Credit: Shutterstock photoThe ETF industry has been roaring with explosive growth seen in recent years and is now a preferred investment vehicle for financial advisors over mutual funds and hedge funds. Thanks to unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and low cost, the ETF now has a bigger asset base than hedge funds, overcoming all odds in its investment tool.
In particular, investors seek to trade in ETFs that can easily be purchased and sold on the market, suggesting that the ETF should have enough liquidity. Volume, or the number of shares traded in a particular period, is definitely the most important consideration for determining the liquidity of a particular fund. Higher number of shares trading in a particular fund provides easy access to move in and out of that product, keeping bid/ask spreads tight.
Further, a greater volume ensures easy creation and redemption of shares in the fund basket, which is a regular and vital mechanism in the ETF. This is especially true as authorized participants (AP) have the ability to create new baskets of ETF shares for underlying securities or redeem them when required. This phenomenon allows ETFs to trade in line with their net asset value (NAV) (see: all the Category ETFs here ).
That being said, we have highlighted ETFs that have seen massive trading volumes this year and are the top 10 volume leaders of 2015 as per xtf.com .
SPDR S&P 500 ETF ( SPY )
SPY is leading the space in terms of volume with the highest trading volume of over $6,309 billion this year. It tracks the S&P 500 index and holds 506 stocks in its basket that are widely spread out across a number of sectors and securities. Each security holds less than 3.4% share while information technology, financials, health care, consumer discretionary, and industrials are the top five sectors accounting for double-digit exposure each. The product has $183.3 billion in AUM and charges 9 bps in fees per year. It has gained 2.1% this year and has a Zacks ETF Rank of 3 or 'Hold' rating with a Medium risk outlook.
iShares Russell 2000 ETF ( IWM )
The second largest volume leader is IWM, which exchanged a total of $962.2 billion in 2015. This is the largest and most popular ETF in the small cap space with AUM of $27.8 billion. The fund follows the Russell 2000 Index and charges 20 bps in annual fees and expenses. Holding 1,993 stocks, the product is well diversified across each security with none holding more than 0.38% of total assets. However, about one-fourth of the portfolio is allotted to financials while information technology, health care, consumer discretionary and industrials round off to the top four. The ETF is down more than 3% this year and has a Zacks ETF Rank of 2 or 'Buy' rating with a Medium risk outlook (read: 8 ETFs to Watch in December ).
PowerShares QQQ ( QQQ )
This product provides exposure to the 106 largest domestic and international companies excluding financial stocks by tracking the Nasdaq-100 Index. It is heavily concentrated on the top firm - Apple ( AAPL ) - at 11.3%, followed by 8.4% in Microsoft ( MSFT ). Other firms hold no more than 5.8% share. About 55% of the portfolio is dominated by information technology while consumer discretionary and health care round off to the top three. With AUM of $41.9 billion, the fund has traded in massive volumes of $875.1 billion and has gained 10.1% this year. It charges 0.20% in annual fees and has a Zacks ETF Rank of 2 with a Medium risk outlook.
iShares MSCI Emerging Markets ETF ( EEM )
This fund targets emerging markets and follows the MSCI Emerging Markets Index, charging 68 bps in annual fees from investors. It has accumulated assets worth $21.7 billion and has exchanged $527.3 billion in shares this year. Holding 849 securities, the product is widely spread out across various securities with none holding more than 3.48% of assets but is tilted toward the financial sector at 27.8%, followed by information technology (210%). Among the emerging countries, China takes the top spot at 26.4% while South Korea and Taiwan round off the next two spots with double-digit exposure each. The fund has lost about 14% this year and carries a Zacks ETF Rank of 3 with a Medium risk outlook (read: Emerging Market Crisis: 5 ETFs Down Over 30% in 2015 ).
