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Thanks to the rise in "thematic investing” and craze for “smart beta,” the ETF industry is seeing explosive growth in terms of both AUM and launches. The rapid growth can be traced back to unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and most importantly — low cost (read: 8 New Successful ETFs of 2018).
In particular, investors seek to trade in ETFs that can easily be purchased and sold on the market, suggesting that the ETF should have enough liquidity. 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 number of shares 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 basket, which is a regular and vital mechanism in ETFs. This is especially true as authorized participants (AP) have the ability to create new baskets of ETF shares for underlying securities or redeem them when required. This phenomenon allows ETFs to trade in line with their net asset value (NAV) (see: all the Category ETFs here).
Nevertheless, assessing just the number of shares is not a profitable task, as a higher number of cheaper funds can be bought for a given amount of money, leading to increased volumes. As a result, honing in on dollar volume ETFs will reveal the true picture of liquidity. Dollar volume measures the number of shares traded multiplied by share price.
That said, we have highlighted 10 ETFs that have seen higher dollar volume this year and are thus the top 10 volume leaders of 2018 as per xtf.com.
This product provides exposure to the 103 largest domestic and international companies, excluding financial stocks, by tracking the Nasdaq-100 Index. It is concentrated on the top three firms that make up for more than 9% of the assets each.
This fund targets emerging markets and follows the MSCI Emerging Markets Index. It holds 951 stocks in its basket, with none accounting for more than 5% share (read: Emerging Markets on a Rebound? 5 ETFs Seeing Big Inflows).
This fund provides exposure to the stocks in Europe, Australia, Asia and the Far East by tracking the MSCI EAFE Index. It holds 935 securities in its basket, with none holding more than 1.75% of assets.
The fund targets the broad financial segment and follows the Financial Select Sector Index. It holds 67 stocks in its basket, with double-digit allocation to the top two firms — Berkshire Hathaway Inc. (BRK.B) and JPMorgan Chase (read: Profit From Bearish Financial Sector With Inverse ETFs).
iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report)
This ETF offers exposure to a broad range of U.S. high yield corporate bonds by tracking the Markit iBoxx USD Liquid High Yield Index. Holding 974 securities, effective duration and average maturity come in at 3.96 and 5.16 years, respectively.
This ETN provides exposure to short-term equity market volatility by following the S&P 500 VIX Short-Term Futures Index Total Return with the help of the CBOE Volatility Index futures contracts.
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10 Most-Heavily Traded ETFs of 2018
Thanks to the rise in "thematic investing” and craze for “smart beta,” the ETF industry is seeing explosive growth in terms of both AUM and launches. The rapid growth can be traced back to unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and most importantly — low cost (read: 8 New Successful ETFs of 2018).
In particular, investors seek to trade in ETFs that can easily be purchased and sold on the market, suggesting that the ETF should have enough liquidity. 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 number of shares 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 basket, which is a regular and vital mechanism in ETFs. This is especially true as authorized participants (AP) have the ability to create new baskets of ETF shares for underlying securities or redeem them when required. This phenomenon allows ETFs to trade in line with their net asset value (NAV) (see: all the Category ETFs here).
Nevertheless, assessing just the number of shares is not a profitable task, as a higher number of cheaper funds can be bought for a given amount of money, leading to increased volumes. As a result, honing in on dollar volume ETFs will reveal the true picture of liquidity. Dollar volume measures the number of shares traded multiplied by share price.
That said, we have highlighted 10 ETFs that have seen higher dollar volume this year and are thus the top 10 volume leaders of 2018 as per xtf.com.
SPDR S&P 500 ETF (SPY - Free Report)
This fund tracks the S&P 500 index and holds 505 well-diversified stocks in its basket with each holding less than 3.7% of the assets (read: Not a Merry Christmas for Wall Street: Bet on These ETFs).
Zacks ETF Rank: #2 (Buy)
Aggregate YTD Volume: $6,441.6 billion
AUM: $230.1 billion
Expense Ratio: 0.09%
Top Sector: Information Technology (20%)
YTD Returns: -11.00%
Invesco QQQ (QQQ - Free Report)
This product provides exposure to the 103 largest domestic and international companies, excluding financial stocks, by tracking the Nasdaq-100 Index. It is concentrated on the top three firms that make up for more than 9% of the assets each.
