10 Best ETFs Of January 2024 (2024)

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The 10 Best ETFs of January 2024

Fund NameExpense Ratio
Vanguard Total International Stock ETF (VXUS)0.07%
Schwab U.S. Dividend Equity ETF (SCHD)0.06%
Invesco S&P 500 GARP ETF (SPGP)0.34%
Schwab Fundamental International Large Company Index ETF (FNDF)0.25%
Vanguard Mid Cap Growth ETF (VOT)0.07%
Vanguard Intermediate-Term Corporate Bond ETF (VCIT)0.04%
iShares Floating Rate Bond ETF (FLOT)0.15%
iShares National Muni Bond ETF (MUB)0.07%
Avantis U.S. Small Cap Value ETF (AVUV)0.25%
Columbia U.S. ESG Equity Income ETF (ESGS)0.35%

Why We Picked It

The Vanguard Total International Stock ETF has a powerful factor in its favor. Currently, key foreign stock markets are more attractively valued than that of the U.S., based on comparisons to the widely followed S&P 500 Index. Based on the reversion to the mean principal, international stocks are due for a rebound.

With nearly 8,000 holdings, VXUS provides expansive exposure to international stocks. Still, bear in mind that many component stocks do business in the U.S., including Taiwan Semiconductor Manufacturing (TSM) and Nestle (NSRGY).

About three-quarters of VXUS is at work in stocks based in developed markets. Roughly 70% of holdings are large-cap stocks. The balance consists of mid- and small-cap stocks.

VXUS holdings reflect the wisdom of the investment world, due to the fund’s market-capitalization weighting approach. This is truly a set-it-and-forget-it international-stock fund, designed as core portfolio holding.

Schwab U.S. Dividend Equity ETF (SCHD)

10 Best ETFs Of January 2024 (12)

Expense Ratio

0.06%

Dividend Yield

3.47%

10-Year Avg. Ann. Return

11.22%

10 Best ETFs Of January 2024 (13)

0.06%

3.47%

11.22%

Why We Picked It

Investors seeking strong dividends, high-quality stocks and capital appreciation will find a lot to love in the Schwab U.S. Dividend Equity ETF. The low expense ratio is alluring. SCHD aims for a portfolio populated by companies with stronger fundamental metrics than their peers.

SCHD’s roughly 100 holdings skew toward large-cap value stocks. Many are reliable dividend payers. Unlike the tech-heavy S&P 500, industrials, health care, financials and consumer staples make up the bulk of SCHD holdings.

SCHD outperformed its Morningstar large-cap value fund category during the previous five- and 10-year periods. Investors seeking a passive index fund that’s relatively generous with dividends and which often outpaces its peers should check out SCHD.

Invesco S&P 500 GARP ETF (SPGP)

10 Best ETFs Of January 2024 (14)

Expense Ratio

0.34%

Dividend Yield

1.24%

10-Year Avg. Ann. Return

14.50%

10 Best ETFs Of January 2024 (15)

0.34%

1.24%

14.50%

Why We Picked It

The Invesco S&P 500 GARP ETF owns stocks primed for growth at a reasonable price. The fund’s roughly 70 holdings are chosen from among companies in the S&P 500 with the highest growth scores, along with what Invesco calls high quality and strong value composite scores.

Well diversified, SPGP’s top 10 holdings comprise roughly 20% of the fund. Healthcare is SPGP’s largest sector. Technology is close behind, followed by financials and industrials.

SPGP has larger weightings of mid- and small-cap stocks than the S&P 500 does. That’s likely a key reason that SPGP is more volatile than the large-cap bogey. Still, if you want a cautious fund that has handily outperformed its Morningstar category over the past three, five and 10 years, kick the tires on SPGP.

Schwab Fundamental International Large Company Index ETF (FNDF)

10 Best ETFs Of January 2024 (16)

Expense Ratio

0.25%

Dividend Yield

3.44%

10-Year Avg. Ann. Return

4.91%

10 Best ETFs Of January 2024 (17)

0.25%

3.44%

4.91%

Why We Picked It

International stocks should be a part of any diversified investment portfolio. Schwab Fundamental International Large Company Index ETF focuses on large- and mid-sized companies from developed markets.

This passively managed fund offers a dividend yield that’s higher than the market average, represented by the S&P 500 Index. FNDF leans towards large-cap value and core stocks. The fund has outperformed its Morningstar category over the past one, three, five and 10 years.

