Best U.S. Exchange Traded Funds (ETFs) in 2020
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Best U.S. Exchange Traded Funds (ETFs) in 2020

Joel Koh
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ETFs hold a special place in my heart.

The first thing I invested in as a poor graduate with not much capital was the Straits Times Index (STI) exchange-traded fund (ETF).

What drew me to ETFs was it allowed me to create a diversified portfolio with a small amount of investment capital.

I also liked the daily liquidity of ETFs as like the name suggests, you can trade ETFs on the stock exchange like ordinary stock

The low fees of ETFs appealed to me as well as they generally have lower fees compared to mutual funds.

ETFs are also very versatile as you can invest in market indices like the S&P500 and into sectors like technology, health, consumer staples and investment trends.

As much as the STI ETF has its merits, I was looking to diversify globally and the U.S. ETFs caught my eye.

If you would like to add some exposure to American companies and add a relatively safer investment to your portfolio— we got you!

Here are seven of the best U.S. ETFs for your consideration.

TL;DR: Seven of The Best U.S. Exchange Traded Funds (ETF) in 2020

Exchange Traded FundCompanies/SectorAnnualised Returns
(5 Years)
Expense Ratio (net)
Vanguard S&P 500 (VOO)Top 500 companies in U.S.9.08%0.07%
SPDR Dow Jones Industrial Average (DIA)Top 30 companies in the U.S.8.92%0.16%
iShares Russell 2000 ETF (IWM)Top 2000 small-cap U.S. companies2.89%0.19%
Technology Select Sector SPDR Fund (XLK)Technology18.40%0.13%
SPDR S&P Health Care Equipment ETF (XHE)Healthcare14.75%0.13%
Consumer Staples Select Sector SPDR Fund (XLP)Consumer Staples6.62%0.13%
SPDR Gold Trust (GLD)Gold6.95%0.40%

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 

What Are Exchange-Traded Funds?

Before you start buying up U.S. ETFs, here are some important things to consider.

Stonks Meme
Source: Giphy

When you are investing in ETFs you are not actually buying a company’s stock or bonds directly. Rather you are investing money into a fund that buys a basket of stocks and bonds for you.

Naturally, holding multiple stocks or assets in one fund reduces volatility in comparison to just buying a few individual stocks.

Do note that when investing in ETFs, be sure that you would buy the underlying assets that the fund invests in.

As diversified as ETFs are, they are still an investment. And as with all investments, ETFs come with risk.

Risks of Buying ETFs

Even though you are buying an ETF with several underlying positions, the risk still applies. Some investments might give higher returns but are a lot riskier and ETFs are no exception.

ETFs that track market indices like the Dow Jones Industrial Average are generally less risky. Whereas ETFs that track commodities, options and small narrower sectors are more risky and volatile.

In other words, less risk ≠ no risk.

U.S. Exchange Traded Fund Fees

Expense Ratio

Expense ratio (or management expense ratio) is the expense incurred to pay the managers for managing the fund.

earn money on the side

Choosing an actively managed fund will naturally cost more per year and eat into your returns. So as an investor, you want to find an ETF with a low expense ratio.

According to Morningstar Investment Investment Research, investors pay an average of 0.52% expenses for U.S. ETFs.

In other words, the fund will cost you $5.20 in annual fees for every $1,000 you invest.

Foreign Currency Risk

Since these ETFs are denominated in a currency outside Singapore dollars (SGD), investors need to be aware of the risk of currency fluctuations, during transactions and translations.

On top of this, brokerages also charge conversion fees. When you too up SGD to your brokerage account and buy U.S. stocks denominated in USD, your broker will charge a currency conversion fee which will eat into your returns.

When You have any currency conversion always consider multi-currency accounts like YouTrip, Revolut, InstaReM or TransferWise as they generally charge lower fees.

Check out our multi-currency account comparison if you would like to save more!

Withholding Tax For Dividends

Singaporeans investing in the American market are taxed 30% on our dividends as the U.S does not have a tax treaty with Singapore.

For example, if the company declares a dividend that amounts to $100 to you, you will essentially only receive $70. However, we are exempt from capital gains (when the share price of our shares increase).

One way to go around this is to invest in Ireland-Domiciled ETFs. These Irish-Domiciled ETFs benefit from the U.S./Ireland tax treaty rate of 15% on dividends.

And while this is not perfect, it certainly is more pocket-friendly than 30%.

However, not all U.S. ETFs are domiciled in Ireland.

1) The All-Rounder — Vanguard S&P 500 (VOO)

We will start things off with a classic.

Investing in the Vanguard S&P 500 ETF (VOO) gives you exposure to 500 of the biggest companies in the U.S. by market capitalisation.

FYI: Market capitalisation (or market cap for short) simply refers to a company’s share price multiplied by its total number of outstanding shares. 

