Displaying items by tag: low cost
Bond ETFs for the Low Fee Investor
Fidelity's Enhanced High Yield ETF (FDHY) recently reduced its expense ratio from 45 to 35 basis points, making it one of the most cost-effective active high-yield bond ETFs among the top 10 in its category.
This reduction is projected to save shareholders approximately $331,000 annually, highlighting the importance of expense ratios in maximizing investor returns. Unlike passive strategies that track high-yield bond indexes, FDHY employs a quantitative, rules-based approach, screening for bonds with strong return potential and low default risks.
This active methodology allows the fund to exploit market inefficiencies, providing a potential edge over passive competitors. Since the expense cut in October, the fund has attracted over $24 million in net flows, demonstrating increased investor interest.
Finsum: Keeping an eye on fees, particularly for active funds can really advance returns in a macro environment.
Three Cheap ETFs to Add to Your Portfolio
Exchange-traded funds (ETFs) have experienced tremendous growth due to their low costs, diversification, transparency, tax advantages, and creative investment strategies. Among various costs associated with ETFs, such as trading fees and tracking errors, expense ratios stand out as the most critical factor for attracting investors.
Lower expense ratios can significantly enhance long-term returns; for instance, a $10,000 investment in a fund with a 0.10% expense ratio grows more over 30 years than one with a 0.50% ratio. Recognizing this, investors often seek out the cheapest ETFs, which include options like BNY Mellon Core Bond ETF (0.00% expense ratio) offering broad U.S. bond market exposure.
Other low-cost leaders include SPDR Portfolio S&P 500 ETF (0.02%), providing access to the S&P 500, and JPMorgan BetaBuilders U.S. Equity ETF (0.02%), targeting U.S. large and mid-cap equities. These ETFs showcase how affordability and strategic design make them ideal choices for cost-conscious investors.
Finsum: Picking a low cost ETF is reall y a combination of finding the correct factor exposure and keeping the fees down.
Growth in 2025 Could Propel These Low Cost ETFs
Post-pandemic, U.S. economic forecasts have consistently underestimated growth, a trend strategists like RBC’s Lori Calvasina believe will continue into 2025. RBC projects 2%–3% GDP growth for the year, while Bank of America estimates 2.4%, surpassing the Bloomberg consensus of 2.1%.
Strong GDP growth is historically tied to better equity market performance, with stocks gaining 70% of the time when growth ranges between 2.1% and 3%. Value stocks, which perform well in periods of robust growth and higher interest rates, are expected to benefit from continued economic resilience and protectionist policies under the second Trump administration.
This environment is favorable for ETFs focused on value stocks, such as Invesco S&P 500 Enhanced Value ETF (SPVU) and Vanguard Small-Cap Value ETF (VBR), which have lower P/E ratios compared to broader market ETFs.
Finsum: These value-focused ETFs may see a strong turnaround in 2025, fueled by higher bond yields and resilient economic conditions.
Three Low-Cost ETFs for Different Needs
Vanguard's ETFs offer excellent options for investors seeking both passive income and diversification. The Vanguard Value ETF, one of the largest value-oriented funds, holds mainly large-cap stocks with solid dividend payouts, keeping its top 10 holdings at around 21% of the portfolio.
For a more concentrated approach, the Vanguard Mega Cap Value ETF focuses on mega-cap companies, leaning toward value-heavy sectors like healthcare and energy, which tend to fare well in economic downturns. Investors aiming for higher yield might consider the Vanguard High Dividend Yield ETF, which offers broad exposure to 537 holdings and a nearly 3% yield without overemphasizing any single sector.
Although these funds have lagged the tech-driven S&P 500 recently, they have shown significant long-term growth, nearly tripling in value over the last decade.
Finsum: These ETFs suit different needs, whether one prefers a focus on industry giants or broader diversification for consistent passive income.
Three Low-Cost Low-Volatility ETFs For Fall Turbulence
In recent months, the stock market has been extremely volatile, prompting increased interest in low-volatility low-cost ETFs. While the market has seen gains this year due to a growing appetite for riskier investments, uncertainties like the Federal Reserve's future actions, geopolitical tensions, and the upcoming U.S. presidential election still loom large.
Low-volatility ETFs offer investors a way to participate in the market with potentially less risk, although they are not immune to sharp downturns. These funds may underperform compared to more dynamic portfolios, especially during market surges. However, they can be attractive for those prioritizing capital preservation over high returns.
Examples of popular low-volatility ETFs include the Invesco S&P 500 Low Volatility ETF, which focuses on the least volatile stocks in the S&P 500, and the iShares MSCI EAFE Min Vol Factor ETF, which targets lower-risk companies in developed markets outside the U.S.
Finsum: Be mindful of what thematic ETFs you want to integrate into your portfolios, because there will be a chance to capitalize in the coming months.