FIND THE BEST ETFS FOR YOUR GOALS

You can build a solid core for your portfolio and explore new opportunities with our favorite exchange-traded funds.

- NELLIE S. HUANG

The pandemic is still top of mind. But the bear-market sell-off that it sparked is now a distant memory, thanks to one of the fastest rebounds in history. Yet volatility remains. Market sentiment shifts with the trendline in new COVID-19 cases and any news, good or bad, of a vaccine. It’s a crucial election year, too, which can move markets in unexpected ways. Even so, investors now realize a true market resurgence hinges on an economic recovery and a revival of corporate profits.

Despite a market buffeted by big moves and clouded by uncertainty, the past year has been huge for exchange-traded funds, those increasingly popular low-cost securities that hold baskets of assets and trade like stocks. Assets in ETFs topped $4 trillion last year, ahead of the $3.8 trillion in index mutual funds. In October, most brokerage firms eliminated commissions to trade shares in ETFs (and stocks), too, which fueled asset flows. The final stamp of approval came from the federal government itself.

The Federal Reserve invested billions of dollars in 16 investment-grade and high-yield corporate bond ETFs between May and June as part of a program to prop up the bond market. “It’s an interesting moment for ETFs,” says Rich Powers, head of Vanguard’s ETF product management. The Fed chose ETFs as a way to support the bond market for the same reasons individual investors favor these securities. “They’re efficient, low-cost and cover the breadth of the market they invest in,” says Powers.