Vanguard Mid Cap Growth ETF (VOT)

10 Best ETFs Of January 2024 (18)

Expense Ratio

0.07%

Dividend Yield

0.72%

10-Year Avg. Ann. Return

10.05%

10 Best ETFs Of January 2024 (19)

0.07%

0.72%

10.05%

Why We Picked It

Growth funds own companies that are delivering higher-than-average growth rates in key metrics like sales and cash flow. The Vanguard Mid Cap Growth ETF posts a five-year earnings growth rate around 29%. That’s about four percentage points higher than VOT’s Morningstar mid-cap growth category’s average.

VOT’s top sector weightings are in technology, healthcare stocks and industrials. The fund has outperformed its Morningstar category over the past one, three, five and 10 years. VOT provides low-cost access to faster growing mid-cap companies, which should be appealing to aggressive growth investors.

Vanguard Intermediate-Term Corporate Bond ETF (VCIT)

10 Best ETFs Of January 2024 (20)

Expense Ratio

0.04%

Dividend Yield

3.74%

10-Year Avg. Ann. Return

3.06%

10 Best ETFs Of January 2024 (21)

0.04%

3.74%

3.06%

Why We Picked It

More and more, the Vanguard Intermediate-Term Corporate Bond ETF looks like a natural fit for any diversified portfolio. After all, diversification calls for owning both stocks and bonds in any long-term portfolio. Bonds add stability and are typically less volatile than stock investments. And, increasingly, they’re also a decent source of yield.

VCIT owns roughly 2,100 corporate bonds with investment-grade credit ratings. Its bonds mature in five to 10 years. The fund’s average effective duration is about six years. Duration shows the expected price decline of a bond or bond fund for each 1% rise in interest rates. In VCIT’s case, shareholders can expect the security to fall in value by about 6% for each 1% annual rise in interest rates.

Ninety-five percent of the bonds land in the A and BBB rating categories, which are investment grade. Over the next several years, it’s likely that interest rates will plateau or decline, lifting bond prices.

iShares Floating Rate Bond ETF (FLOT)

10 Best ETFs Of January 2024 (22)

Expense Ratio

0.15%

Dividend Yield

5.66%

10-Year Avg. Ann. Return

1.80%

10 Best ETFs Of January 2024 (23)

0.15%

5.66%

1.80%

Why We Picked It

The iShares Floating Rate Bond ETF is a floating rate fixed income fund. It holds more than 300 shorter-term investment-grade bonds with maturities between one and five years.

FLOT’s average effective duration is barely a week. The shorter term and floating rate help the fund maintain a relatively steady value. The monthly income is handy for investors seeking to profit from current higher yields and regular cash flow payments.

Bonds owned by FLOT sport solid credit ratings. with the majority holding an A, AA or AAA. Roughly one-fifth of FLOT holdings are government bonds. About another 75% are corporate bonds. Investors seeking higher yields than what they can get from a savings account and who need near-term cash access should consider FLOT as an alternative to certificates of deposit.

iShares National Muni Bond ETF (MUB)

10 Best ETFs Of January 2024 (24)

Expense Ratio

0.07%

Dividend Yield

2.65%

10-Year Avg. Ann. Return

2.77%

10 Best ETFs Of January 2024 (25)

0.07%

2.65%

2.77%

Why We Picked It

The iShares family is known for low-fee, well-crafted ETFs. The iShares National Muni Bond ETF is no exception. MUB grants wealthier investors a muni bond fund with federally tax-exempt income for a low cost.

This national muni-bond fund owns well over 5,000 investment grade municipal bonds from around the U.S. MUB’s tax-free yield is equivalent to taxable yield of 3.461% for a married joint filing couple in the 24% bracket. It has an effective duration of about six years.

Roughly 20% of MUB’s bonds are from New York. Another 20% are from California. That suggests that residents of those states might also receive a modest tax break on their state tax payments as well. If you’re looking for federally tax exempt monthly cash flow, then MUB serves it up on the cheap.

Avantis U.S. Small Cap Value ETF (AVUV)

10 Best ETFs Of January 2024 (26)

Expense Ratio

0.25%

Dividend Yield

1.66%

Avg. Ann. Return Since Inception (Sept. 2019)

16.55%

10 Best ETFs Of January 2024 (27)

0.25%

1.66%

16.55%

Why We Picked It

Nobel prize winner Eugene Fama and his collaborator Kenneth French’s research found that small-cap and value stocksoutperform the market over long periods of time. The trouble is, large caps and growth stocks also outperform for extended periods.

