Two broad trends have come to dominate the fund universe over the past decade: the triumph of low-cost indexing, and the rise of exchange-traded funds (which is a related trend since most ETFs are index portfolios).
Neither trend is going away, says John Rekenthaler, vice president of research for Morningstar. “Investors have realized the advantages of indexed strategies,” he says. So too have fund companies, as a flood of new index funds and ETFs have come to market, giving investors more options than ever.
To reflect this new landscape, MONEY has expanded its longstanding MONEY 50 into two lists: the MONEY 50 recommended mutual funds and a new MONEY 50 recommended ETFs.
What follows is our list of recommended ETFs, broken out into three groupings: "building-block ETFs" for the core of your portfolio, offering you broad exposure to stocks and bonds; "custom ETFs" to help you tilt toward specific strategies; and "one-decision ETFs," single funds that offer exposure to both equities and fixed income.
These exchange-traded funds expose you to broad swaths of the stock and bond markets, and should be used to construct the core part of your port-folio that you’ll hold for years. Because you’re simply seeking basic exposure, low-cost index funds are your best bet here.
Don’t want to put together a portfolio on your own? Then use one of these professionally managed ETFs that hold a diversified mix of stocks and bonds.
Supplement your core holdings with these funds to diversify more broadly and to tilt toward certain types of stocks and bonds.
NOTES: Net prospectus expense ratios were used for annual expenses. Total return figures are as of Nov. 30; five-year returns are annualized. N.A.: Not available or not applicable.
SOURCES: Lipper, Morningstar, and fund companies