Which ETF to Buy – Major ETF Performance Over 10 Years
So which exchange-traded fund (ETF) should you buy? Or maybe just as importantly, which ETF shouldn’t you buy? Well, we’ve got you covered with both questions by taking a quick look at the 10-year performance of some of the most heavily-traded ETFs out there.
Of course, we have to tell you at this point that past performance is not indicative of future results – and that’s absolutely true. But practically speaking, we as investors naturally gravitate towards investments that have performed well in the past, and tend to shun those that have performed poorly. And it’s no different when it comes to investing in ETFs.
Let’s start by taking a look at the most popular, talked-about, heavily-traded, and invested-in ETFs available. Any list you can come up with would absolutely have to include the king of all ETFs – SPY. This giant tracks the almighty benchmark index, the S&P 500. Then, we would also need to add another immensely popular one, QQQ, which tracks the more tech- and growth-heavy Nasdaq 100. Rounding out the list are three other very commonly-traded ETFs: XLF (financial sector), EEM (emerging markets), and GDX (gold mining companies).
As usual, the chart above tells the whole story better than any words can. On the chart, the ETFs are ordered from top to bottom by performance over the 10-year period, and the y-axis is labeled with the current price and percentage return for each ETF.
How Did Each Perform?
Now, we don’t generally advocate a long-term buy-and-hold strategy. But here’s what would’ve happened if you put some hard-earned money in those ETFs 10 years ago in 2008 (during the financial crisis) and held till today (Thanksgiving Day in November 2018):
- You’d be ecstatic about your QQQ investment, which would’ve grown by more than 200%.
- You would be pleased with your SPY investment, as it grew by more than 80%.
- You’d be somewhat disappointed about your financial sector bet on XLF, which only returned a measly 5-6% in ten years.
- You would be upset and kicking yourself for investing in emerging markets through EEM, which lost you a very substantial 21% during the period.
- Finally, you’d be livid and screaming bloody murder for having bought gold mining companies via GDX in late 2008. Your investment would’ve lost you well over 50% after ten years.
So what can we learn (if anything) from this for present and future ETF investments? Well, QQQ and SPY have proven time and again that they are resilient and tend to strengthen over the long run. Buying these high performers on dips (like what we’ve seen in the past several weeks) could be – and has been – a solid long-term play.
And as for emerging markets and gold miners? There may indeed be good individual investment opportunities in those areas, and they could also serve as a way to diversify your investment portfolio. But given their poor performance in the past, it may just pay to stick to the tried-and-true basics with large-cap U.S. equities.
IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Past performance is not indicative of future results. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.
Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Senior Market Analyst at The Technicals
A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart