5 Best ETFs to Watch in December 2025

Exchange-traded funds (ETFs) have evolved significantly since their introduction nearly 30 years ago. Individual investors are realizing that purchasing ETFs is a simpler path to diversification than buying a basket of individual stocks across different sectors.

ETFs offer a diverse range of investment options at a lower cost than mutual funds. While they both offer a pool of assets, ETFs usually have lower expense ratios than mutual funds. The expense element and diversification are among their biggest reasons for their growing popularity.

In this guide, we present five of the best ETFs currently trading on exchanges. They have all performed well over the past five years, have relatively low expense ratios, and target different types of investors. Whether you are looking for more growth, more value, or diversified exposure to certain growth sectors, such as technology, there’s an ETF for you. See our picks below:

An in-depth look at these top ETFs

Let’s take a more detailed look at our selections. We’re focusing on ETFs worth your attention because they have delivered strong returns this year and over the past decade. Most of them are showing double-digit share price growth this year.

1. SPDR S&P 500 ETF: Solid ETF for long-term investing with good diversification

The passively managed fund is up more than 13% over the past year, thanks to the S&P 500’s rise. It’s considered a good ETF for long-term investors who want exposure to the top large-cap US stocks and its dividend yield is 1.08%. The expense ratio is low at 0.10%.

The fund provides diversification with 504 holdings as of the last count. Its anticipated 5-year earnings per share growth is 16.26%. The S&P 500 is a cap-weighted index, therefore, the top holdings receive heavier allocations in the SPY portfolio. 

Its top three holdings are Netflix at 8.22%, Nvidia at 8.07%, followed by Apple at 7.03% and Microsoft at 6.60% It has broad sector coverage, but it does skew toward electronic technology stocks at 35.35%.

With the S&P 500 doing well this year, the fund has also done well. However, it’s worth noting that despite its diversification, it would likely tumble if there was a recession in the US.

The ETF has no exposure to small cap stocks or international stocks that could outperform the S&P 500. Still, the fund is a low-cost way of gaining exposure to large-cap stocks, without having to do a lot of research.

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2. Vanguard S&P 500 ETF: Low expenses, good exposure to large-cap companies

This passively managed ETF is up more than 13% over the past year. It tracks the S&P 500 Index and holds all stocks in the same capitalization weighting as the index. It has a very low expense ratio of 0.03% and a dividend yield of 1.15%.

It’s considered a relatively safe ETF, as it holds mega and large cap stocks, such as ExxonMobil, Apple, IBM and GE. These large and stable companies are unlikely to go under, unless the economy completely collapses.

The size of the companies in the ETF, though, means their growth could be limited, but they do pay solid dividends.

VOO could be interesting for investors seeking broad mega and large cap exposure. It’s also more diversified than most, containing 504 securities. It’s a nice building block ETF for portfolios, especially for long-term investors looking to keep costs low.

Like other S&P 500 index funds, it’s heavily weighted toward tech stocks at 36.1%. That’s followed by financials at 12.9%. and communication services at 10.1%. The largest single allocation of one company in the fund is Nvidia, with an 8.46% share.

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3. VanEck Semiconductor ETF: Great tech ETF for growth

This exchange traded fund tracks one of the fastest-growing sub-sectors, the semiconductor manufacturing industry. Because it only tracks 26 stocks, it lacks diversification and can be volatile.

It attempts to latch on to the growth that the sub-sector brings as chips power smartphones, computers, and they underpin data centers, artificial intelligence (AI) technology.

They are also present in electric vehicles. Semiconductor stocks have struggled at times. However, if the Fed lowers interest rates, chipmakers that tend to borrow to support growth, will benefit from lower interest rates.

The fund is up more than 41% over the past year and is actively managed with a 0.35% expense ratio. Over the past decade, it lost money in only two years — 2018 and 2022 — and has had an average annual total return of 31.06% in that period.

