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3 ETFs With Low Fees and Market-Beating Returns

ETF is a best option to invest. Where to Invest concept, Investmets newspaper with loupe and marker. 3d illustration — Photo

Key Points

  • ETFs with low expense ratios minimize the cost to investors, allowing them to retain a larger share of returns.
  • While many low-expense-ratio funds are broad, it is also possible to find specialized strategies and even actively managed funds with comparably low fees.
  • SPMO, FGLD, and SEIM are three ETFs with both low expense ratios and a history of strong performance.
  • 5 stocks we like better than SEI Enhanced U.S. Large Cap Momentum Factor ETF.

The appeal of exchange-traded funds (ETFs) is clear: increase the diversification of your portfolio by targeting a large basket of equities with a single ticker to trade, and leave oversight of that basket to professional fund managers. It's no wonder that ETFs have ballooned in popularity, now comprising more than 10,000 funds managing over $11 trillion in assets.

A trade-off to ETFs for retail investors is that fund managers charge a fee to oversee and administer these products. While an expense ratio may not seem like a significant amount of money—a ratio of 0.50% means you'll pay $50 on every $10,000 invested in an ETF each year—these fees have the potential to add up. That's why, among the many other considerations to keep in mind when selecting an ETF to invest in, the expense ratio is a key factor for investors to consider.

Fortunately for investors, fund providers are often competing against other managers for investor assets, and one way they differentiate their products is by lowering expense ratios to make a more attractive value prospect for potential customers. There are many funds with a relatively low expense ratio which nonetheless provide outsized returns by beating the broader market.

SPMO: Momentum Factor Investing at a Low Cost

Invesco S&P 500 Momentum ETF Today

SPMOSPMO 90-day performance
Invesco S&P 500 Momentum ETF
$96.89 +0.85 (+0.89%)
(As of 11/8/2024 ET)
52-Week Range
$59.12
$97.22
Dividend Yield
0.98%
Assets Under Management
$3.16 billion

The Invesco S&P 500 Momentum ETF NYSEARCA: SPMO is focused on S&P 500 stocks that have a recent history of outperformance. By looking at firms that have a strong 1-year history of growth, SPMO aims to give investors a chance to capitalize on continued momentum in fast-growing stocks while mitigating risk through a portfolio of 100 different names. The key to SPMO's methodology is that it excludes performance in the most recent months and adjusts for volatility. This helps to protect against outlier companies that may have experienced a short-lived spike.

As one of a growing number of factor funds, SPMO differentiates itself with a low expense ratio of just 0.13%. Given its 1-year return of nearly 69%, this is a competitive fee and a good value. However, there are other momentum funds that provide broader diversification for investors considering a long-term approach.

FGLD: Access to Responsibly Sourced Gold

Franklin Responsibly Sourced Gold ETF Today

FGLDFGLD 90-day performance
Franklin Responsibly Sourced Gold ETF
$26.18 -0.34 (-1.28%)
(As of 05/18/2023)
52-Week Range
$21.48
$27.53
Dividend Yield
0.00%
Assets Under Management
$104.86 million

The Franklin Responsibly Sourced Gold ETF NYSEARCA: FGLD provides investors with indirect access to gold bullion. Gold prices have continued to soar to new record highs throughout 2024, making funds that offer exposure to the gold industry highly desirable. In the last year, FGLD is up 40%, on par with the S&P 500, and it has an expense ratio of just 0.10%.

There are a host of ETFs that offer gold exposure, including to stocks focused on gold mining as well as to bullion itself. FGLD distinguishes itself by only holding responsibly sourced gold, defined as London Good Delivery gold bullion bars that were refined after 2011 and according to ethical and environmental standards to protect against human rights abuse, money laundering, and other negative actions.

SEIM: Another Targeted Momentum Play

SEI Enhanced U.S. Large Cap Momentum Factor ETF Today

SEI Enhanced U.S. Large Cap Momentum Factor ETF stock logo
SEIMSEIM 90-day performance
SEI Enhanced U.S. Large Cap Momentum Factor ETF
$39.51 +0.87 (+2.25%)
(As of 11/8/2024 ET)
Dividend Yield
0.60%
Assets Under Management
$541.97 million

Like SPMO above, the SEI Enhanced U.S. Large Cap Momentum Factor ETF BATS: SEIM is a momentum factor fund that centers around large-cap stocks. It is an actively managed fund seeking to target companies that have a history of strong performance and, secondarily, attractive value and volatility metrics, among other characteristics.

SEIM has an even narrower list of stocks than SPMO, with only 63 holdings as of late October 2024. However, it's rare for investors to get access to an actively managed fund for an expense ratio of just 0.15%, and the fund's 1-year performance of nearly 53% speaks for itself.

ETF Considerations

Low expense ratios and strong performances make these and similar ETFs attractive prospects for investors searching for a low-lift investment. It's important to note that the expense ratio is just one of many important considerations, though. If you plan to trade your ETF holdings more regularly, it pays to watch a fund's liquidity metrics including trading volume, for example. Lower liquidity may make trading more expensive, reducing or even canceling out the benefit of a low expense ratio. On the other hand, buy-and-hold strategies may be more interested in the diversification of a fund and how often it is rebalanced.

Should you invest $1,000 in SEI Enhanced U.S. Large Cap Momentum Factor ETF right now?

Before you consider SEI Enhanced U.S. Large Cap Momentum Factor ETF, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and SEI Enhanced U.S. Large Cap Momentum Factor ETF wasn't on the list.

While SEI Enhanced U.S. Large Cap Momentum Factor ETF currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Nathan Reiff
About The Author

Nathan Reiff

Contributing Author

Fundamental analysis, ETFs, Consumer Staples

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Invesco S&P 500 Momentum ETF (SPMO)N/A$96.89+0.9%0.98%20.66Moderate Buy$96.89
Franklin Responsibly Sourced Gold ETF (FGLD)N/A$26.18-1.3%N/AN/AN/AN/A
SEI Enhanced U.S. Large Cap Momentum Factor ETF (SEIM)N/A$39.51+2.3%N/A28.31Moderate Buy$39.51
Compare These Stocks  Add These Stocks to My Watchlist 


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