Vanguard Logo

The top 10 companies (26.01% of total assets) represented in this fund include:

NameSymbolPercentage of Assets
Microsoft CorpMSFT5.67%
Apple IncAAPL5.09%
Amazon.com IncAMZN4.27%
Facebook Inc AFB2.04%
Alphabet Inc AGOOGL1.67%
Alphabet Inc Class CGOOG1.67%
Johnson & JohnsonJNJ1.64%
Berkshire Hathaway Inc Class BBRK.B1.48%
Visa Inc Class AV1.26%
Procter & Gamble CoPG1.22%

This grants you instant diversification into all these U.S. companies.

In a way investing in the S&P 500 is like a proxy for investing in the U.S. economy.

If you are investing for the long term, this index fund is would be a good fit.

Over the last 5 years, the VOO ETF has produced annualised total returns of 9.08% (as of 21 May 2020).

This fund (Ireland Domiciled) also charges an expense ratio (net) of just 0.07%.

For more information on how to buy this, check out our guide to investing in Ireland-Domiciled S&P 500 ETFs.

2) Top 30 Over 30 — The SPDR Dow Jones Industrial Average ETF (DIA)

Next up we have the SPDR Dow Jones Industrial Average ETF (DIA).

The fund tracks the Dow Jones Industrial Average, a stock market index tracking 30 large companies listed on the US’ New York Stock Exchange (NYSE) and the Nasdaq.

Compared to the S&P500 which is broader and more heavily weighted to banks and technology companies, the DIA is narrower and more heavily weighted to industrial companies.

Michael Che Saturday Night Live
Source: SNL | Giphy

In the DIA, components with higher share prices are given greater weight. Therefore, a higher percentage move in a higher-priced stock will have a larger impact on the index.

That means the DIA is price-weighted, as opposed to the S&P 500, which is market capitalisation-weighted.

The top 10 companies (55.67% of total assets) represented in this fund include:

NameSymbolPercentage of Assets
Apple IncAAPL8.27%
UnitedHealth Group IncUNH8.23%
The Home Depot IncHD6.19%
McDonald's CorpMCD5.28%
Goldman Sachs Group IncGS5.16%
Microsoft CorpMSFT5.04%
Visa Inc Class AV5.03%
3M CoMMM4.28%
Johnson & JohnsonJNJ4.22%
Boeing CoBA3.97%

Some of the stocks that belong to the DIA are brand name companies such as 3M, American Express, Apple, Coca-Cola, Disney, Johnson & Johnson, Nike, and Visa.

Over the last 5 years, the DIA ETF has produced annualised returns of 8.92% (as of 21 May 2020).

This fund also charges an expense ratio (net) of just 0.16%.

3) Small-Cap Companies — iShares Russell 2000 ETF (IWM)

If the big companies aren’t your thing, you can check out the iShares Russell 2000 ETF (IWM) which tracks the 2000 smallest companies in the Russell 3000 index. This is calculated based on market capitalisation.

iShares Blackrock Logo

FYI: Small-cap companies have a market capitalisation between $300 million to $2 billion.

This is a great way to invest gain exposure to the smaller companies in the U.S. stock market as a whole.

These smaller companies have lots of room for growth but are generally riskier and more volatile.

The top 10 companies (3.9% of total assets) represented in this fund include:

NameSymbolPercentage of Assets
Teladoc Health IncTDOC0.72%
Lumentum Holdings IncLITE0.37%
Repligen CorpRGEN0.37%
Generac Holdings IncGNRC0.36%
Amedisys IncAMED0.35%
Haemonetics CorpHAE0.35%
Immunomedics IncIMMU0.35%
NovoCure LtdNVCR0.35%
Five9 IncFIVN0.34%
Trex Co IncTREX0.34%

Over the last 5 years, the IWM ETF has produced annualised returns of 2.89% (as of 21 May 2020).

This fund also charges an expense ratio (net) of just 0.19%.

4) Tech Focused — The Technology Select Sector SPDR Fund (XLK)

Now to sector ETFs.

If you are interested in the technology sector and U.S. technology companies; the Technology Select Sector SPDR Fund (XLK) ETF will be a good fit.

SPDR Logo

The XLK ETF tracks the price and would provide exposure to the technology and telecom sector in the U.S.

This includes technology companies that deal in hardware, storage, and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment, instruments and components.

The top 10 companies (67.95% of total assets) represented in this fund include:

NameSymbolPercentage of Assets
Microsoft CorpMSFT22.00%
Apple IncAAPL19.75%
Visa Inc Class AV4.92%
Intel CorpINTC4.20%
Mastercard Inc AMA3.93%
Cisco Systems IncCSCO2.89%
NVIDIA CorpNVDA2.88%
Adobe IncADBE2.75%
PayPal Holdings IncPYPL2.32%
Salesforce.com IncCRM2.31%

Do note that this ETF is more narrow, but it allows investors to take a more targeted position.

Over the last 5 years, the XLK ETF has produced annualised returns of 18.40% (as of 21 May 2020).

