Best ETFs to invest in to grow your wealth

Exchange-traded funds (ETFs) are a versatile solution for creating a passive investment portfolio that grows over time with minimum effort, time, and knowledge.

In this article, we will explore the best ETFs to invest in that are worth considering for investment in the UK. We’ll begin by providing a comprehensive list of traded funds that can help you build a well-balanced portfolio. Additionally, we will highlight the standout performers in each category, ensuring you have a diverse range of options to choose from.

An ETF is an investment fund that holds a diversified portfolio of securities. However, there are five key factors that set it apart from mutual funds:

1. ETFs function similarly to stocks, which means high liquidity. They can be bought or sold at any time during market hours, providing an advantage that mutual funds lack.
2. Passively-managed ETFs have lower management fees than actively-managed mutual funds. However, as you can trade them just like stocks, most brokers charge commissions when making trades (unless it is a commission-free broker).
3. ETFs offer transparency as investors can readily access real-time information about the fund’s net asset value and the composition of its underlying portfolio.
4. Most ETFs in the UK (about 75%) are subject to capital gains tax, not income tax. To classify for this lower tax, they should have a “reporting” or “distributor” status.
5. As ETFs are more liquid than mutual funds, it is not only easier to trade them but there is also greater choice and flexibility.

By investing in a select few listed funds, you can construct a well-diversified investment portfolio at a minimal cost. ETFs offer numerous advantages, including their affordability, low fees, inherent diversification, and straightforward nature.

Which one is the best ETF to invest in?

The market offers a vast array of ETFs tracking various indices, and interestingly, many of these listed funds replicate the same index.

With such a plethora of options available, selecting the right ETFs can be overwhelming. To simplify the process, we have curated a list of the top ETFs that are ideal for inclusion in your investment portfolio.

Our selection criteria were as follows:

• Wide and Diversified Portfolio: Each ETF on our list boasts a broad and diversified portfolio, ensuring exposure to a range of assets.
• Long-Term Indexing: These ETFs serve as excellent core holdings for long-term, index-based portfolios.
• Strong Performance Over the Last Five Years: We carefully evaluated the performance of each ETF over the past five years to identify those that have consistently delivered favourable results.

ETF	Ticker/ISIN	Active	TER	Type
Xtrackers MSCI Emerging Markets ESG Screened UCITS ETF 1C	IE00BM67HJ62	RV Emerging	0.7	Acc
iShares MSCI World SRI UCITS ETF EUR (Acc)	IE00BYX2JD69	RV Developed	0.20	Acc
Amundi ETF S&P 500 UCITS ETF USD	LU1681049018	RV USA	0.15	Acc
WisdomTree Global Quality Dividend Growth UCITS ETF USD	IE00BZ56RN96	RV Developed	0.38	Acc/Dist
Invesco US Real Estate Sector UCITS ETF	IE00BYM8JD58	REITS USA	0.14	Acc
iShares US Property Yield UCITS ETF	IE00B1FZSF77	REITS USA	0.40	Dist
iShares USD Treasury Bond 0-1yr UCITS ETF	IE00BGSF1X88	RF Gov USA	0.07	Acc
iShares USD Floating Rate Bond UCITS ETF EUR Hedged	IE00BF11F458	RF USA	0.12	Dist
PIMCO US Short-Term High Yield Corporate Bond Index UCITS ETF EUR Hedged Dist	IE00BF8HV600	RF High Yield Developed	0.60	Dist

If you want to create your ETF portfolio right away, make sure you check the best ETF brokers.

Now, let’s have a closer look at some of them.

Xtrackers MSCI Emerging Markets ESG Screened UCITS ETF 1C

Xtrackers MSCI Emerging Markets ESG Screened UCITS ETF 1C replicates the MSCI Emerging Markets Select ESG. It contains large and medium capitalisation stocks.

Its five largest positions are, in this order:

• Taiwan Semiconductors
• Tencent Holdings
• Samsung
• Alibaba
• Reliance Industries

Here is the fund’s performance in the past five years:

Source: MorningStar

iShares MSCI World SRI UCITS ETF EUR (Acc)

iShares MSCI World SRI UCITS ETF EUR (Acc) seeks to replicate the MSCI WORLD ESG index which includes large and medium-sized companies from developed markets, focusing on ESG criteria.

It is a global ETF that invests in companies from all over the world. Specifically, its objective is to replicate the famous MSCI World Index (although it also takes into account ESG criteria), which brings together the 1,500 most important companies from the 23 main developed countries in the world.

Its five largest positions are, in this order:

• Microsoft
• Tesla
• NVDA
• Home Depot
• Coca Cola Company

Here is the fund’s performance in the past five years:

Source: MorningStar

Amundi ETF S&P 500 UCITS ETF USD

The ETF follows the S&P 500 index, which has the top 500 companies with the highest capitalisation in the US. It is one of the most popular indices in the world.

Its five largest positions are, in this order:

• Apple
• Microsoft
• Amazon
• Berkshire Hathaway
• Alphabet

Here is the fund’s performance in the past five years:

Source: MorningStar

WisdomTree Global Quality Dividend Growth UCITS ETF USD

This ETF replicates an index that follows developed market companies that have been growing their dividends and is weighted according to fundamentals.

Its five largest positions are, in this order:

• Microsoft
• Apple
• J&J
• Novartis
• Nestle

Here is the fund’s performance in the past five years:

Source: TradingView 

Invesco US Real Estate Sector UCITS ETF

This ETF invests in US REITs (real estate investment trusts) and each component has a maximum weight of 20%.

