The 20 Cheapest ETFs on the Market

Help your nest egg by making every last basis point count

Investors looking to get a leg up in their long-term plan can do so by simply rolling up their sleeves and rummaging through Wall Street’s bargain bin.

The 20 Cheapest ETFs on the Market

A handful of exchange-traded fund providers offer absolutely dirt-cheap ETFs that offer you instant broad exposure for next to nothing. The cheapest ETFs, in fact, can let you invest in hundreds of stocks or bonds for merely a few basis points in expenses.

Sure, a few hundredths of a percent might not sound like a huge deal, but if you can get roughly equal performance from two funds, the slightest difference in cost can result in thousands of dollars in savings over the course of an investment lifetime.

Let’s say you invest $10,000 in a fund that simply tracks the S&P 500 and charges 1% in expenses. After 30 years, about $18,700 of your money will have gone toward the expenses of that fund. However, let’s say you invested in a cheap ETF like the SPDR S&P 500 ETF (SPY) instead (at 1/10th the expense), you would’ve only spent roughly $2,000. You’re telling me you couldn’t use an extra $16,700 in retirement?

Even a few basis points make a difference — you’d save a couple thousand dollars by investing in a fund that charges 0.1% instead of 0.2%.

True, expenses aren’t everything, but countless investors could easily be getting performance similar to their current holdings for a fraction of the cost.

So, if you’re interested in saving a few thousand bucks down the line, get familiar with this quick look at the 20 cheapest ETFs on the market, according to ETFdb:

Cheapest ETFs, #20: SPDR S&P 500 ETF (SPY)

Type: Large-Cap Equity
Expense Ratio: 0.0945%
The Skinny: Yes, the granddaddy of them all, the SPY — the first and oldest ETF — is at the butt end of this group of cheap ETFs. But it’s cheap enough for most. At 22 years old, the SPY has attracted $177 billion in assets, making it the largest S&P 500-tracking ETF by assets — indeed, it’s the largest ETF period.

Get more info on the SPY.

Cheapest ETFs, #19: Schwab Short-Term U.S. Treasury ETF (SCHO)

Type: Government Bonds
Expense Ratio: 0.08%
The Skinny: This won’t be the last time you see Charles Schwab (SCHW) on this list. The Schwab Short-Term U.S. Treasury ETF (SCHO) is one of Schwab’s many cheap ETFs, this one providing investors exposure to short-term U.S. Treasury bonds. You’re not getting much in the way of yield considering you’re talking about bonds between one and three years in duration, but you’re also not paying much, either.

Get more info on the SCHO.

Cheapest ETFs, #18: Schwab U.S. Small-Cap ETF (SCHA)

Type: Small-Cap Equity
Expense Ratio: 0.08%
The Skinny: The Schwab U.S. Small-Cap ETF (SCHA) is the cheapest ETF on the market to provide exposure to small-cap stocks (typically viewed as stocks with market capitalizations between $300 million and $2 billion). Here, you get potentially explosive smaller companies such as cybersecurity firm Palo Alto Networks (PANW) and biopharma stock Alkermes (ALKS).

Get more info on the SCHA.

Cheapest ETFs, #17: Schwab International Equity ETF (SCHF)

Type: Foreign Large-Cap Equity
Expense Ratio: 0.08%
The Skinny: If you’re an American investor and believe in the strength of the American economy, naturally you should be invested in U.S. stocks. But you should always diversify, and you can do so geographically with the Schwab International Equity ETF (SCHF). You should note that SCHF is heavily weighted in Japan and developed European countries, so you’re not getting even, whole-world exposure. Still, this is a dirt-cheap way to get access to stable foreign large caps such as Nestle (NSRGY) and Novartis (NVS) — and collect about 2.7% in dividends to boot.

Get more info on the SCHF.

Cheapest ETFs, #16: iShares Core U.S. Aggregate Bond ETF (AGG)

Type: Total Bond Market
Expense Ratio: 0.08%*
The Skinny: The iShares Core U.S. Aggregate Bond ETF (AGG) is one of a few popular ways to delve into a few types of investment-grade bonds. AGG is weighted most heavily in U.S. Treasury bonds (about 40%), but it also holds mortgage-backed securities and corporate debt. Yields in total bond funds like these are a bit better than they are in shorter-term government debt funds, with AGG sporting a yield of slightly more than 2%.

* Includes fee waiver

Get more info on the AGG.