This fund also charges an expense ratio (net) of just 0.13%.

5) A ‘Healthy’ Investment — SPDR S&P Health Care Equipment ETF (XHE)

The SPDR S&P Health Care Equipment ETF (XHE) tracks the healthcare equipment and supplies sector in the U.S.

SPDR Logo

The majority of the companies here are in the healthcare sector, with a small minority of companies in the Industrials and Technology sector.

The top 10 companies (24.04% of total assets) represented in this fund include:

NameSymbolPercentage of Assets
Quidel CorpQDEL3.34%
iRhythm Technologies IncIRTC2.81%
DexCom IncDXCM2.80%
Masimo CorpMASI2.33%
Merit Medical Systems IncMMSI2.33%
Tandem Diabetes Care IncTNDM2.24%
West Pharmaceutical Services IncWST2.20%
ICU Medical IncICUI2.10%
CryoPort IncCYRX1.95%
Insulet CorpPODD1.94%

Although this ETF is more narrow, it let investors take a more strategic position on the healthcare sector in the U.S.

Over the last 5 years, the XHE ETF has produced annualised returns of 14.75% (as of 21 May 2020).

This fund also charges an expenses ratio of just 0.13%.

6) Stuff You Cannot do Without — The Consumer Staples Select Sector SPDR Fund (XLP)

The ticker symbol for this is very close to the acronym for Xiao Long Bao (XLB), which helped me remember it better.

Xiao Long Bao
Source: Giphy | XLP not XLB

This is somewhat related to the Consumer Staples Select Sector SPDR Fund (XLP) ETF as the index includes stocks from the following sectors:

  • Food and staples retailing
  • Household products
  • Food products
  • Beverages
  • Tobacco
  • Personal products

In order to track the index, this fund implements a replication strategy where invests at least 95%, of its total assets in the securities comprising the index.

This fund can be considered as a defensive asset as it typically gives out regular dividends and steady earnings regardless of the health of the overall stock market.

The top 10 companies (71.27% of total assets) represented in this fund include:

NameSymbolPercentage of Assets
Procter & Gamble CoPG16.43%
PepsiCo IncPEP10.31%
Coca-Cola CoKO9.89%
Walmart IncWMT9.64%
Mondelez International Inc Class AMDLZ4.69%
Altria Group IncMO4.64%
Philip Morris International IncPM4.45%
Costco Wholesale CorpCOST4.39%
Colgate-Palmolive CoCL3.82%
Kimberly-Clark CorpKMB3.01%

Although this ETF is more narrow, it let investors take a more focused position on the consumer staples sector in the U.S.

Over the last 5 years, the XLP ETF has produced annualised returns of 6.62% (as of 21 May 2020).

This fund also charges an expense ratio (net) of just 0.13%.

7) All That Glitters is GLD — SPDR Gold Trust (GLD)

SPDR Gold Trust (GLD) is one of the largest gold ETFs in the world.

person saying i love gold
Source: Giphy

If you would like to invest in gold and have no place to store the bars of the precious metal in your home; this Gold ETF is for you.

This ETF actually acts as a proxy for the price of gold bullion and is considered a safe haven investment as in theory,  the investment will protect your capital when the stock market crashes.

Typically, the price of gold will have an inverse relationship with the popular index funds mentioned above. Although this ETF is very narrow, it is commonly used as a hedge against the stock market when it drops.

Over the last 5 years, the GLD ETF has produced annualised returns of 6.95% (as of 21 May 2020).

This fund also charges an expense ratio (net) of 0.40%.

Bonus — Covid-19 Testing & Treatments Index (.COVID19:Exchange)

The last index is not something you can invest in or buy at the moment.

However, I find that it is interesting to track during the COVID-19 pandemic as it provides insight into the U.S. stock market.

The index is an equal-weighted index of 29 companies that are testing and treating COVID-19 and consists of pharmaceutical and biotechnology companies like Cambridge, Foster City and Gilead Sciences.

Interestingly, there seems to be a strong relationship between the S&P500 and COVID-19 index, which lends support to some Wall Street Investors’ thesis that a vaccine will cause the financial markets to recover to previous highs.

COVID-19 Index
Source: CNBC

Investing in U.S. ETFs

At the end of the day, when investing in U.S. ETFs, do remember that even though the ETF is already diversified, there will still be risk.

Also, be sure that you would buy the underlying assets that the fund invests in and remember that the performance quoted above represents past performance, which is no guarantee of future results. 

Have Burning Questions Surrounding The Stock Market?

Why not check out our friendly SeedlyCommunity and jump in the discussion about stocks!

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 

REITs Tool

About Joel Koh
History student turned writer at Seedly. Before you ask, not a teacher. My time as a history student has equipped me with the skills to evaluate the impact societal development has on financial and nonfinancial events, as well as financial transactions and models.
You can contribute your thoughts like Joel Koh here.

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