market ETF (VTI - Free Report) ) – Expense ratio: 0.03%
Vanguard Total Stock Market ETF follows the CRSP US Total Market Index, offering broad exposure across growth and value styles. Holding 4028 stocks, it is the third-largest and most popular fund with an AUM of $330.4 billion and an average daily volume of nearly 3 million shares. VTI has a Zacks ETF Rank #2.
Vanguard S&P 500 (VOO - Free Report) ) – Expense ratio: 0.03%
Vanguard S&P 500 is another low-cost, well-diversified large-cap fund tracking the S&P 500 Index and holding 507 securities in its basket. It trades in a volume of 4.4 million shares a day and has an AUM of $355.6 billion. Vanguard S&P 500 has a Zacks ETF Rank #2.
iShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) ) – Expense ratio: 0.03%
iShares Core S&P Total U.S. Stock Market ETF also offers the total U.S. stock market, ranging from some of the smallest to largest companies and tracks the S&P Total Market Index. It holds a larger basket of 2,771 stocks and has an AUM of $46.6 billion. ITOT trades in an average daily volume of 1.6 million shares and has a Zacks ETF Rank #3.
Schwab U.S. Large-Cap ETF (SCHX) – Expense ratio: 0.03%
Schwab U.S. Large-Cap ETF follows the Dow Jones U.S. Large-Cap Total Stock Market Index, holding 756 securities in its basket. It has amassed $35.1 billion in its asset base and trades in a volume of 2 million shares. Schwab U.S. Large-Cap ETF has a Zacks ETF Rank #3.
Schwab U.S. Broad Market ETF (SCHB - Free Report) ) – Expense ratio: 0.03%
This fund provides broad exposure to the U.S. equity market by tracking the Dow Jones U.S. Broad Stock Market Index. It holds a well-diversified portfolio of 2,463 stocks. SCHB is one of the most popular and liquid ETFs, with an AUM of $23.9 billion and an average daily volume of 840,000 shares. It has a Zacks ETF Rank #2.
SPDR Portfolio Developed World ex-US ETF (SPDW) – Expense ratio: 0.03%
SPDR Portfolio Developed World ex-US ETF offers broad exposure to developed international equities outside the United States by tracking the S&P Developed Ex-U.S. BMI Index. It has a well-diversified basket of 2,443 stocks, with an AUM of $17.1 billion and an average daily volume of 4.1 million shares. SPDR Portfolio Developed World ex-US ETF has a Zacks ETF Rank #3.
Vanguard Total Bond Market ETF (BND - Free Report) ) – Expense ratio: 0.03%
Vanguard Total Bond Market ETF targets the broad U.S. investment grade bond market by tracking the Bloomberg U.S. Aggregate Float Adjusted Index. It holds 10,707 securities in its basket, with an average maturity of 8.6 years and an average duration of 6.1 years. BND is the largest bond ETF, with an AUM of $100.9 billion and an average daily volume of 7.2 million shares.
iShares Core U.S. Aggregate Bond ETF (AGG - Free Report) ) – Expense ratio: 0.03%
iShares Core U.S. Aggregate Bond ETF also offers broad exposure to U.S. investment-grade bonds and follows the Bloomberg Barclays US Aggregate Bond Index. It holds a broad basket of 11,305 bonds, with an average maturity of 8.57 years and an effective duration of 6.16 years. AGG is the largest and most liquid bond ETF, with an AUM of $96.4 billion and an average daily volume of 9.5 million shares.
Schwab Short-Term U.S. Treasury ETF (SCHO - Free Report) ) – Expense ratio: 0.03%
Schwab Short-Term U.S. Treasury ETF targets the short-end of the Treasury market by tracking the Bloomberg US Treasury 1-3 Year Index. It holds 98 bonds in its basket, with an average maturity of 1.96 years and an average duration of 1.88 years. Schwab Short-Term U.S. Treasury ETF has an AUM of $11.8 billion and trades in an average daily volume of 1.8 million shares. It has a Zacks ETF Rank #3.
