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Comparing Sector ETFs and ETNs

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Exchange traded funds (ETFs) are a perfect tool for asset allocation. But be careful -- ETNs are lumped in the same category, but can be very different in terms of holdings, fees, and liquidity.

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So enough talk; let's start the ETF Smackdown!

S&P 500 Funds

The contenders are the S&P 500 Spiders (NYSEARCA:SPY), iShares S&P 500 (NYSEARCA:IVV), and Vanguard S&P 500 (NYSEARCA:VOO):



Winner: iShares. IVV has better performance, decent trading volume, and a legal structure that allows the reinvestment of dividends. In contrast, SPY's unit investment trust structure doesn't allow dividend reinvestment. I'm a big believer in reinvesting dividends, so IVV takes the cake. Vanguard's VOO offering has a minuscule 0.05% expense ratio, but its average daily trading volume is only 725,000 shares and I want more liquidity before jumping on board.

General Bond Funds

The contenders are Vanguard Total Bond Market (NYSEARCA:BND), iShares Barclays Aggregate Bond Fund (NYSEARCA:AGG), and SPDR Barclays Capital Aggregate Bond (NYSEARCA:LAG):



Winner: Vanguard. BND has the best trading volume, the cheapest expense ratio, and its unique structure as a share class of the huge VBTLX open-end fund gives it broader exposure to the bond market than the other ETFs, so less tracking error.
No positions in stocks mentioned.
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