10 Best ETFs to Watch in 2024

Exchange-traded funds (ETFs) have come a long way from when they were first introduced a little more than 30 years ago. Individual investors are realizing that purchasing ETFs is an easier path to diversification than buying a bushel of individual stocks in different sectors.

The growth in the total value of ETFs is accelerating. Global ETF assets will grow to $14 trillion by the end of 2024 from $12 trillion last year, and $6 billion five years ago, the research unit of BlackRock, the world’s largest asset manager, predicted. ETFs can provide a great assortment of investment options at a lower cost than, for instance, mutual funds. While they both offer a pool of assets, ETFs usually have lower expense ratios than mutual funds. The expense element and diversification are among their biggest reasons for their growing popularity.

In this guide, we present a collection of ETFs that have performed well this year, over the past five years, and have relatively low expense ratios. We also picked ETFs that may be appropriate for different types of investors. Whether you are looking for more growth, more value, or a diversified exposure to certain growth sectors, such as the best technology stocks, or semiconductor shares, there’s an ETF for you. Read on to find 10 of the best ETFs:

An in-depth look at these top ETFs

Let’s take a more detailed look at our selections. We’re focusing on ETFs worth your attention because they have delivered strong returns this year and over the past decade. Most of them are showing double-digit share price growth this year.

1. BNY Mellon US Large Cap Core Equity ETF: 4-year average annualized return of 14.84%

The passively managed fund tracks an index of large cap US equities called the Solactive GBS United States 500 Index TR. It does it without charging investors a management fee. The fund is highly liquid, so investors can buy or sell it at any time the markets are open. In a little more than four years, it already has more than $2.5 billion in AUM. So far this year, the ETF is up 18.7% and it has a dividend yield of 1.26%.

BKLC’s holdings include 505 stocks, such as real estate income trusts, that are screened for liquidity. The portfolio is smaller than some large-cap ETFs, so it’s also less diversified than those. However, no one stock represents more than 7% of the portfolio, with the highest share going to Apple at 6.86%, followed by Microsoft at 6.54% and Nvidia at 6.31%. 

The largest sector represented is information technology at 31.74%, followed by financials at 12.93%, and healthcare at 11.88%. It’s a relatively new ETF, established in April of 2020, so it’s without a long track record. That may be a turnoff for some investors.

2. SPDR S&P 500 ETF: 10-year average annualized return of 13%

The passively managed fund is up more than 18.5% this year, thanks to the S&P 500’s rise. It’s considered a good ETF for long-term investors who want exposure to the top large-cap US stocks. The expense ratio is low at 0.09%, and the fund is up 18.40% this year. It also has a dividend yield of 1.22%.

The fund provides diversification with 503 holdings at last count. Its anticipated 5-year earnings per share growth is 16.26%. The S&P 500 is a cap-weighted index, the top holdings receive heavier allocations in the SPY portfolio.  Its top three holdings are Apple at 6.90%, followed by Nvidia at 6.78% and Microsoft at 6.64%. It has broad sector coverage, but it does skew toward information technology stocks at 31.85%.

With the S&P 500 doing well this year, the fund has also done well. However, it’s worth noting that despite its diversification, it would likely tumble if there was a recession in the US. It has no exposure to small cap stocks or international stocks that could outperform the S&P 500. Still, the fund is a low-cost way of gaining exposure to large-cap stocks, without having to do a lot of research.

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3. Vanguard S&P 500 ETF: 10-year average annualized return of 13.02%

This passively managed ETF is up more than 18.7% this year. It tracks the S&P 500 Index, and holds all stocks in the same capitalization weighting as the index. It has a very low expense ratio of 0.03%, and a dividend yield of 1.22%. It’s considered a relatively safe ETF, as it holds mega and large cap stocks, such as ExxonMobil, Apple, IMB and GE. These large and stable companies are unlikely to go under unless the economy completely collapses. The size of the companies in the ETF, though, means their growth could be limited, but they do pay solid dividends.

VOO could be interesting for investors seeking broad mega and large cap exposure. It’s also more diversified than most, containing 504 securities. It’s a nice building block ETF for portfolios, especially for long-term investors looking to keep costs low. Like other S&P 500 index funds, it’s heavily weighted toward information technology stocks at 31.40%. That’s followed by financials at 13% and healthcare at 11.9%. The largest single allocation of one company in the fund is Apple, with 6.89%.

