The ETF landscape in the U.S. is vast and varied, with the ETF Central screener showing some 3,479 U.S.-listed ETFs as of April 4th.
This number is particularly dynamic, as numerous prospectuses have been filed and are pending approval at this time. You can find a roundtable of March's most notable filings here.
Over the last half-decade, the financial markets have experienced a series of significant events—from the COVID-19 crash to the subsequent bull market, a bear market in bonds during 2022 driven by rising rates and inflation, and the frenzies around AI and cryptocurrencies in 2022 and 2023.
Amidst this turbulent backdrop, certain ETFs have emerged as standout performers over the last five years. Here's a closer look at the top 5 best-performing ETFs based on 5-year quarter-end trailing returns in ascending order.
(Sidenote: It's noteworthy to mention that for this overview, we've excluded leveraged and inverse ETFs from our consideration. Including them would have skewed the results significantly.)
Invesco Semiconductors ETF (PSI)
Five-year trailing return as of March 31: 34.07%
The semiconductor sector has surged due to increased GPU demand for cryptocurrency mining and applications in generative AI, with industry giants like Nvidia (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing, and Advanced Micro Devices (NASDAQ:AMD) reporting significant earnings growth.
This trend has made semiconductor ETFs like the Invesco Semiconductors ETF (PSI-1.56%) top performers. With a five-year trailing return of 26.28% as of March 31, PSI tracks the Dynamic Semiconductor Intellidex℠ Index.
This index selects 30 U.S. semiconductor companies not just based on market cap but also factors in price momentum, earnings momentum, quality, management action, and value. PSI carries a 0.57% expense ratio.
iShares U.S. Home Construction ETF (ITB)
Five-year trailing return as of March 31: 26.68%
Despite a brief downturn during COVID-19, the U.S. economy has shown remarkable resilience, with high levels of home construction reflecting robust economic activity. It's no surprise, then, that the homebuilding sector, known for its cyclicality, has outperformed in this environment.
The go-to ETF for capturing this industry's growth is ITB (ITB+0.02%), which tracks the Dow Jones U.S. Select Home Construction Index, comprising 46 holdings that represent a cross-section of the U.S. home construction industry.
With an expense ratio of 0.40%, ITB's top holdings include major players in the field such as D.R. Horton, Lennar Corp (NYSE:LEN), PulteGroup (NYSE:PHM), and Lowe's, showcasing the strength and diversity within the U.S. homebuilding sector.
iShares Semiconductor ETF (SOXX)
Five-year trailing return as of March 31: 29.62%
Despite the sophisticated factor-based indexing strategy of PSI, it hasn't managed to outperform more straightforward market cap-weighted semiconductor ETFs like SOXX(SOXX-1.39%) over the last five years.
SOXX offers a more cost-efficient solution with a lower expense ratio of 0.35% and stands out as one of the largest and most liquid options for investors looking to gain exposure to the semiconductor sector.
Boasting $12.7 billion in assets under management and a minimal 0.01% 30-day bid-ask spread, SOXX also supports an options chain, providing additional flexibility for investors.
VanEck Semiconductor ETF (SMH)
Five-year trailing return as of March 31: 29.62%
The semiconductor sector's impressive performance in recent years has been largely propelled by a select few mega-cap companies, with Nvidia standing out as a prime example.
Consequently, it's no surprise that SMH(SMH-1.35%), which currently allocates a substantial 20% of its portfolio to Nvidia as its top holding, has seen notable success.
SMH is designed to track the MVIS US Listed Semiconductor 25 Index, which aims to capture the performance of the largest and most liquid semiconductor companies.
With an expense ratio mirroring that of SOXX at 0.35%, SMH offers investors a targeted approach to investing in the heavyweight champions of the semiconductor industry, rewarding those who made a concentrated bet on the sector's leaders.
Grayscale Bitcoin Trust (NYSE:GBTC)
Five-year trailing return as of March 31: 59.17%
The standout ETF in terms of performance over the last five years has been GBTC(GBTC), boasting a remarkable five-year trailing return of 59.17% as of March 31.
However, there's a notable caveat to this achievement: GBTC was not always an ETF. In fact, until January 11, 2024, it operated as a closed-ended fund.
The journey to becoming an ETF was far from smooth for GBTC. Before its conversion, Grayscale found itself locked in a legal battle with the SEC, during which the fund often traded at a significant discount to its net asset value (NAV), particularly amid the 2022 Bitcoin bear market.
Following its conversion to an ETF, GBTC also experienced substantial outflows as investors gravitated towards newer, more cost-effective spot Bitcoin ETFs, in part due to GBTC's relatively high expense ratio of 1.5%. Despite these challenges, GBTC still remains the largest spot Bitcoin ETF (TSX:EBIT) by assets under management, holding $22.3 billion.
In response to the competitive landscape, Grayscale has initiated efforts to maintain its market position, filing to launch a "mini" version of GBTC that promises a lower expense ratio.
This content was originally published by our partners at ETF Central.