If there's one thing the ETF industry is good for, it's that it allows investors of all sophistication levels and affluence the ability to build a broadly diversified portfolio with very little cost. Long gone are the days of high commissions, broker fees and minimum initial investments. Investors today can buy as little as a single share of more than 2,000 different funds covering almost every corner of the market.
Better yet, many of these funds are cheap. Like really cheap. There are dozens of funds available that charge 0.10% or less annually to own. The 50 ETFs that I'll list here momentarily all come with expense ratios of 0.05%. BNY Mellon and SoFi both offer a pair of funds each that come with a 0.00% expense ratio. That's right, they're free to own.
Virtually all of the ETFs listed here will have two things in common.
First, they're offered by one of the big ETF issuers. Vanguard alone places 19 funds on this. Schwab has 10. BlackRock and State Street combine for another 12. They say the largest issuers control the marketplace and that's no more evident than looking at this list.
Second, they're almost all plain vanilla funds. That means they cover broad segments on the market, such as small-caps, Treasuries, S&P 500 or value stocks, and come with no frills. These are essentially all meant to be cornerstone holdings in a portfolio.
Zero Fee ETFs
I wanted to touch real quickly on the four 0.00% expense ratio ETFs on this list: BNY Mellon U.S. Large Cap Core Equity ETF (BKLC), BNY Mellon Core Bond ETF (BKAG), SoFi Select 500 ETF (SFY) and SoFi Next 500 ETF (SFYX).
Whenever you see something like a 0% expense ratio, you should be instantly skeptical. Some of these products can be a gimmicky and come with small print that you should be aware. Some of them are still too small to survive despite their cost advantages.
Take, for instance, the Salt Low TruBeta U.S. Market ETF (LSLT) and the Salt High TruBeta U.S. Market ETF (SLT). Both came to market with a difficult-to-beat expense ratio of -0.05%. In essence, Salt was going to pay people to invest in the fund. The "catch" was that it would only offer the rebate on the first $100 million of assets. After that, it would charge 0.29%. The cheapest ETF in the industry would suddenly be nowhere near the cheapest if its growth goals were met.
The problem was they weren't. The funds only attracted about 1/10 of that $100 million figure and eventually got bought out by Pacer, who immediately raised the fee to 0.60%.
To be clear, I don't criticize Salt for trying this since cheaper was the direction the industry was headed. But at least part of the reason for the failure, I feel, is that investors recognized that the -0.05% expense ratio was a bit of a gimmick and it's always better to do a little homework on these funds that seem too good to be true.
For BKLC and BKAG, these seem to be true 0% expense ratio funds. The prospectus shows 0% with no fee waiver, so these look like they'll free indefinitely.
SFY and SFYX are a little different. They have listed expense ratios of 0.19% with a 0.19% fee waiver to make them free. That fee waiver needs to be reviewed periodically, but it means that the "free" label can go away at any time.
Will they? Fund issuers probably wouldn't consider this until they achieve a fairly large scale. The 0% expense ratio is the selling point and they don't want to risk it unless the asset base has built up enough to approach escape velocity.
SFYX still has a modest $20 million in assets, but SFY is up to $150 million. That's a good size, but probably not big enough for SoFi to consider rolling back the waiver.
The point here is to never take a number at face value. The 0% expense ratio ETFs will probably remain so for a while at least, but there is some fine print.
50 Cheapest ETFs
With that being said, here's the list of the 50 ETFs with the lowest expense ratios available to investors today to begin building out their portfolios.