It allows exposure to swaths of chipmakers and may serve useful to buy-and-hold investors looking for a diversified way to buy into semiconductor stocks.

The fund focuses mainly on US stocks, avoiding risks that may come with semiconductor companies that are based in less stable countries. Its largest two holdings are Nvidia at 18.6%, Taiwan Semiconductor at 9.49% and Broadcom at 8.04%.

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4. Real Estate Select Sector SPDR Fund (XLRE): Seeking major REITs, low expenses

We’re including some specialist funds in our list to highlight our point that ETFs are an excellent tool for investors to gain exposure to other asset classes beyond stocks, in this instance, to the real estate sector with XLRE.

The fund’s shares are flat this year but are up more than 7% over the past five years. It has 30 holdings, including real estate management and development companies as well as REITs.

The ETF has a low expense ratio of 0.08% and tracks the Real Estate Select Sector Index. It focuses primarily on S&P 500-listed REITs involved with telecommunications, healthcare, data centers, and residential apartments.

Its top holdings include logistics healthcare REIT Welltower (NYSE: WELL) 10.81% , REIT ProLogis (NYSE: PLD) at 9.50%, cell tower REIT American Tower A (NYSE: AMT) at 7.17%, and data center REIT Equinix (NASDAQ: EQIX) 6.41% 

The ETFs quarterly dividend yields about 3.42%, but that comes with a high dividend payout ratio of 136.44%, so it may not be sustainable. 

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5. PIMCO 0-5 Year High Yield Corporate Bond Index ETF: High yield, low interest-rate risk

Another specialist fund we’re featuring among the best ETFs invests in short-term speculative-grade fixed-income assets.

Founded in 2011, the ETF looks to track the total return of the BofA Merrill Lynch 0-5 Year US High Yield Constrained IndexSM. It has 893 holdings of high-yield corporate bonds.

Technology accounts for 9.7% of its holdings, followed by media cable at 7.2%. The fund focuses on bonds with a short maturity, giving it less interest-rate risk. The average maturity length is 3.15 years.

The fund has an expense ratio of 0.56%, slightly on the higher side for an ETF. Its dividend of $0.52 per share per month delivers an annual yield of 7.20%, topping most typical fixed-income ETFs.

So far this year, the fund has a total return of 7.14%. Over the past five years, its total return has been an impressive 31.95%.

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Year-to-date performance of the best ETFs for 2025

A snapshot of the most recent performance of our top-ranked ETFs:

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What are exchange traded funds

Exchange-traded funds (ETFs) are a way to buy a grouping of stocks, bonds, or a combination of the two. ETFs provide exposure to quality stocks or bonds at a fraction of their individual price. They trade on traditional stock exchanges, unlike mutual funds, which are available directly from asset management firms.

One of the benefits of ETFs is that they have relatively low fees. They also often have some tax advantages compared with mutual funds, such as lower capital gains distributions.

ETFs have a great variety and often focus on a certain sector or a type of investing. Another advantage is that ETFs take out some of the guesswork involved in predicting what markets will do.

There are passively managed ETFs and actively managed ones. The passively managed funds usually track certain indexes and tend to have lower fees than actively managed ETFs. The latter can sometimes have better performance, though, especially during an economic downturn.

The growth of ETF assets

The growth in the total value of ETFs is accelerating. According to a report by PwC, global ETF assets under management (AUM) will grow to $19.2 trillion in the five years to June 2028, representing a compound annual growth rate (CAGR) of 13.5% over that period.

With more ETFs every year, they provide a wealth of ways to invest with greater transparency and at lower costs than mutual funds.

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How t​​o invest in ETFs 

ETFs are easy to buy on major exchanges. The details on them are generally transparent, making for easier research, as their websites show their holdings and track their performance.

Their lower fees mean that investors can keep more of their returns, which is critical for long-term investing growth. Some brokerages have their own grouping of ETFs, but don’t allow you to buy outside the ETFs they compile. For this reason, it’s important to use a broker that gives you plenty of options.