Cheapest ETFs, #15: Vanguard Total Bond Market ETF (BND)

Type: Total Bond Market
Expense Ratio: 0.07%
The Skinny: The Vanguard Total Bond Market ETF (BND) looks a lot like AGG. It’s a cheap total bond market fund that’s most heavily invested in Treasuries, but also has MBS and corporate exposure. BND is a little bit more exposed to Treasuries than AGG, and as of right now, it yields slightly more at 2.14% vs. AGG’s 2.03%. But otherwise, these are very similar funds.

Get more info on the BND.

Cheapest ETFs, #14: Schwab U.S. TIPS ETF (SCHP)

Type: Inflation-Protected Bonds
Expense Ratio: 0.07%
The Skinny: The Schwab U.S. TIPS ETF (SCHP) invests in U.S. Treasury Inflation Protected Securities, better known as just TIPS. Per TreasuryDirect.gov, “the principal of a TIPS increases with inflation and decreases with deflation.” In other words, TIPS protect investors against the effects of inflation … but for that protection, you’re accepting extremely little yield (roughly 0.8% for the trailing 12 months).

Get more info on the SCHP.

Cheapest ETFs, #13: Schwab U.S. Large-Cap Value ETF (SCHV)

Type: Large-Cap Value Equity
Expense Ratio: 0.07%
The Skinny: The Schwab U.S. Large-Cap Value ETF (SCHV) is, as the name suggests, the way to lean toward a more value-oriented approach on large-cap stocks. So, rather than looking for exceptional growth prospects, SCHV is looking more so for undervalued companies. SCHV also leans toward more defensive, dividend-paying stocks such as Microsoft (MSFT) and Exxon Mobil (XOM).

Get more info on the SCHV.

Cheapest ETFs, #12: Schwab U.S. REIT ETF (SCHH)

Type: Real Estate
Expense Ratio: 0.07%
The Skinny: Real estate investment trusts are a favorite among the dividend crowd, and for good reason — these companies are required to pay out the vast majority of their income as dividends. The Schwab U.S. REIT ETF (SCHH) is certainly the cheapest ETF that tracks this particular segment — though at a 2.4% yield, it’s far from the best-paying option.

Get more info on the SCHH.

Cheapest ETFs, #11: Schwab U.S. Mid-Cap ETF (SCHM)

Type: Mid-Cap Equity
Expense Ratio: 0.07%
The Skinny: Mid-cap stocks are the so-called “sweet spot” of the market cap spectrum. On the one hand, they typically have better growth prospects than much more established large-cap companies, but they’re not as risky and have much better access to capital than their small-cap brethren. And over the long run, mid-caps have outperformed their large- and small-cap brethren. With the Schwab U.S. Mid-Cap ETF (SCHM), you can leverage these mid-sized companies for a staggeringly low price.

Get more info on the SCHM.

Cheapest ETFs, #10: Schwab U.S. Large-Cap Growth ETF (SCHG)

Type: Large-Cap Growth Equity
Expense Ratio: 0.07%
The Skinny: Again, the Schwab U.S. Large-Cap Growth ETF (SCHG) is exactly what it sounds like — a fund dedicated to “growthier” large-cap stocks. As you’d imagine, then, this fund is most heavily weighted in information technology, with Apple (AAPL), Amazon (AMZN), Facebook (FB) and Google (GOOG, GOOGL) all earning spots in SCHG’s top 10 holdings.

Get more info on the SCHG.

Cheapest ETFs, #9: iShares Core S&P Total U.S. Stock Market ETF (ITOT)

Type: All-Cap Equity
Expense Ratio: 0.07%
The Skinny: If you find that you’re awfully indecisive and just want the whole U.S. stock market in your pocket … well, the iShares Core S&P Total U.S. Stock Market ETF (ITOT) can’t exactly give you that, but it can give you a close approximation. ITOT holds slightly more than 1,500 stocks of all shapes and sizes, from $655 billion Apple to $69 million Penn Virginia (PVA). And ITOT even has a small performance advantage over SPY, beating it by about 4 percentage points in total return since inception in 2004.

Get more info on the ITOT.

Cheapest ETFs, #8: Schwab U.S. Dividend Equity ETF (SCHD)

Type: All-Cap Dividend Equity
Expense Ratio: 0.07%
The Skinny: The Schwab U.S. Dividend Equity ETF (SCHD) continues Schwab’s dominance among cheap ETFs, this time providing investors a low-cost way to hold dividend stocks. Solid payers like Pfizer (PFE), Microsoft and Johnson & Johnson (JNJ) help to fund a decent 2.9% yield — and expenses will only eat into a mere sliver of that.

