Exchange-traded funds (ETFs) offer a lot of benefits that make them attractive investment options. They are easy to buy and sell, typically have low costs, and are often tax-efficient depending on their investment set. Additionally, ETFs provide transparency, allowing investors to see exactly what they are getting.
Considering these qualities, ETFs can serve as excellent building blocks for a portfolio. They allow investors to target specific parts of the market they are interested in while avoiding areas they prefer to stay away from.
One way to start evaluating ETFs is by looking at the Morningstar Medalist Rating. ETFs that receive a Gold rating are believed to have the potential to outperform over a full market cycle. Today, we are focusing on the best stock ETFs in three main asset-allocation categories: US large-cap stocks, US mid- and small-cap stocks, and international stocks.
The top 20 large-cap stock ETFs that have earned a Morningstar Medalist Rating of Gold with 100% analyst coverage in May 2024 include options like Dimensional US Core Equity 1 ETF, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF. These ETFs provide exposure to the stocks of large companies, making them solid foundations for an equity portfolio.
When it comes to mid- and small-cap stock ETFs, options like Vanguard Mid-Cap ETF and Vanguard Small-Cap ETF are worth considering. While these may not be essential for all portfolios, they can be beneficial for those looking to diversify their holdings or increase their exposure to smaller companies.
International stock ETFs offer opportunities beyond US markets. While they may not be crucial for all portfolios, they can provide valuable diversification. ETFs like Vanguard FTSE Europe ETF and Vanguard Total International Stock ETF are among the top-rated options in this category.
It’s important for investors to do their research and find the best ETFs for their long-term investment goals. With the ETF marketplace becoming more complex, tools like Morningstar’s Guide to ETF Investing and the Morningstar Investor Screener can be valuable resources for selecting the right ETFs for your portfolio.
In DailyBubble’s view, ETFs are versatile investment vehicles that offer a range of benefits for investors looking to build diversified portfolios. By carefully selecting top-rated ETFs in different asset classes, investors can enhance their investment strategy and potentially achieve long-term financial goals.