Schwab U.S. TIPS ETF (SCHP) – Expense ratio: 0.03%
Schwab U.S. TIPS ETF tracks the Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L), holding 50 securities in its basket. It has an effective duration of 6.40 years and an average maturity of 7.00 years. SCHP is among the cheapest options in the TIPS space, with an AUM of $11.6 billion and an average daily volume of 1.5 million shares.
iShares 0-5 Year TIPS Bond ETF (STIP - Free Report) ) – Expense ratio: 0.03%
iShares 0-5 Year TIPS Bond ETF offers exposure to short-term TIPS, with an effective duration of 2.36 years and an average maturity of 2.46 years. The fund holds 25 securities in its basket and follows the ICE US Treasury 0-5 Year Inflation Linked Bond Index. STIP has amassed $8.9 billion in its asset base and trades in an average daily volume of 680,000 shares.
SPDR Portfolio Aggregate Bond ETF (SPAB) – Expense ratio: 0.03%
With an AUM of $7.5 billion, SPDR Portfolio Aggregate Bond ETF tracks the Bloomberg U.S. Aggregate Bond Index, with an adjusted duration of 6.22 years and an average maturity of 8.66 years. It offers comprehensive exposure to U.S. dollar-denominated investment-grade bonds, including government bonds, corporate bonds, mortgage pass-through securities, commercial mortgage-backed securities and asset-backed securities. SPDR Portfolio Aggregate Bond ETF trades in an average daily volume of 3 million shares.
Schwab U.S. Aggregate Bond ETF (SCHZ - Free Report) ) – Expense ratio: 0.03%
Schwab U.S. Aggregate Bond ETF offers exposure to the U.S. investment grade, taxable bond market, holding 9,851 bonds in its basket. It tracks the Bloomberg US Aggregate Bond Index, with an effective duration of 5.90 years and an average maturity of 8.30 years. Schwab U.S. Aggregate Bond ETF has amassed $7.2 billion and trades in a volume of 1 million shares a day on average.
SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM) – Expense ratio: 0.03%
SPDR Portfolio S&P 1500 Composite Stock Market ETF offers exposure to the broad market by tracking the S&P Composite 1500 Index, holding 1,516 stocks in its basket. It has an AUM of $7 billion and trades in an average daily volume of 521,000 shares. SPDR Portfolio S&P 1500 Composite Stock Market ETF has a Zacks ETF Rank #2.
SPDR Portfolio S&P 400 Mid Cap ETF (SPMD - Free Report) ) – Expense ratio: 0.03%
SPDR Portfolio S&P 400 Mid Cap ETF targets the broad mid-cap segment of the broad U.S. market. It tracks the S&P MidCap 400 Index and holds 401 stocks in its basket. SPDR Portfolio S&P 400 Mid Cap ETF has accumulated $7.3 billion in its asset base while trading in a volume of 836,000 shares per day on average. It has a Zacks ETF Rank #2.
SPDR Portfolio S&P 600 Small Cap ETF (SPSM) – Expense ratio: 0.03%
SPDR Portfolio S&P 600 Small Cap ETF offers exposure to the small-cap segment by tracking the S&P Small Cap 600 Index. It holds 606 stocks in its basket. SPDR Portfolio S&P 600 Small Cap ETF has been able to manage $8.7 billion in its asset base and trades in a good volume of 1.5 million shares a day on average. It has a Zacks ETF Rank #2 (read: Are Small-Cap ETFs Too Cheap to Ignore?).
SPDR Portfolio Long-Term Treasury ETF (SPTL) – Expense ratio: 0.03%
SPDR Portfolio Long-Term Treasury ETF offers exposure to US Treasuries with remaining maturities of 10 or more years and tracks the Bloomberg Barclays Long U.S. Treasury Index. It holds 87 bonds in its basket, with an average maturity of 22.75 years and an adjusted duration of 15.55 years. SPTL is one of the popular choices in the long-term Treasury space, with an AUM of $7.8 billion and an average daily volume of 6 million shares.
SPDR Portfolio Short Term Treasury ETF (SPTS) – Expense ratio: 0.03%
SPDR Portfolio Short Term Treasury ETF offers exposure to U.S. Treasuries with a remaining maturity between 1 and 3 years, and follows the Bloomberg 1-3 Year U.S. Treasury Index. It holds 104 bonds in its basket, with an average maturity of 1.96 years and an adjusted duration of 1.87 years. SPDR Portfolio Short Term Treasury ETF has an AUM of $5.5 billion and an average daily volume of 2.3 million shares. It has a Zacks ETF Rank #3.