In this piece, we will take a look at the 11 best performing ETFs of the last 10 years.
Investing in stocks is a risky endeavor. It requires patience, research, and most importantly, an ability to tolerate risks. Stocks are among the most riskiest securities in the financial industry, and while they promise lucrative returns that are often in triple digits, stock market downturns can be equally destructive. Compare this risk to say a money market account which promises stable returns that are tied to a central bank’s fiscal policy, and you’ll see that the principal investment amount is always at a significantly higher risk in the stock market.
Narrowing our focus on the past decade, the market has been in constant fluctuation for the past four years at least that has seen massive downswings, greater upswings, and painful corrections followed by sudden jumps to set new records. The current investment climate in America is fundamentally different than the one even five years back. This is because the Federal Reserve and the U.S. government have injected large amounts of capital into the market by making access to money cheap. This has also translated into strong gains by major stock indexes such as the NASDAQ and the S&P500. Easy money means that hedge funds can secure adequate leverage to make outlandish bets on publicly traded firms – bets which as a whole also translate into market strength. At the same time, low interest rates during the time of crisis in the coronavirus era reduced the incentives of investors to either keep their money in the bank and watch it grow through interest rate hikes or invest in other interest tied securities such as bonds.
However, while the rapid dynamic shifts due to the coronavirus pandemic and the devastating aftermath of the Russian invasion of Ukraine on the technology sector of the market have captivated attention for so long everything else has become ancient history, the fact is that since 2013, the market has undergone some tremors before 2020 as well. One of these took place in the middle of the decade ending in 2020 as worries about China’s ability to maintain growth made investors jittery and caused them to translate these fears into a market downturn.
This crisis, which started in the middle of the third quarter of 2015 taught hedge funds about the pitfalls of relying exclusively on long positions as part of their portfolio construction. Taking long positions generally does not draw criticism from anyone since it is an uncontroversial practice in the market. However, such positions can also prove to be risky if the global economic environment starts to become shaky. This is because no matter how much a firm optimizes operations and delivers superior products, if there are no customers willing to spend money, then revenue will drop and the business might be forced to shut down too. The market sell off in 2015 was particularly painful for hedge funds since August is the time when most money managers stop spending most of their day worrying about where the market will go as they turn their attention to less stressful activities such as sailing on a luxury yacht.
According to data from Goldman Sachs, long positions were more than two times as big as short positions back then, with hedge funds and others taking out $1.5 trillion in long positions compared to $684 billion in short positions. Some of the reasons behind the turmoil back then are still present today. U.S. stock indexes such as the blue chip Dow Jones Industrial Average (DJIA) followed a selloff in Chinese stocks on fears of the country’s economy. Since China is one of the world’s largest consumers of industrial and agricultural commodities, a slowdown in its economy also translates poorly for prices of goods such as copper and oil. So, the commodities market also dropped and so did emerging market currencies.
The rapid nature of this slowdown left a lot of investors scratching their heads, and if we fast forward to 2023, we’ll see that some of these trends are still present today as the market rebalances itself after posting fantastic results during the first half of the year. There’s a big question market painted on Chinese economic growth prospects right now, oil prices are only high because Saudi Arabia is delivering production cuts, and commodities prices have only recently started to recover after slipping in July.
Some would say that perhaps history is repeating itself. But while we can’t say that for sure, we did decide to take a look at the top performing ETFs for the last ten years out of which the notable names are iShares Semiconductor ETF (NASDAQ:SOXX), VanEck Semiconductor ETF (NASDAQ:SMH), and Invesco Semiconductors ETF (NYSE:PSI).
Pixabay/Public domain
Our Methodology
To compile our list of the best performing ETFs over the past ten years, we first used previous media coverage to make a definitive list of the 26 top ETFs that have done well over the decade. Then, we ranked these funds by their annualized returns over ten years, and the top 11 ETFs with the highest returns are as follows.
11 Best Performing ETFs of the Last 10 Years
11. iShares Russell Top 200 Growth ETF (NYSE:IWY)
Annualized Return Over 10 Years: 16.09%
iShares Russell Top 200 Growth ETF (NYSE:IWY) is a sizeable exchange traded fund with $6 billion in assets. It was set up in 2009 and is part of the iShares fund family. The ETF limits its attention to investing in U.S. large companies that have the potential to deliver above average growth in the future. This philosophy seems to be working as the iShares Russell Top 200 Growth ETF (NYSE:IWY) marks a strong start to our list with double digit ten year total returns. Along with VanEck Semiconductor ETF (NASDAQ:SMH), iShares Semiconductor ETF (NASDAQ:SOXX),and Invesco Semiconductors ETF (NYSE:PSI), iShares Russell Top 200 Growth ETF (NYSE:IWY) is one of the best performing ETF over the last ten years.
10. Invesco S&P 500 Equal Weight Technology ETF (NYSE:RYT)
Annualized Return Over 10 Years: 17.54%
The Invesco S&P 500 Equal Weight Technology ETF (NYSE:RYT) is part of the Invesco fund family and has $2.9 billion in net assets. Like the iShares Russell Top 200 Growth ETF, this fund also invests in large cap and growth companies. It tracks the S&P500 information technology index. This leads the ETF to have major stakes in some of the biggest technology companies in the world. Its top three investments are in NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Microsoft Corporation (NASDAQ:MSFT).
9. Invesco QQQ Trust (NASDAQ:QQQ)
Annualized Return Over 10 Years: 17.92%
Invesco QQQ Trust (NASDAQ:QQQ) is one of the biggest ETFs not only on our list but also in the world. It has a whopping $205 billion in net assets, and its size hasn’t kept the fund back from delivering strong returns such as its ten year daily total returns are a strong 17.92%. The asset size is perhaps unsurprising as the fund tracks one of the biggest stock market indexes in the world, the NASDAQ-100 index. Naturally, the NASDAQ-100’s strong performance in 2023 has also boosted the returns of Invesco QQQ Trust (NASDAQ:QQQ) since its share price is up by 40% year to date.
