When browsing for an exchange traded fund, investors typically make a bee-line toward the largest ETF in a given market segment. However, with over 1,400 funds available, people should also look at alternative products that cover similar strategies.
If you take the time to look around, there are a number of funds outside the big ETFs that could provide better returns and diversification, writes Aaron Levitt for Investopedia.
For instance, many have invested in the SPDR Gold Shares (NYSEARCA:GLD), which has a 0.40% expense ratio, as a way to hedge against quantitative easing, debt issues and inflation expectations. Alternatively, the iShares Gold Trust (NYSEARCA:IAU) is a similar offering but comes with a 0.25% expense ratio.
Additionally, the ETFS Physical PM Basket (NYSEARCA:GLTR) and the ETFS Physical White Metals Basket Share (NYSEARCA:WITE) provide exposure to a basket of various precious metals. WITE holds the "white metals" silver, platinum and palladium; and GLTR holds a basket of silver, platinum, palladium and gold.
Investors who are interested in a broad large-cap index ETF do not have to stick with the S&P 500. For instance, the Vanguard Mega Cap ETF (NYSEARCA:MGC), which tracks the CRSP US Mega Index, has outperformed the S&P 500 by 1% annually over the past three years.
Max Chen contributed to this article.
Full disclosure: Tom Lydon's clients own GLD.
Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.