If you want to dip your toes into a particular sector of the public market, an ETF is a great way to do so. You can add as you go, and many investors reap impressive rewards over the long-term, despite their tendency toward intermittent volatility. To get you started, here are the best ETFs for 2020.
What is an ETF?
ETF stands for exchange-traded fund. Like mutual funds, they represent a collection of securities. Oftentimes, they track an index or a sector of the market. What differentiates ETFs from mutual funds is that ETFs are bought and sold throughout the day, instead of once per day after the market closes. This makes them a sort of fusion between mutual funds and stocks.
Some of the top-performing index funds overall for 2020 are ETFs that follow the S&P 500 index, including options from Vanguard, SPDR, and iShares.
Best travel ETF
The best transportation ETF for 2020 is the SPDR S&P Transportation ETF, which goes by the symbol "XTN." This includes airlines and air freight, plus trucking, marine, and railroad transportation. The sector has seen large swings this year, but XTN is better off than the U.S. Global Jets ETF (or "JETS") which is down 47.38 percent YTD—about a 36 percent larger fall than XTN.
Best value ETF
Value investors will want to check out the ARK Innovation ETF, or "ARKK." This ETF centers around innovations that analysts expect will disrupt the market, at least within a particular sector. The 0.75 percent expense ratio is hefty, but so are the net assets of nearly $9 billion. ARKK has jumped 89.1 percent YTD.
Best oil ETF for 2020
While most of the sector has hit rock bottom during 2020, the iShares U.S. Oil & Gas Exploration & Production ETF ("IEO") has managed to hold onto middle ground. IEO has recovered 26.41 percent since its March low.
Best gold ETF for 2020
For investors interested in the gold sector, check out the Perth Mint Physical Gold ETF ("AAAU") which has a low expense ratio of 0.18 percent. Its YTD performance is fairly good, too, with a 22.16 percent rise from Jan. 2–Oct. 29.
Best dividend ETF for 2020
Dividends are a great way to secure extra earnings from a company. Dividend ETFs take it one step further by valuing earnings per share (EPS) based on the collective index that ETF is tracking. For 2020, the best dividend ETF is the Vanguard High Dividend Yield ETF ("VYM"), which holds $27.5 billion in assets with a 3.4 percent annual dividend yield.
Best impact ETF
The Invesco Solar ETF trades under the symbol "TAN" and has net assets of $633 million. While it does hold a high expense ratio of 0.71 percent, you can make up for it with long-term growth. This ETF, which focuses on solar power, has grown 121.16 percent since the start of 2020 (even including the global market crash that began in February).