Get more info on the SCHD.

Cheapest ETFs, #7: iShares Core S&P 500 ETF (IVV)

Type: Large-Cap Equity
Expense Ratio: 0.07%
The Skinny: We now come to the second of the three major S&P 500-tracking funds, the iShares Core S&P 500 ETF (IVV). IVV is an enormous funds at $70 billion in AUM, though that’s still less than half of what’s invested in the SPY — despite its slightly cheaper expenses. Also, the IVV has another small advantage in that it can use derivatives and portfolio lending as part of its strategy, which can result in slightly different (higher, when things work out) performance than if it were to perfectly track the S&P 500. The difference is marginal — IVV tops SPY by just 50 basis points over the span of five years — but outperformance is outperformance.

Get more info on the IVV.

Cheapest ETFs, #6: Schwab U.S. Aggregate Bond ETF (SCHZ)

Type: Total Bond Market
Expense Ratio: 0.05%
The Skinny: The Schwab U.S. Aggregate Bond ETF (SCHZ) is the cheapest of the total bond funds at just 5 basis points in expenses; otherwise, there’s nothing really novel about this one. Like AGG and BND, SCHZ is a mix of Treasuries, MBSes and corporate debt. This one also sports a low yield at 2.03%, but that’s on par with AGG currently.

Get more info on the SCHZ.

Cheapest ETFs, #5: Vanguard S&P 500 ETF (VOO)

Type: Large-Cap Equity
Expense Ratio: 0.05%
The Skinny: Here we have the cheapest way to buy the S&P 500, and at least as far as the past few years are concerned, the Vanguard S&P 500 ETF (VOO) is also the best. VOO also can use derivatives and lending to help juice returns a little bit, and juice they have. Over the past five years, the SPY has returned 104.2% and IVY has returned 104.7% … but the VOO has both topped by a relative mile, at 107.8% in that time.

Get more info on the VOO.

Cheapest ETFs, #4: Vanguard Total Stock Market ETF (VTI)

Type: All-Cap Equity
Expense Ratio: 0.05%
The Skinny: The Vanguard Total Stock Market ETF (VTI) is another means of getting exposure across a host of market capitalizations, and this one dwarfs the ITOT, boasting some 3,800 stocks to the ITOT’s 1,500. VTI also boasts slightly better long-term performance than the ITOT.

Get more info on the VTI.

Cheapest ETFs, #3: Schwab U.S. Large-Cap ETF (SCHX)

Type: Large-Cap Equity
Expense Ratio: 0.04%
The Skinny: While the Schwab U.S. Large-Cap ETF (SCHX) doesn’t track the S&P 500, it is the cheapest ETF offering large-cap exposure — and really, the holdings are awfully similar to the S&P 500. In fact, while the weightings are slightly different, both SCHX and the SPY share the same top 10 holdings. And to boot, the SCHX boasts an ever-so-slight performance advantage over the SPY during the past three and five years.

Get more info on the SCHX.

Cheapest ETFs, #2: Schwab U.S. Broad Market ETF (SCHB)

Type: All-Cap Equity
Expense Ratio: 0.04%
The Skinny: Schwab yet again lays down the cheapest ETF in a category, this time for all-cap exposure. The Schwab U.S. Broad Market ETF (SCHB) allows investors to get involved with a little more than more than 2,000 stocks for a pittance, offering a blend that leans toward information technology, financials and healthcare.

Get more info on the SCHB.

Cheapest ETFs, #1: iShares Treasury Floating Rate Bond ETF (TFLO)

Type: All-Cap Equity
Expense Ratio: 0.00%*
The Skinny: Well, if the iShares Treasury Floating Rate Bond ETF (TFLO) were any cheaper, they’d be paying you to hold it. The TFLO actually advertises an expense ratio of 0.15%, but iShares is offering a 0.15% fee waiver through at least the end of February 2016. So … why so cheap? The TFLO holds a relatively young type of security — Treasuries with floating rates — that frankly isn’t expected to generate much in the way of returns. Since inception in February 2014, the fund has moved a scant 0.16% in the black (and that’s with very little wiggle — “selling high” wouldn’t have garnered you a whole lot more). Plus yields are uber-low, with TFLO offering a current SEC yield of just 0.07%.

* Includes fee waiver

Get more info on the TFLO.

Kyle Woodley is the Managing Editor of InvestorPlace.com. As of this writing, he was long VOO. Follow him on Twitter at @KyleWoodley.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/the-20-cheapest-etfs-2015/.

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