Kip ETF 20: The Best Cheap ETFs You Can Buy
Exchange-traded funds (ETFs) are growing at an astronomical rate. U.S. assets are closing in on $4.25 trillion. The ETF share of total assets at investment firms has more than doubled to 17% from 8% at the start of the decade, while mutual funds have lost market share. The only problem with this explosive growth? The industry now boasts thousands of funds, making it difficult to determine the very best ETFs.
But investors are getting smarter about how they use ETFs in their portfolios. "After a decade of market gains, ETFs now play a unique role for investors as the foundation of a portfolio and also as vehicles that enable investors to be nimble," says Kari Droller, who oversees third-party mutual funds and ETFs at Charles Schwab.
We try to be nimble, too. Although a thorough review of the Kiplinger ETF 20 happens only once a year, we watch each fund closely. As you'll see below, we've noted where a couple of funds merit more scrutiny as interest rates stay steady and low. But for now, we're holding fast to our 20.
Read on for more analysis of our Kiplinger ETF 20 picks, which allow investors to tackle various strategies at a low cost.
Invesco S&P SmallCap Low Volatility
Total assets: $2.4 billion
Dividend yield: 2.4%
Expense ratio: 0.25%, or $25 per $10,000 invested
Small-cap stocks tend to produce bumpy returns. Over the past decade, the Russell 2000 small-company stock index has been 36% more volatile than the S&P 500. Invesco S&P SmallCap Low Volatility (XSLV, $51.33) is designed to smooth out the ride. So far, so good: Since this ETF launched in early 2013, it has outpaced two small-company stock benchmarks - the Russell 2000 and the S&P SmallCap 600 - on an annualized basis, with less volatility.
There are cheaper options, but none as steady. Over the past five years, the ETF has outperformed its peers - other low-volatility and traditional small-company stock ETFs - with lower volatility in both up and down markets. We view this ETF as a core small-company stock holding.
The stock-picking process is simple. XSLV tracks a subset of the S&P SmallCap 600 Index that comprises 120 of the least volatile stocks, measured over the past