8. iShares Global Tech ETF (NYSE:IXN)
Annualized Return Over 10 Years: 18.08%
iShares Global Tech ETF (NYSE:IXN) is part of the iShares fund family and has $3.63 billion in net assets. The fund was set up in 2001 and it tracks a stock index which invests in technology companies all over the world. Its top three investments are Apple Inc. (NASDAQ:AAPL), NVIDIA Corporation (NASDAQ:NVDA), and Microsoft Corporation (NASDAQ:MSFT).
7. Vanguard Information Technology Index Fund (NYSE:VGT)
10-Year Daily Total Returns: 19.52%
Vanguard Information Technology Index Fund (NYSE:VGT) is part of the Vanguard fund family and it focuses its attention on the technology industry. The fund was set up in 2004 and it has sizeable net assets of $64.77 billion. It tracks a benchmark stock index and focuses only on companies that use the latest scientific technology to manufacture their products. The Vanguard Information Technology Index Fund (NYSE:VGT)’s NAV price is slightly lower than its market price, and the year to date returns for its NAV stand at 33.96% which is two basis points higher than the returns offered by the market price during the same time period. The ETF’s top three holdings are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA). Cumulatively, the trio represents roughly 45% of the fund’s holdings and also makes it vulnerable to any recessionary downswing in the technology sector.
6. Technology Select Sector SPDR Fund (NYSE:XLK)
Annualized Return Over 10 Years: 19.69%
Technology Select Sector SPDR Fund (NYSE:XLK) is part of the SPDR State Street Global Advisors Fund Family. The fund was set up in 1998 making it one of the oldest on our list. It has $50.9 billion in net assets and a price to earnings ratio of 32 which suits an ETF that is invested in the technology industry. The fund’s top three stock picks are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and NVIDIA Corporation (NASDAQ:NVDA).
iShares Semiconductor ETF (NASDAQ:SOXX), Technology Select Sector SPDR Fund (NYSE:XLK), VanEck Semiconductor ETF (NASDAQ:SMH), and Invesco Semiconductors ETF (NYSE:PSI) are some top performing ETFs of the last ten years.
5. Invesco Solar ETF (NYSE:TAN)
Annualized Return Over 10 Years: 22.06%
Invesco Solar ETF (NYSE:TAN) marks off a nice start to the second part of our list since it is an exchange traded fund that invests in one of the most crucial technologies for today and tomorrow, solar power. The ETF invests in mid sized growth companies, it was set up in 2008, and is a relatively smaller fund on our list compared to other heavy hitters since it has a modest $1.63 billion in net assets. The Invesco Solar ETF (NYSE:TAN)’s top three stock picks are First Solar, Inc. (NASDAQ:FSLR), Enphase Energy, Inc. (NASDAQ:ENPH), and SolarEdge Technologies, Inc. (NASDAQ:SEDG).
4. SPDR S&P Semiconductor ETF (NYSE:XSD)
Annualized Return Over 10 Years: 22.11%
The SPDR S&P Semiconductor ETF (NYSE:XSD), as the title suggests, is an ETF that invests primarily in semiconductor stocks. This also makes it unsurprising that it ranks fourth in our list of the ten best performing ETFs over the past ten years since the semiconductor sector has been one of the hottest in the world recently. The SPDR S&P Semiconductor ETF (NYSE:XSD) is part of the SPDR State Street Global Advisors Fund Family and the ETf has net assets of $1.56 billion. The top three holdings are MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI), NVIDIA Corporation (NASDAQ:NVDA), and Semtech Corporation (NASDAQ:SMTC).
3. Invesco Semiconductors ETF (NYSE:PSI)
Annualized Return Over 10 Years: 23.12%
Invesco Semiconductors ETF (NYSE:PSI) is another semiconductor focused ETF. Compared to the SPDR S&P Semiconductor fund, this fund has $678 million in net assets, making it one of the smallest on our list so far. The ETF tracks the Dynamic Semiconductor Intellidex index, and seeks to invest at least 90% of its funds into stocks that are part of the underlying index. The fund was set up in 2005 and it has invested in established chip players such as Broadcom Inc. (NASDAQ:AVGO), and Micron Technology, Inc. (NASDAQ:MU).
2. iShares Semiconductor ETF (NASDAQ:SOXX)
Annualized Return Over 10 Years: 23.36%
iShares Semiconductor ETF (NASDAQ:SOXX) makes sure that semiconductor ETFs dominate our list of the top performing funds over the past ten years. It is part of the iShares fund family and is the largest semiconductor ETF on our list so far in terms of net assets, since it has net assets more than $9 billion. NVIDIA, AMD, Intel Corporation (NASDAQ:AVGO), and Broadcomm are its four largest investments.
1. VanEck Semiconductor ETF (NASDAQ:SMH)
Annualized Return Over 10 Years: 23.75%
VanEck Semiconductor ETF (NASDAQ:SMH) is officially the largest semiconductor ETF on our list since it has $10 billion in net assets. The fund was set up in 2011 and its year to date total return sits at an impressive 44%. The top three stock picks are the Taiwan Semiconductor Manufacturing Company (NYSE:TSM), NVIDIA Corporation (NASDAQ:NVDA), and Broadcom Inc. (NASDAQ:AVGO).
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Disclosure: None. 11 Best Performing ETFs of the Last 10 Years is originally published on Insider Monkey.
