Aiolux.com: Compare Stocks, ETFs, Crypto Side by Side | Aiolux (2024)

FAQs

What is the best performing ETF? ›

Once you've opened an investment account, you'll need to decide: Do you want to invest in individual stocks included in the S&P 500 or a fund that is representative of most of the index? Investing in an S&P 500 fund can instantly diversify your portfolio and is generally considered less risky.

Passive, or index, ETFs generally track and aim to outperform a benchmark index. They provide access to many companies or investments in one trade, whereas individual stocks provide exposure to a single firm. As such, ETFs remove single-stock risk, or the risk inherent in being exposed to just one company.

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

The best-performing ETF in the last 10 years was VanEck Semiconductor ETF (SMH).

Over the past decade, you would have done even better, as the S&P 500 posted an average annual return of a whopping 12.68%. Here's how much your account balance would be now if you were invested over the past 10 years: $1,000 would grow to $3,300. $5,000 would grow to $16,498.

Over the long run, they do compound—those fee differences—and investors have been putting a lot more money into VOO versus SPY. That is the reason why we view VOO slightly better than SPY. And that is just the basic approach, which is the lower the investor can pay, the better the investment is.

Market risk

The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.

What are the disadvantages of ETF? ›

Disadvantages of ETFs. Although ETFs are generally cheaper than other lower-risk investment options (such as mutual funds) they are not free. ETFs are traded on the stock exchange like an individual stock, which means that investors may have to pay a real or virtual broker in order to facilitate the trade.

You can't beat the Vanguard S&P 500 ETF's low cost

Though they are all extremely similar (as they are designed to track the same index), I prefer the Vanguard S&P 500 ETF mainly because of its low cost. It has a 0.03% expense ratio, which works out to total annual fees of $0.30 per $1,000 invested.

Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.

In the past year, QQQ returned a total of 39.51%, which is significantly higher than VOO's 30.26% return. Over the past 10 years, QQQ has had annualized average returns of 18.90% , compared to 13.03% for VOO. These numbers are adjusted for stock splits and include dividends.

Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.