Cheapest Large Cap ETFs
Vanguard has made a name for itself by offering low-cost, index-based ETFs. Rather than pay for pricey active managers, these funds are simply pegged to a benchmark index and reflect its returns faithfully — and cheaply — with no strings attached.
So unsurprisingly, one of the most popular ETFs out there is the Vanguard S&P 500 ETF (VOO), which gives investors a foothold in the iconic index of 500 large-cap stocks from the S&P 500. The names there are the ones you know and love — Apple (AAPL), Exxon Mobil (XOM) and Johnson & Johnson (JNJ), just to name a few of the biggies.
Why this Vanguard ETF when the SPDR S&P 500 ETF (SPY) is older and has more assets under management? Well, because the SPY charges a net expense ratio of just over 0.09% while the VOO charges just 0.05%. Both of these funds are very cheap since that works out to $9 annually on each $10,000 invested or $5 on each $10,000, respectively. But why pay more than you have to?
And remember, just because a fund is passively managed and relies on a benchmark doesn’t mean it will always be this cheap. Take the iShares NYSE Composite ETF (NYC), which is tied to a static benchmark but charges 0.25% or $25 per $10,000 invested each year. That’s five times the VOO with a remarkably similar lineup of stocks.