Best ETFs For Trading

Best ETFs For Trading

We score 213 highly liquid funds on their short-term holding costs.

You can use exchange-traded funds to invest or you can use them to speculate. This survey of ETFs is aimed at the latter purpose.

The survey ranks funds in 21 different categories, from short-term government bonds to emerging market stocks, on their three-month holding costs. Conspicuous among those costs: the bid/ask spread that determines how much you lose to market makers getting in and out of a position.

Two other costs figure in: the expense ratio drawn off by the vendor of the fund, and the cost offset derived from securities lending.

The Best Buy funds here are a select group of ETFs that can be owned for a fourth of a year at a combined cost, per $10,000 invested, that is below $10. They also had to clear another hurdle: getting a grade of B or better for liquidity.

It’s a select group, for which only one in nine ETFs qualify.

If you want to go in and out of the broad U.S. market, Vanguard’s giant Total Stock Market ETF (VTI) is the best vehicle. It will cost you only $1.90. The Vanguard S&P 500 (VOO) and the iShares Core S&P 500 (IVV) are almost as cheap.

In smaller-company funds, the BlackRock iShares fund family takes the lead. Its Core S&P Small-Cap (IJR) and its Russell 2000 (IWM) can both put $10,000 to work for three months for less than a dollar.


3-month Holding Cost*
Liquidity ScoreAssets ($billion)_
TickerExchange-traded fund
SPYSPDR S&P 500$2.95A+271.9
IVViShares Core S&P 5002.24A+154.9
VTIVanguard Total Stock Market1.79A+102.4
VOOVanguard S&P 5002.00A+95.7
EFAiShares MSCI EAFE9.17A+73.0
VEAVanguard FTSE Developed Markets2.05A71.4
VWOVanguard FTSE Emerging Markets4.62A62.3
QQQInvesco QQQ5.67A+70.0
IEFAiShares Core MSCI EAFE2.46A+58.4
AGGiShares Core US Aggregate Bond2.14A+55.8

*Cost of a $10,000 position held for three months. Reflects bid/ask spread, expense ratio and cost offset from securities lending.

Data sources: Morningstar, Bloomberg, fund distributors

All three cost factors come into play in making iShares ETFs winners in the small-cap category. Its large funds are favorites of traders, and their heavy volume keeps bid/ask spreads tight. BlackRock extracts a lot of revenue lending securities to short-sellers, and that revenue trims the net cost to investors. And many iShares funds (especially the ones labeled “Core”) have rock-bottom expense ratios.

BlackRock also offers the best trading vehicles in eight different bond-fund categories. These ETFs are a cost-effective way to make bullish bets on interest rate declines or just to put some idle cash to work for a short period.

The 213 funds on our Best Buy ETFs for Traders list are a subset of the 737 Best Buy ETFs for Investors. The larger list is ranked by ten-year holding costs, and different funds climb to the top there. Go to Best Buy ETFs to find the winners in 55 investing categories for long-term investing.


3-month Holding Cost*
Liquidity ScoreAssets ($billion)_
TickerExchange-traded fund
IJRiShares Core S&P Small-Cap0.43A+44.8
IWMiShares Russell 20000.66A+46.4
VTIVanguard Total Stock Market1.79A+102.4
IEMGiShares Core MSCI Emerging Markets1.92A+48.3
CIUiShares Intermediate Credit Bond1.97A6.3
VGKVanguard FTSE Europe2.00A+17.2
VOOVanguard S&P 5002.00A+95.7
VEAVanguard FTSE Developed Markets2.05A71.4
CSJiShares 1-3 Year Credit Bond2.05A10.5
VBVanguard Small-Cap2.06A24.4

*Cost of a position held for three months. Reflects bid/ask spread, expense ratio and cost offset from securities lending.

Data sources: Morningstar, Bloomberg, fund distributors

Cost figures do not include brokerage commissions, which vary widely and are often zero. Vanguard this year introduced commission-free trading of most ETFs. Fidelity has 95 commission-free funds from iShares or its own shelves. Schwab and TD Ameritrade have deals. (Sometimes you get a commission-free trading coming and going, sometimes just on the purchase, so read the fine print.)

Liquidity is important to any trader who is working with more than a few hundred shares. Trading volume matters here as much as the quoted spread.

VTI sees $3 billion of activity on a good day; it would take a large order indeed to push the price away. But trying to move 3,000 or even 1,000 shares of a thinly traded ETF could widen its spread. To assess this situation, look at the liquidity scores. These grades are based on a combination of a fund’s dollar trading volume and the percentage difference between bid and ask quoted for small trades. The grades are awarded on a curve for the 737 funds in the larger data set, with the 5% easiest to trade getting an A+ and the next 20% an A.

The raw data for our cost analysis came from Morningstar, Bloomberg and fund sponsors.

Best ETFs for Trading: Large-Cap

Best ETFs for Trading: Small- and Mid-Cap

Best ETFs for Trading: Dividend and Factor Funds

Best ETFs for Trading: Sector Funds

Best ETFs for Trading: Short-Term Bonds

Best ETFs for Trading: Medium-Term Bonds

Best ETFs for Trading: Long-Term Bonds

Best ETFs for Trading: TIPS, Junk and Munis

Best ETFs for Trading: International


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