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4. BNY Mellon Emerging Markets Equity ETF: 4-year average annualized return of 2.12%

The passively managed ETF is up more than 8% so far this year. It provides strong diversification for investors interested in emerging markets, which provide more growth potential than many value-oriented ETFs. However, apart from that, it presents a little more risk. Emerging markets have lagged the S&P 500 substantially over the past decade, but that trend may not continue considering how high the average price-to-earnings ratio (P/E) is for S&P 500 stocks.

The fund tracks the Solactive GBS Emerging Markets Large & Mid Cap USD Index NTR. The gauge follows the performance of the large and mid cap segment, covering about 85% of the free-float market capitalization in emerging markets. Chinese stocks, such as Tencent Holdings and Alibaba, make up the highest share in the fund’s portfolio at 22.4%, followed by India with 21.3%, and Taiwan with 18.3%. Its two biggest sectors are information technology at 22.6% and financial services at 22.05%. 

The ETF includes more than 1,700 holdings, with the largest being Taiwan Semiconductor at 8.84%, followed by Tencent Holdings at 3.57%. Many of the stocks are underappreciated, so the fund’s average price-to-earnings ratio is a relatively low 15.56.

5. The Invesco S&P 500 Momentum ETF: 8-year average annualized return of 17.54%

The Invesco S&P 500 Momentum ETF tracks the S&P 500 Momentum Index of the 100 stocks in the S&P 500 that have had better recent price performance compared with peers. The measure is known as the high momentum score. The index and fund are reconstituted and rebalanced twice a year. So far this year, the fund has had a nice jump. rising more than 38%. Its expense ratio is relatively low at 0.13%.

The fund’s methodology measures the percentage change in stock prices over the past year, excluding the most recent month. Then it adjusts for volatility. The portfolio is then weighted based on a combination of company size and the momentum score. The majority of the stocks, 68.74%, are large-cap growth stocks. The largest single holding is Nvidia at 12.73%, followed by Apple at 9.92%.

The fund is passively managed, and is part of a growing trend of factor ETFs. The one concern is its relatively small portfolio, which makes it a bit riskier than a larger, more diverse portfolio would be. Consequently, it may not be a good option for long-term buy-and-hold investors. There are also momentum ETFs with broader portfolios, though its performance and low fees has made it popular.

6. The Roundhill Magnificent Seven ETF: 1-year average annualized return of 54.06%

MAGS is an actively managed fund that offers highly concentrated exposure to the largest and most liquid technology stocks. Its expense ratio at 0.29% is lower than what many actively managed funds would charge. So far this year, the fund is up more than 39%.

MAGS assigns an equal weight to each of the Magnificent Seven stocks. This approach ensures that no single company’s performance can overly influence the ETF’s returns. The ETF is getting rebalanced to equal weight on a quarterly basis. The advantage for investors is exposure to high flying stocks, with a degree of diversification, albeit not as much as a typical ETF. The benefit is that the cost is significantly less than it would take to buy lots of shares of each of the Magnificent Seven. Microsoft, for example, costs more than $423 per share right now.

The biggest concern for investors is no one knows how long the Magnificent Seven’s shares will keep climbing for. In addition, many of them have high price-to-earnings ratios, meaning they could face a significant price correction if we entered a recession. The fund is so new, too, so it’s probably not going to be the best option for risk-averse investors.

7. Fidelity High Dividend ETF: 8-year average annualized return of 12.95%

The ETF uses as its benchmark the Fidelity High Dividend Index of large-cap and mid-cap developed market stocks that pay high dividends. It’s a popular choice for investors looking for steady income and its current dividend yield is at 2.92%. It isn’t overwhelmingly diverse with only 106 holdings, many of them more established US companies.

So far this year, the fund is up more than 16%. The expense ratio on the actively managed fund is 0.15%, higher than some, but lower than most actively managed ETFs. It has about $3.3 billion in AUM.

The draw of the fund is its dividends, and over the past five years, it has a total return of 101.5%. It has more than $3.16 billion in AUM. Nvidia is the largest single share at 6.23%, followed by Microsoft at 6.03%. The deterrent for some investors is that some of its other holdings may not score highly on the ESG scale, as the company holds shares in tobacco company Philip Morris, and oil companies Chevron and Exxon, all three of which, though, add to the fund’s dividends.

8. VanEck Semiconductor ETF: 10-year average annualized return of 27.15%

This exchange traded fund tracks one of the fastest-growing sub-sectors, the semiconductor manufacturing industry. Because it only tracks 25 stocks, it lacks diversification and can be volatile. It attempts to latch on to the growth that the sub-sector brings as chips power smartphones, computers, and they underpin data centers, artificial intelligence (AI) technology. They are also present in electric vehicles. Semiconductor stocks have struggled this year at times. However, if the Fed trims interest rates, as expected, chipmakers that tend to borrow to support growth, will benefit from lower interest rates.

