8 Best ETFs for 2022 (2024)

*Note: The fund's investment adviser waived management fees until at least June 2022.

Best Overall: Vanguard Total Stock Market ETF

• 3-year return (as of Dec. 31, 2021): 25.76%
• Expense ratio: 0.03%
• Assets under management (AUM as of Dec. 31, 2021): $1.4 trillion
• Inception date: May 24, 2001

The best overall ETF for investors is the Vanguard Total Stock Market ETF. This fund aims to replicate the returns of the entire U.S. stock market at a cost of just 0.03%. Without an investment minimum, it gives investors instant exposure to large-cap, medium-cap, and small-cap companies. As of Dec. 2021, the ETF owns 4,139 stocks, with top holdings including Apple, Microsoft, Alphabet, and Amazon.

Some investors choose to build a simple, two-fund portfolio using this fund and a bond fund, letting them set their allocation between stocks and bonds easily.

Best No-Fee: SoFi Select 500 ETF

• 1- year return (as of Dec. 31, 2021): 27.79%%
• Expense ratio: 0.00%
• Assets under management (as of Feb. 11, 2022): $375.76 million
• Inception date: April 11, 2019

This is a relatively newer ETF with a unique feature: The fund's investment adviser waived management fees until at least June 2022. The fund functions very similarly to an S&P 500 index fund, holding shares in roughly 500 of the largest businesses in the United States. It does adjust the weighting of these businesses somewhat, investing more in companies that seem poised for growth rather than weighting its holdings purely on market capitalization.

Best for Active Traders: SPDR S&P 500 ETF

• 3-year return (as of Dec. 31, 2021): 25.88%
• Expense ratio: 0.0945%
• Assets under management (as of Feb. 11, 2022): $400 billion
• Inception date: Jan. 22, 1993

SPDR S&P 500 ETF, or SPY, is one of the most popularly traded ETFs in the world. It tracks the U.S.’ S&P 500 index, which includes 500 of the largest companies in the country. The S&P is one of the most commonly used indexes to measure the performance of the stock market as a whole.

If you want to day trade based on the overall performance of the market, SPY is one fund that you can use. It tracks the performance of the S&P in real time and is highly liquid, with nearly 30 million shares changing hands daily as of Feb. 11, 2022.

Best for Small Caps: iShares Core S&P Small-Cap ETF

• 3-year return (as of Dec. 31, 2021): 20.6%
• Expense ratio: 0.06%
• Assets under management (as of Feb. 11, 2022): $69.89 billion
• Inception date: May 22, 2000

Small-caps companies are those with market capitalizations between $250 million and $2 billion. The iShares Core S&P small-cap ETF is one of the best ETFs if you want to invest in a diverse portfolio of smaller businesses.

The fund is large, with more than $74 billion under management, and inexpensive to invest in. As of Feb. 11, 2022, its portfolio includes 676 holdings. Such diversification may help counteract volatility that small-caps stocks may experience.

Best for Large Caps: Vanguard Mega Cap ETF

• 3-year return (as of Dec. 31, 2021): 26.73%
• Expense ratio: 0.07%
• Assets under management (as of Dec. 31, 2021): $4.7 billion
• Inception date: Dec. 17, 2007

The Vanguard Mega Cap ETF invests in some of the largest companies in the United States, focusing on the businesses that make up roughly 70% of the country’s market capitalization.

This fund typically holds shares in large companies with long histories. Large-cap companies are considered more stable than small-cap businesses, and typically offer dividends and more consistent returns. However, they can still experience volatility, which investors must be willing to accept before investing.

As of Dec. 31, 2021, the top holdings of this ETF include Apple Inc., Microsoft Corp., Alphabet Inc., and Amazon.com Inc.

Best for Dividends: Schwab U.S. Dividend Equity ETF

• 3-year return (as of Dec. 31, 2021): 23.89%
• Expense ratio: 0.06%
• Assets under management (as of Feb. 11, 2022): $34 billion
• Inception date: Oct. 20, 2011

Dividends are one of the most popular ways for investors to turn their portfolios into sources of income. The Schwab U.S. Dividend Equity ETF is one of the best funds to invest in if you’re looking for income.

The fund focuses on buying shares in large companies with consistent dividends. It passes those dividends onto its investors, offering a yield of a little over 2.8% while charging a low expense ratio of just 0.06%, as of Jan. 31, 2022.

Best for International Stocks: Vanguard Total International Stock ETF

• 3-year return (as of Dec. 31, 2021): 13.73%
• Expense ratio: 0.08%
• Assets under management (as of Dec. 31, 2021): $418.9 billion
• Inception date: Jan. 26, 2011

If you want exposure to international businesses, the Vanguard Total International Stock ETF is one of the best funds to invest in. Unlike other international stock funds, this fund doesn’t focus solely on mature markets or rapidly growing countries. You can use it to get exposure to some of the top international companies while getting exposure to firms from fast-growing countries.

As of Dec. 31, 2021, this ETF had a portfolio of more than 7,700 stocks from around the world, with significant exposure to companies in Europe (40.9%) and emerging markets (24.7%).

Best Actively Managed: First Trust Long/Short Equity ETF

• 3-year return (as of Dec. 31, 2021): 12.51%
• Expense ratio: 1.55%
• Assets under management (as of Feb. 11, 2022): $472.29 million
• Inception date: Sept. 8, 2014

Most of the funds on this list are passively-managed funds, which means the managers aim to replicate a certain index and don’t take an active hand in choosing what to invest in. Actively managed funds are typically more expensive, but may appeal to investors who want to try to beat the market.

The First Trust Long/Short Equity ETF is one of the most exciting actively-managed ETFs on the market. It takes both long and short positions on stocks to try to produce the best possible return. This means that, in theory, the fund could produce a positive return in both rising and falling markets.

However, higher expenses come with active management and long/short strategy. The fund’s annual management fee is 0.95% but add in the margin and short sales fee, the total annual expenses go up to 1.55%, which is significantly higher than most of the funds on this list.

Pros and Cons of Investing in ETFs

Pros Explained

• Easily build a diversified portfolio: ETFs make it easy for investors to diversify their portfolios. If you buy shares in an ETF that holds hundreds of different stocks, you get exposure to all of those stocks.
• Trade shares throughout the day: You can trade ETFs whenever the market is open, making them more flexible than mutual funds.

Cons Explained

• Typically only buy in whole share increments: Unlike mutual funds, which typically let you invest any amount once you reach the minimum, you can only buy shares in ETFs in whole share increments, unless your broker specifically allows fractional share investing.
• ETFs charge fees: ETFs charge fees called an expense ratio, which can reduce your returns. While the funds we list have reasonable fees (typically lower than mutual funds), there are many funds that have much higher fees.

Is an ETF Right for You?

If you’re looking for an easy way to build a diversified portfolio without having to buy dozens of different securities, ETFs are one of the best ways to do it. You can build a portfolio entirely out of ETFs if you want to.

If you’re more of an active trader or like to pick stocks, ETFs can still form the backbone of your portfolio, but you might want to focus more on the individual businesses you invest in rather than buying shares in ETFs.

Frequently Asked Questions