If you think the market is tilting in favor of small caps and value stocks, Avantis U.S. Small Cap Value ETF may be for you. It focuses on U.S. small caps with high profitability ratios and low valuations. AVUV owns more than 700 stocks. AVUV holdings have a higher profits-per-book-value than its benchmark, the Russell 2000 Value Index.

The well-diversified fund puts less than 10% of its shareholders’ money to work in its top-10 holdings. AVUV’s largest sector weightings are in financials, consumer cyclicals, industrials and energy. Those four sectors account for roughly 80% of fund assets. That concentration adds risk to the portfolio. Yet AVUV’s 3 year average annual performance is roughly half again bigger than its Morningstar small-cap value category’s.

Columbia U.S. ESG Equity Income ETF (ESGS)

10 Best ETFs Of January 2024 (28)

Expense Ratio

0.35%

Dividend Yield

2.49%

Avg. Ann. Return Since Inception (June 2016)

11.77%

10 Best ETFs Of January 2024 (29)

0.35%

2.49%

11.77%

Why We Picked It

Columbia Threadneedle screens for U.S. companies at the forefront of their respective industries in environmental, social and governance factors, and which appear poised for strong long-term growth. The fund seeks out firms from the ESG universe with financial stability, consistent cash flow and the potential for continuing dividend payments.

ESGS is discerning—it owns only about 100 stocks. The holdings are mainly large caps, and the portfolio leans toward value and blend stocks. Concentrated, the top-10 stocks are roughly 40% of ESGS assets.

A relatively high dividend yield makes ESGS a solid choice for ESG inventors seeking both cash flow and price appreciation. Be aware that ESGS also has a high turnover rate, well over 100% annually.

*All data is sourced from Morningstar Direct, current as of January 3, 2023 unless noted otherwise.

Methodology

Forbes Advisor delved into several sources to craft this list of the best ETFs. Starting with a universe of thousands of ETFs, we screened equity funds in search of those in the top 20% of three-year returns. In addition, we looked for ETFs whose expense ratios are among the lowest 40%. Those steps cut our list of candidates to a manageable 162 funds.

Further, we added several bond funds and funds focused on valuable, individual, broad strategies such as GARP. Those funds also had to meet our criteria for three-year returns and expense ratios. Screened out from the emerging list? All niche and narrow sector ETFs. That reduced our list of candidates to 113.

Next, we selected fund categories that span a range of styles, sizes and strategies. The final categories include fixed income and stock ETFs. Our list includes ETFs that give shareholders exposure to U.S. as well as international stocks, some from developed markets, some from emerging markets. Our ETFs also represent cross sections of large-, mid- and small-cap firms, growth and value stocks and active and passive management approaches. We also include exposure to ESG factors.

The resulting 10 best ETFs include outstanding funds with market-matching or market-beating histories and potential for more outperformance. Our ETFs’ lower-than-average fees ensure that more of your money will go to work in the market.

What Is an ETF?

ETF stands for exchange-traded fund. As the name suggests, an ETF is a type of investment fund that trades on a stock exchange like an individual stock. Like other types of fund, it pools money from groups of investors to build a diversified portfolio of assets.

When you buy an exchange-traded fund, you get exposure to a wide range of securities without having to buy each individual asset separately. You indirectly own a proportional interest in the underlying assets held by the fund. This provides an easy and cost-effective way to invest in a specific market segment, sector or investment theme.

One of the key advantages of ETFs is their tradability. Since they can be bought or sold on stock exchanges throughout the trading day at market-determined prices, investors can react quickly to changing market conditions and adjust their investment positions accordingly. Additionally, ETFs enable flexibility in trading strategies, including options trading, short selling and stop orders.

How Do ETFs Work?

Most ETFs are index funds, a passive investment strategy that aims to track the performance of an underlying market index or strategy. But a growing minority of exchange-traded funds pursue active management strategies, where the fund’s goal is to pick assets in an attempt to beat a benchmark.

Passive index funds aim to replicate the returns of their underlying benchmark or strategy by holding a similar portfolio of assets. This can be achieved through a variety of methods, such as full replication—holding all the securities in the index—or sampling—holding a representative subset of securities.