Energy Select Sector SPDR ( XLE )
The ultra-popular energy ETF has been on the top 10 list of volume leaders as it has seen massive trading volumes of $339.8 billion in total this year. The fund follows the Energy Select Sector Index and holds 42 securities in its basket. It is heavily concentrated on the top two firms - Exxon Mobil ( XOM ) and Chevron ( CVX ) - with a combined share of 33%. Other firms hold no more than 7.6% of assets. The ETF has amassed $11.9 billion in its asset base and has 0.14% in expense ratio. It has plunged about 20% this year and has a Zacks ETF Rank of 4 or 'Sell' rating with a High risk outlook (read: 3 Energy ETFs Down at least 20% in the Past One Month ).
iPath S&P 500 VIX Short-Term Futures ETN ( VXX )
This is a popular ETN providing exposure to short-term equity market volatility by following the S&P 500 VIX Short-Term Futures Index Total Return with the help of the CBOE Volatility Index futures contracts. This product has amassed nearly $668.5 million in AUM and traded in total volumes of $323.4 billion. Expense ratio came in at 0.89%. The ETN is down 37.7% this year.
iShares MSCI EAFE Index ( EFA )
This fund provides exposure to the stocks in Europe, Australia, Asia and the Far East by tracking the MSCI EAFE Index. It holds 934 securities in its basket with none holding more than 1.9% of assets. Japan and United Kingdom make up for the top two countries with double-digit exposure each. From a sector look, financials takes the top spot with one-fourth share while consumer discretionary, industrials, consumer staples, and health care round off the top five. With AUM of $59.6 billion, EFA has seen total volumes of $318.2 billion this year and charges 33 bps per year from investors. The ETF has added 0.2% and has a Zacks ETF Rank of 3 with a Medium risk outlook.
iShares 20+ Year Treasury Bond ETF ( TLT )
This is one of the most popular and liquid ETFs in the long-dated bond space with AUM of nearly $6 billion. It tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index, holdings 31 securities in its basket. The fund has average maturity of 26.69 years and effective duration of 17.38 years. It charges 15 bps in annual fees and traded in total volumes of $279.5 billion. It has lost nearly 1% this year and holds a Zacks Rank of 2 with a High risk outlook (read: Rate Hike in the Cards: How Will Bond ETFs React? )
SPDR Dow Jones Industrial Average ETF ( DIA )
This fund has traded in total volumes of $267.1 billion this year, returning 1%. It follows the Dow Jones Industrial Average, providing exposure to 32 blue-chip U.S. stocks. The ETF is well spread out across a number of securities and sectors with none holding more than 7.1% of assets and industrials, information technology, financials, consumer discretionary and health care taking the top five spots with double-digit exposure each. The fund charges 17 bps in annual fees from investors and has a Zacks ETF Rank of 3 with a Medium risk outlook.
iShares China Large-Cap ETF ( FXI )
This fund provides exposure to a basket of 51 Chinese large cap stocks by tracking the FTSE China 50 Index. The product is extremely liquid, trading in total volumes of more than $238 billion this year and charges 73 bps in fees per year from investors. The ETF is largely concentrated on its top five holdings with nearly 37.3% of total assets. In terms of sector holdings, financials dominates the fund with 54.5% share while telecom, oil & gas, and technology provide a decent mix in the portfolio. The fund is down about 10% and holds a Zacks Rank of 3 with a High risk outlook (read: 4 Country ETFs to Gain from Oil Price Crash ).
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SPDR-SP 500 TR (SPY): ETF Research Reports
ISHARS-R 2000 (IWM): ETF Research Reports
ISHARS-EMG MKT (EEM): ETF Research Reports
NASDAQ-100 SHRS (QQQ): ETF Research Reports
IPATH-SP5 VX ST (VXX): ETF Research Reports
SPDR-EGY SELS (XLE): ETF Research Reports
ISHARS-EAFE (EFA): ETF Research Reports
ISHARS-20+YTB (TLT): ETF Research Reports
SPDR-DJ IND AVG (DIA): ETF Research Reports
ISHARS-CHINA LC (FXI): ETF Research Reports
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