Zacks ETF Rank: #2
Aggregate YTD Volume: $1,935 billion
AUM: $57.7 billion
Expense Ratio: 0.20%
Top Sector: Information Technology (42.4%)
YTD Returns: -7.4%
iShares Russell 2000 ETF (IWM - Free Report)
This ETF targets the small-cap segment by tracking the Russell 2000 index and holds 2034 stocks with each holding less than 0.4% of the assets.
Zacks ETF Rank: #3 (Hold)
Aggregate YTD Volume: $888.9 billion
AUM: $38.2 billion
Expense Ratio: 0.19%
Top Sector: Financials (18.3%)
YTD Returns: -16.5%
iShares MSCI Emerging Markets ETF (EEM - Free Report)
This fund targets emerging markets and follows the MSCI Emerging Markets Index. It holds 951 stocks in its basket, with none accounting for more than 5% share (read: Emerging Markets on a Rebound? 5 ETFs Seeing Big Inflows).
Zacks ETF Rank: #3
Aggregate YTD Volume: $838.8 billion
AUM: $28.9 billion
Expense Ratio: 0.69%
Top Sector: Financials (25.1%)
YTD Returns: -17.3%
iShares MSCI EAFE ETF (EFA - Free Report)
This fund provides exposure to the stocks in Europe, Australia, Asia and the Far East by tracking the MSCI EAFE Index. It holds 935 securities in its basket, with none holding more than 1.75% of assets.
Zacks ETF Rank: #3
Aggregate YTD Volume: $490.3 billion
AUM: $61.2 billion
Expense Ratio: 0.31 %
Top Sector: Financials (19.2%)
YTD Returns: -16.6%
Financial Select Sector SPDR (XLF - Free Report)
The fund targets the broad financial segment and follows the Financial Select Sector Index. It holds 67 stocks in its basket, with double-digit allocation to the top two firms — Berkshire Hathaway Inc. (BRK.B) and JPMorgan Chase (read: Profit From Bearish Financial Sector With Inverse ETFs).
Zacks ETF Rank: #1
Aggregate YTD Volume: $416.7 billion
AUM: $21.1 billion
Expense Ratio: 0.13%
Top Sector: N/A
YTD Returns: -19.1%
iShares iBoxx $ High Yield Corporate Bond ETF (HYG - Free Report)
This ETF offers exposure to a broad range of U.S. high yield corporate bonds by tracking the Markit iBoxx USD Liquid High Yield Index. Holding 974 securities, effective duration and average maturity come in at 3.96 and 5.16 years, respectively.
Zacks ETF Rank: #5 (Strong Sell)
Aggregate YTD Volume: $342.5 billion
AUM: $12.1 billion
Expense Ratio: 0.49%
Top Sector: Communications (23.7%)
YTD Returns: -3.8%
iPath S&P 500 VIX Short-Term Futures ETN (VXX - Free Report)
This ETN provides exposure to short-term equity market volatility by following the S&P 500 VIX Short-Term Futures Index Total Return with the help of the CBOE Volatility Index futures contracts.
Zacks ETF Rank: N/A
Aggregate YTD Volume: $379 billion
AUM: $1.3 billion
Expense Ratio: 0.89%
Top Sector: N/A
YTD Returns: 76.8%
iShares China Large-Cap ETF (FXI - Free Report)
This fund provides exposure to a basket of 52 Chinese large cap stocks by tracking the FTSE China 50 Index. It is concentrated on its top five holdings (read: China's Manufacturing Stalls in November: ETFs in Focus).
Zacks ETF Rank: #3
Aggregate YTD Volume: $305.8 billion
AUM: $5.6 billion
Expense Ratio: 0.74%
Top Sector: Financials (46.4%)
YTD Returns: -14.2%
iShares Core S&P 500 ETF (IVV - Free Report)
Like SPY, this fund also follows the S&P 500 index, holding a well-diversified 505 securities in its basket.
Zacks ETF Rank: #2
Aggregate YTD Volume: $310.3 billion
AUM: $139 billion
Expense Ratio: 0.04%
Top Sector: Information Technology (19.9%)
YTD Returns: -10.5%
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