15 Best Low Cost ETFs

Hamna Asim
20 min read

In This Article:

In this article, we discuss 15 best low cost ETFs. If you want to see the top 5 low cost ETFs, head directly to 5 Best Low Cost ETFs.

Beginner investors usually go for passive investing, with a focus on consistently increasing wealth over the long term with lower fees and reduced risk. In contrast, investors with more experience may have an inclination towards active investing, seeking to profit from short-term shifts in the market. Passive investment plans normally involve investing in a range of stocks, bonds, and other assets to achieve easy diversification. This approach helps in lessening the impact of market volatility as the investment is spread across different assets. Passive funds, like low-cost ETFs or passively managed mutual funds, offer affordable investment choices with lower management fees and less trading activity. It is also relatively easier to maintain them as they do not require as much ongoing research as active funds do. On the other hand, active investing allows portfolio managers to select investments based on their own judgment rather than following a specific index or predetermined portfolio. This flexibility allows them to respond to real-time market conditions and potentially surpass short-term market benchmarks. Active investing often involves active trading strategies like short-selling and hedging to maximize short-term price movements. However, active fund managers generally charge higher fees due to the higher frequency of trading and specific expertise required for this strategy.

In 2023, global passive equity funds became more popular than active funds for the first time. This shift was driven by investors seeking lower-cost options that follow broad market indices. Passive equity funds reached $15.1 trillion in net assets by December, surpassing the $14.3 trillion held by active funds. This trend towards passive funds began after the 2008 financial crisis as investors sought safer investments during uncertain times, as reported by Reuters. In 2023, the SPDR S&P 500 ETF Trust (NYSE:SPY) attracted the most inflows, bringing in $52.83 billion. The iShares Core S&P 500 ETF (NYSE:IVV) and Fidelity 500 Index (NASDAQ:FXAIX) followed closely, attracting $38.1 billion and $24.79 billion, respectively. Geoffrey Strotman, senior vice president at Segal Marco Advisors, believes that the increasing popularity of passive funds could lead to pricing discrepancies. This could create opportunities for active managers to buy stocks at lower prices and sell them at higher prices. Mark Haefele, chief investment officer of wealth management at UBS AG, predicts a comeback for active funds in 2024. He expects Federal Reserve rate cuts to lower borrowing costs, benefiting small-cap companies more than larger ones.

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