Exchange-traded funds (ETFs) have become immensely popular in recent years. Unlike mutual funds, ETFs trade on an exchange much like stocks. You can buy and sell an ETF’s shares throughout the trading day. They passively track an underlying index, similar to how index funds work. Depending on the underlying index they are tracking, ETFs could hold assets in stocks, bonds, or commodities. Here we take a look at the top 10 largest ETFs in the world by their assets under management.
There are a few things to keep in mind when investing in ETFs. Those with higher assets under management (AUM) and higher average trading volumes have an advantage over ETFs with lower AUMs and trading volumes. They can track their respective indices more closely, minimizing the tracking error. The higher trading volumes indicate a tighter spread, meaning there is little potential for huge swings in prices.
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Besides AUM and trading volume, you should also look at an ETF's expense ratio and tracking records to decide if an ETF is right for you. Expense ratios have been declining in recent years. Some of the most popular ETFs have an expense ratio of under 0.1%. If two or three ETFs tracking the same index have similar expense ratios, it makes sense to go for the one with greater AUM and trading volume.
These are the top 10 largest ETFs in the world based on their assets under management. The ranking is based on data from ETFdb. The AUM of an ETF is calculated by multiplying the number of outstanding shares by the market price per share.
10- iShares MSCI EAFE (EFA), $64.3 billion
BlackRock's EFA is among the world's largest ETFs investing in international stocks. As of February 07, 2020, it has $64.3 billion in assets. EFA tracks the MSCI EAFE Index, which measures the equity market performance of Europe, Australasia and Far East (EAFE). Its expense ratio is 0.32%. EFA has a pretty good average daily trading volume of 22,081,520 shares.
9- Vanguard FTSE Emerging Markets ETF (VWO), $65.3 billion
Vanguard's VWO ETF is for people who want to invest in emerging markets such as China, India, Taiwan, Brazil, Russia, and others. Investing in emerging markets is a high-risk, high-reward adventure. VWO tracks the FTSE Emerging Markets All Cap China A Inclusion Index, which measures the stock performance of more than 20 emerging countries. VWO has an expense ratio of 0.12% and average trading volume of 11,826,518 shares.
8- iShares Core U.S. Aggregate Bond ETF (AGG), $73.1 billion
AGG is the only ETF on this list investing in bonds. Bonds are an important part of an investor's portfolio. At just 0.05% expense ratio, it's a low-cost way to diversify your portfolio. AGG tracks the total US investment-grade bond market, covering Treasuries, corporate bonds, and municipal bonds. It has an average daily trading volume of 4,758,174 shares.
7- iShares Core MSCI EAFE ETF (IEFA), $76.6 billion
IEFA tracks the MSCI EAFE Investable Market Index, which measures the performance of 3,257 stocks across developed countries except the US and Canada. Its expense ratio is 0.07% and the average trading volume is 9,565,971 shares. As of February 07, 2020, it has $76.6 billion in assets.
6- Vanguard FTSE Developed Markets ETF (VEA), $80.5 billion
Vanguard's VEA tracks the FTSE Developed All Cap ex US Index, which measures the performance of a diversified group of stocks in Europe, Canada, and the Pacific region. It has $80.5 billion in assets. VEA's expense ratio is incredibly low at just 0.05%. Its average daily trading volume is 8,375,162 shares. It's suitable for investors seeking geographic diversification in their portfolio.
5- Invesco QQQ (QQQ), $94.5 billion
Invesco QQQ ETF tracks the NASDAQ 100 Index, which includes 100 of the largest non-financial companies by market capitalization listed on Nasdaq. Thanks to the skyrocketing market valuation of technology companies, the NASDAQ 100 Index has outperformed the S&P 500 in the last 10 years. Invesco QQQ has an expense ratio of 0.20%.
4- Vanguard S&P 500 ETF (VOO), $141.9 billion
VOO is not only among the world's largest ETFs but also among the cheapest with an expense ratio of just 0.03%. It has a staggering $141.9 billion in assets. VOO tracks the popular S&P 500 Index, which represents 500 of the largest US companies by market capitalization. Its average daily trading volume is 2,691,133 shares. VOO has low costs and high liquidity.
3- Vanguard Total Stock Market ETF (VTI), $145.4 billion
VTI is another popular ETF from Vanguard. It tracks the CRSP US Total Market Index, which includes the entire US stock market of 4,000 stocks. The index covers nearly 100% of the US investable equity market. VTI's 0.03% expense ratio is very low. It has an average daily trading volume of 2,834,835 shares.
2- iShares Core S&P 500 (IVV), $217.9 billion
With $217.9 billion in assets, 0.04% expense ratio, and an average trading volume of 3,866,419 shares, IVV is among the largest and most popular ETFs. It tracks the S&P 500 index. This is suitable for people who want low-cost exposure to the S&P 500 index with minimal tracking error. It was launched in 2000.
1- SPDR S&P 500 ETF (SPY), $316.3 billion
SPY is the largest ETF in the world with $316.3 billion in assets. It tracks the S&P 500 Index, and has an expense ratio of just 0.09%. SPY is also highly liquid with average daily trading volume of 60,592,539 shares. Launched way back in 1993, it was the very first ETF listed in the United States. SPY has an excellent long trading history.