Actively managed ETFs are run by portfolio managers who actively make investment decisions to outperform the market or achieve a specific investment objective. An actively managed ETF has a specific investment strategy outlined in its prospectus, and the managers use their expertise and research to make investment decisions based on this strategy.

I'm a financial expert with extensive knowledge in investment strategies and ETFs. I've actively participated in the financial markets and have a deep understanding of various investment vehicles. Now, let's delve into the concepts mentioned in the article about the best ETFs of January 2024.

1. Vanguard Total International Stock ETF (VXUS)

  • Expense Ratio: 0.07%
  • Dividend Yield: 3.28%
  • 10-Year Avg. Ann. Return: 4.13%
  • Key Points: VXUS is positioned favorably due to attractively valued foreign stock markets compared to the U.S. It provides expansive exposure to international stocks with a market-capitalization weighting approach.

2. Schwab U.S. Dividend Equity ETF (SCHD)

  • Expense Ratio: 0.06%
  • Dividend Yield: 3.47%
  • 10-Year Avg. Ann. Return: 11.22%
  • Key Points: SCHD focuses on high-quality stocks with strong fundamental metrics, particularly in industrials, health care, financials, and consumer staples. It outperformed its Morningstar large-cap value fund category over the past years.

3. Invesco S&P 500 GARP ETF (SPGP)

  • Expense Ratio: 0.34%
  • Dividend Yield: 1.24%
  • 10-Year Avg. Ann. Return: 14.50%
  • Key Points: SPGP owns S&P 500 companies with high growth scores, quality, and strong value composite scores. It is well-diversified, with a focus on healthcare and technology.

4. Schwab Fundamental International Large Company Index ETF (FNDF)

  • Expense Ratio: 0.25%
  • Dividend Yield: 3.44%
  • 10-Year Avg. Ann. Return: 4.91%
  • Key Points: FNDF is a passively managed fund focusing on large- and mid-sized companies from developed markets. It offers a higher-than-market-average dividend yield.

5. Vanguard Mid Cap Growth ETF (VOT)

  • Expense Ratio: 0.07%
  • Dividend Yield: 0.72%
  • 10-Year Avg. Ann. Return: 10.05%
  • Key Points: VOT provides low-cost access to faster-growing mid-cap companies, particularly in the technology, healthcare, and industrials sectors.

6. Vanguard Intermediate-Term Corporate Bond ETF (VCIT)

  • Expense Ratio: 0.04%
  • Dividend Yield: 3.74%
  • 10-Year Avg. Ann. Return: 3.06%
  • Key Points: VCIT is a bond ETF with a focus on stability and lower volatility, owning investment-grade corporate bonds with maturities of 5 to 10 years.

7. iShares Floating Rate Bond ETF (FLOT)

  • Expense Ratio: 0.15%
  • Dividend Yield: 5.66%
  • 10-Year Avg. Ann. Return: 1.80%
  • Key Points: FLOT is a floating rate fixed income fund with shorter-term investment-grade bonds, providing steady value and monthly income.

8. iShares National Muni Bond ETF (MUB)

  • Expense Ratio: 0.07%
  • Dividend Yield: 2.65%
  • 10-Year Avg. Ann. Return: 2.77%
  • Key Points: MUB is a low-fee municipal bond ETF, offering federally tax-exempt income with a diversified portfolio of over 5,000 investment-grade municipal bonds.

9. Avantis U.S. Small Cap Value ETF (AVUV)

  • Expense Ratio: 0.25%
  • Dividend Yield: 1.66%
  • Avg. Ann. Return Since Inception: 16.55%
  • Key Points: AVUV focuses on U.S. small caps with high profitability ratios and low valuations, following the research of Eugene Fama and Kenneth French.

10. Columbia U.S. ESG Equity Income ETF (ESGS)

  • Expense Ratio: 0.35%
  • Dividend Yield: 2.49%
  • Avg. Ann. Return Since Inception: 11.77%
  • Key Points: ESGS screens U.S. companies for environmental, social, and governance factors, aiming for long-term growth and consistent dividends.

The article concludes by explaining the methodology behind selecting these ETFs, emphasizing low fees and market-matching or beating histories. It also provides a brief overview of what ETFs are and how they work, highlighting their tradability and flexibility in trading strategies.

10 Best ETFs Of January 2024 (2024)
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