Its five largest positions are, in this order:

• PROLOGIS REIT
• AMERICAN TOWER REIT
• EQUINIX REIT
• CROWN CASTLE
• PUBLIC STORAGE REIT

Here is the fund’s performance in the past five years:

Source: MorningStar

iShares USD Treasury Bond 0-1yr UCITS ETF

In this case, the ETF follows an index that replicates a portfolio of US Treasury Bonds with maturities of 0 to 1 year denominated in dollars.

Here is the fund’s performance in the past five years:

Source: MorningStar

Best ETFs to invest in according to category

Next, we’ll introduce you to the best ETFs to invest in according to different categories, such as asset class, markets, or geographical location. It’s important to keep in mind, though, that past performance is not a guarantee of future performance, so you must do your due diligence before investing in any asset.

Best equity ETFs to invest in

This is a selection of equity exchange-traded funds with high performance and average costs, as indicated by the total expense ratio (TER):

Equity ETFs	TER	1 year
Lyxor MSCI Turkey UCITS ETF – Acc	0.45%	67.35%
iShares MSCI Turkey UCITS ETF	0.74%	66.74%
HSBC MSCI Turkey UCITS ETF USD	0.50%	65.05%
iShares S&P 500 Energy Sector UCITS ETF (Acc)	0.15%	38.37%
SPDR S&P US Energy Select Sector UCITS ETF	0.15%	38.24%
Xtrackers MSCI USA Energy UCITS ETF 1D	0.12%	37.41%
Invesco US Energy Sector UCITS ETF	0.14%	36.41%
Invesco Solar Energy UCITS ETF Acc	0.69%	33.28%

Best fixed-income ETFs to invest in

The list of best bond and debt ETFs includes the following:

Fixed Income ETFs	TER	1 year
Amundi Index Breakeven Inflation USD 10y UCITS ETF DR (C)	0.16%	11.44%
iShares USD Corporate Bond Interest Rate Hedged UCITS ETF	0.25%	11.26%
iShares USD Corporate Bond Interest Rate Hedged UCITS ETF USD (Acc)	0.25%	11.02%
WisdomTree USD Floating Rate Treasury Bond UCITS ETF USD	0.15%	9.67%
iShares USD Floating Rate Bond UCITS ETF	0.10%	9.38%
Amundi Floating Rate USD Corporate ESG UCITS ETF USD (C)	0.18%	9.35%
WisdomTree USD Floating Rate Treasury Bond UCITS ETF USD Acc	0.15%	9.29%

Best ETFs to invest in by country

ETFs	TER	1 year
Lyxor MSCI Turkey UCITS ETF – Acc	0.45%	65.05%
iShares MSCI Mexico Capped UCITS ETF (Acc)	0.65%	25.21%
iShares MSCI Australia UCITS ETF	0.50%	16.92%
Xtrackers MSCI Thailand UCITS ETF 1C	0.50%	11.44%
Lyxor MSCI Indonesia UCITS ETF – Acc	0.45%	12.00%

For more options, don’t miss our best ETFs in India article and the best FTSE100 ETFs.

Best ETFs to invest in by sector

Finally, these are the best ETFs according to sectors:

Industry ETFs	TER	3 years
Amundi S&P Global Luxury UCITS ETF EUR (C)	0.25%	50.77%
Lyxor STOXX Europe 600 Automobiles & Parts UCITS ETF – Acc	0.30%	41.59%
iShares Electric Vehicles and Driving Technology UCITS ETF USD (Acc)	0.40%	40.00%
WisdomTree Artificial Intelligence UCITS ETF USD Acc	0.40%	38.54

If you want to invest in ETFs right now, make sure you choose the best broker for your needs:

• Best ETF brokers
• Best fixed income brokers
• Best brokers for beginners
• Best commission-free brokers

How to invest in ETFs?

If you are new to the investing world, we’re here to help: we’ve done all the legwork and picked Interactive Brokers as the best broker to invest in ETFs. Here are some of the reasons why you should consider choosing Interactive Brokers:

• Safe broker regulated by FCA, among other authorities
• £0 minimum deposit
• Hundreds of ETFs to choose from
• Over 150 ETFs are part of the “no transaction fee” program
• Multiple other assets to diversify your portfolio and over 150 global markets

For more information, check our Interactive Brokers review or click on the button below to visit the broker.

How to choose the best ETFs for your portfolio

Choosing the best ETFs for your portfolio involves more than just considering their historical performance. It’s essential to understand how to assess whether an exchange-traded fund is optimal for your specific portfolio and investment strategy.

While there are numerous indicators you can utilise, the following are key factors to consider:

1. Clear Strategy: Having a well-defined strategy is crucial. Your strategy will guide you in determining which ETFs to buy, when to purchase them, and when to sell them.
2. Total Expense Ratio (TER): The TER provides insight into the total cost of owning an ETF, including management fees and other associated expenses.
3. Bid/Ask Spread: Assessing the bid/ask spread, which represents the range between the buying and selling prices, provides valuable information about the ETF’s liquidity as well as that of its underlying assets.
4. Index Replication: Understanding the index that an ETF replicates is essential. It informs you about the specific market or sector you are investing in through the ETF.

Learn more about funds

• How to choose an ETF
• Index funds vs ETFs
• ETF vs ETC vs ETN
• Accumulating vs distributing ETF
• Index fund guide
• Best NASDAQ ETFs

Best ETFs to invest in: summary

In conclusion, exchange-traded funds (ETFs) offer investors a versatile and cost-effective means to build a well-diversified investment portfolio. ETFs provide transparency, tax efficiency, and a wide range of investment exposures, making them an attractive option for both passive and active investors.

By considering the best-performing ETFs in the UK market and employing key selection criteria such as a clear investment strategy, total expense ratio (TER), bid/ask spread, and index replication, investors can make informed decisions that align with their long-term goals.

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