The fund is up more than 47% this year and is actively managed with an 0.35% expense ratio. Over the past decade, it lost money in only two years — 2015 and 2022 — and has a total return of 26.63%. It allows exposure to swaths of chipmakers and may serve useful to buy-and-hold investors looking for a diversified way to buy into semiconductor stocks.

The fund focuses mainly on US stocks, avoiding risks that may come with semiconductor companies that are based in less stable countries. Its largest two holdings are Nvidia at 21.6% of the fund, Taiwan Semiconductor at 13.59% and Broadcom at 8.46%.

The Invesco S&P SmallCap 600 Pure Growth fund is up more than 11% this year. It’s designed to give exposure to high-growth small-cap stocks. The thought is these stocks will have an easier time growing than larger companies. The flip side of that, though, is these stocks tend to be more volatile and can see their share prices rise – or fall rather quickly.

One advantage of this fund is it provides market diversity beyond large caps. It holds just 150 securities, with roughly 17.5% of them in the top 10 holdings. The expense ratio is a bit high at 0.35%, especially for a passively managed ETF that tracks an index, in this case, the S&P SmallCap 600 Pure Growth Index.

Though it has fewer securities that some of its competitors, it’s well-diversified by sector, with consumer discretionary (19.29%), financials (17.46%), industrials (14.25%), energy (11.06%) and healthcare (10.50%) leading its allocations. Individually, not one stock is responsible for as much as 2% of its portfolio, with UFP Technologies Inc., which makes medical devices and sterile packaging, leading the way with its 1.92% share of the fund.

10. Vanguard High Dividend Yield Index Fund ETF: 10-year average annualized return of 9.89%

This ETF is up more than 10% this year. It tracks the FTSE High Dividend Yield Index, which includes dividend paying large-cap value stocks. This fund is a might appeal to income-oriented investors because it follows stocks delivering above-average dividends. It has a low expense ratio of 0.06% and pays a dividend yield of around 2.87%.

The fund includes 551 stocks, many of them considered to be among the safest companies in the world. They represent the most stable sectors as well. The leading sectors are financials, which represent 21.10% of the fund, followed by industrials at 12.70% and healthcare at 11.80%. There’s plenty of diversification among the stocks, with no one company representing more than 4.25%. Broadcom Inc. is the top holding at 4.23%, followed by JPMorgan Chase & Co. at 3.53% and ExxonMobil at 3.08%. 

One type of high-dividend stock the fund doesn’t follow is REITs, battered lately because of high interest rates. However, if interest rates fall, REITs should thrive. The point is, though, that the fund is looking for stable dividends, from companies that are not volatile.

Year-to-date performance of the best ETFs for 2024

Ticker	ETF	Performance YTD
NYSEArca: BKLC	BNY Mellon US Large Cap Core Equity ETF	+18.71%
NYSEArca: SPY	SPDR S&P 500 ETF Trust	+18.59%
NYSEArca: VOO	Vanguard S&P 500 ETF	+18.70%
NYSEArca: BKEM	BNY Mellon Emerging Markets Equity ETF	+8.78%
NYSEArca: SPMO	Invesco S&P 500 Momentum ETF	+38.62%
NASDAQ: MAGS	Roundhill Magnificent 7 ETF	+39.50%
NYSEArca: FDVV	Fidelity High Dividend ETF	+16.95%
NASDAQ: SMH	VanEck Semiconductor ETF	+47.41%
NYSEArca: RZG	Vanguard High Dividend Yield Index Fund	+11.18%
NYSEArca: VYM	Vanguard High Dividend Yield Index Fund ETF	+10.78

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What are exchange traded funds?

Exchange-traded funds (ETFs) are a way to buy a grouping of stocks, bonds, or a combination of the two. ETFs provide exposure to quality stocks or bonds at a fraction of their individual price. They trade on traditional stock exchanges, unlike mutual funds, which are available directly from asset management firms.

One of the benefits of ETFs is that they have relatively low fees. They also often have some tax advantages compared with mutual funds, such as lower capital gains distributions.

ETFs have a great variety and often focus on a certain sector or a type of investing. Another advantage is that ETFs take out some of the guesswork involved in predicting what markets will do.

There are passively managed ETFs and actively managed ones. The passively managed funds usually track certain indexes and tend to have lower fees than actively managed ETFs. The latter can sometimes have better performance, though, especially during an economic downturn.

According to a report by PwC, global ETF assets under management (AUM) will grow to $19.2 trillion by June 2028, representing a five-year compound annual growth rate (CAGR) of 13.5%. With more ETFs every year, they provide a wealth of ways to invest with greater transparency than mutual funds.

How t​​o invest in ETFs? 

ETFs are easy to buy on major exchanges. The details on them are generally transparent, making for easier research, as their websites show their holdings and track their performance.

Their lower fees mean that investors can keep more of their returns, which is critical for long-term investing growth. Some brokerages have their own grouping of ETFs but don’t allow you to buy outside the ETFs they compile. For this reason, it’s important to use a broker that gives you plenty of options.

How to choose the best ETFs to invest in? 

When you invest in ETFs, there are several factors you need to consider regarding your portfolio. They can be a great way of adding diversification, so if you need more medical stocks, or a greater exposure to technology stocks, ETFs are a way to do that.

First, understand an ETF’s expense ratio. Expense ratios vary, but an expense ratio of above 1 is considered high, while one below 0.40% is deemed to be low. An expense ratio of 0.70% could cost you $70 a year in an ETF you have $10,000 invested in. 

Check out the ETFs you’re considering and look at how and what they invest in — large-cap, mid-caps, small-caps, international bonds or a wider market exposure. ETFs with a greater mix of stocks can mean less risk but also less growth potential.

Look into how diversified is the underlying index that ETFs are trying to mimic. Sometimes, just a handful of stocks dominate an index. In that case, assets that track them have more exposure if those stocks run into financial difficulties, or their share prices plummet. The more diversified the index that the ETF tracks, the less risk there is.

Pros and cons of buying ETFs 

ETFs have surged in popularity for several reasons over the past three decades. Here are factors to consider when looking at ETFs:

Some of the pros of investing in ETFs

• Diversification: ETFs make it easier to spread your money across sectors, allowing your returns to grow due to several trends. Doing that same type of diversification by simply buying stocks is generally more expensive and time-consuming. ETFs do that for you and usually in a more efficient manner.
• Exposure to different asset classes: Markets can change quickly and ETFs can allow you to benefit regardless of which sector is doing well. If you were solely buying stocks, it would be easy to miss a big rally for medical stocks or consumer durables, but if you invest in multiple ETFs with strong balance, you would benefit regardless of which sector is taking off. ETFs may be able to help investors gain exposure to asset classes outside of individual stocks, which can also help simplify the process of building a well-rounded, diversified portfolio.
• Lower costs: Buying ETFs generally mean lower fees over time than other financial vehicles, such as mutual funds. ETFs also allow you another way to invest in thriving companies whose individual stock prices may be too expensive.

Some of the cons of investing in ETFs

• Trading costs: Although ETFs generally have lower expense ratios than mutual funds, you may still incur trading costs (like commissions or fees) when buying or selling shares.
• Tracking errors: Some ETFs may not perfectly track the underlying index they have set out to follow. This can result in underperformance or overperformance compared to the benchmark.  
• Liquidity risk: While most major ETFs are highly liquid, less popular or specialized ETFs may have lower trading volumes, making it difficult to buy or sell shares without impacting the price.  

Methodology: How we chose the best ETFs for 2024

We looked specifically for ETFs with low expense ratios (generally below 0.50% for actively managed ETFs and below 0.20% for passively managed ETFs, with the point being to keep costs down and retain profits. Secondly, we looked at ETFs that have a strong track record over a number of years, including this year.

Some other factors you should consider when examining ETFs:

Investment objective: Determine if the ETF’s investment objective aligns with your goals. Are you seeking growth, income, or a combination of both? To do that, you need to understand the specific stocks or other assets the ETF invests in. This could be stocks, bonds, commodities, or a combination of these.

Tracking errors: Assess how closely the ETF tracks its underlying benchmark. A lower tracking error indicates that the ETF is performing more efficiently.

Proven track record: Larger, more established ETFs tend to be more stable and have better liquidity. However, younger ETFs may have higher growth potential.

Fund manager: If the ETF is actively managed, research the experience and track record of the fund manager.

Diversification: Evaluate how well the ETF is diversified. This can help mitigate risk and reduce volatility.

Risk Tolerance: Assess whether the ETF’s risk profile aligns with your comfort level. Some ETFs are more volatile than others.

FAQs on ETFs