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How to choose the best ETFs to invest in 

When you invest in ETFs, there are several factors you need to consider regarding your portfolio. They can be a great way of adding diversification, so if you need more medical stocks, or a greater exposure to technology stocks, ETFs are a way to do that.

First, understand an ETF’s expense ratio. Expense ratios vary, but an expense ratio of above 1 is considered high, while one below 0.40% is deemed to be low. An expense ratio of 0.70% could cost you $70 a year in an ETF you have $10,000 invested in. 

Check out the ETFs you’re considering and look at how and what they invest in — large-cap, mid-caps, small-caps, international bonds or a wider market exposure. ETFs with a greater mix of stocks can mean less risk but also less growth potential.

Look into how diversified is the underlying index that ETFs are trying to mimic. Sometimes, just a handful of stocks dominate an index. In that case, assets that track them have more exposure if those stocks run into financial difficulties, or their share prices plummet. The more diversified the index that the ETF tracks, the less risk there is.

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Pros and cons of buying ETFs 

ETFs have surged in popularity for several reasons over the past three decades. Here are factors to consider when looking at ETFs:

Some of the pros of investing in ETFs

• Diversification: ETFs make it easier to spread your money across sectors, allowing your returns to grow due to several trends. Doing that same type of diversification by simply buying stocks is generally more expensive and time-consuming. ETFs do that for you and usually in a more efficient manner.
• Exposure to asset classes outside stocks e.g.: bonds, forex: ETFs may be able to help investors gain exposure to asset classes outside of individual stocks, which can also help simplify the process of building a well-rounded, diversified portfolio.
• Protection at times of volatility: Markets can change quickly and ETFs can allow you to benefit regardless of which sector is doing well. If you were solely buying stocks, it would be easy to miss a big rally for medical stocks or consumer durables, but if you invest in multiple balanced ETFs you would benefit regardless of which sector is taking off.
• Access to assets outside stocks, such as bonds or forex:
• Lower costs: Buying ETFs generally mean lower fees over time than other financial vehicles, such as mutual funds. ETFs also allow you another way to invest in thriving companies whose individual stock prices may be too expensive.

Some of the cons of investing in ETFs

• Trading costs: Although ETFs generally have lower expense ratios than mutual funds, you may still incur trading costs (like commissions or fees) when buying or selling shares.
• Tracking errors: Some ETFs may not perfectly track the underlying index they have set out to follow. This can result in underperformance or overperformance compared to the benchmark.  
• Liquidity risk: While most major ETFs are highly liquid, less popular or specialized ETFs may have lower trading volumes, making it difficult to buy or sell shares without impacting the price.  

Methodology: How we chose the best ETFs for 2025

We looked specifically for ETFs with low expense ratios (generally below 0.50% for actively managed ETFs and below 0.20% for passively managed ETFs, with the point being to keep costs down and retain profits. Secondly, we looked at ETFs that have a strong track record over a number of years, including this year.

Some other factors you should consider when examining ETFs:

Investment objective: Determine if the ETF’s investment objective aligns with your goals. Are you seeking growth, income, or a combination of both? To do that, you need to understand the specific stocks or other assets the ETF invests in. This could be stocks, bonds, commodities, or a combination of these.

Tracking errors: Assess how closely the ETF tracks its underlying benchmark. A lower tracking error indicates that the ETF is performing more efficiently.

Proven track record: Larger, more established ETFs tend to be more stable and have better liquidity. However, younger ETFs may have higher growth potential.

Fund manager: If the ETF is actively managed, research the experience and track record of the fund manager.

Diversification: Evaluate how well the ETF is diversified. This can help mitigate risk and reduce volatility.

Risk Tolerance: Assess whether the ETF’s risk profile aligns with your comfort level. Some ETFs are more volatile than others.

Using the best investment tools can help you make informed decisions as you assess these factors and choose ETFs that align with your strategy for 2025 and beyond.

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FAQs on ETFs