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Ten ETFs that started everything

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Exchange-traded funds offer investors a way to build better portfolios with lower costs and less tax exposure, writes Matthew Hougan, editor of On the IndexUniverse blog, he highlights 10 ETFs that have helped shape the industry.

  • S&P 500 SPDR – This was the first ETF in the United States, and, according the Hougan, is the largest and most-traded ETF in the world.
  • PowerShares NASDAQ-100 QQQQ – While this fund has slipped from the second or third largest ETF in the world to the sixth, it’s still a major player in the retail and trader communities.
  • Vanguard Total Market Index Fund and Vanguard Emerging Markets ETF – These funds are all about costs, Hougan writes. He says the Total Market Index Fund is the cheapest retail share mutual fund in the world and the Emerging Markets ETF charges only 0.25 percent in annual expenses compared to 1.62 percent for the average international equity mutual fund.
  • SPDR Gold Shares – This fund was the first commodity ETF listed in the United States and offered investors a cheaper, easier way to buy gold.
  • PowerShares DB Commodity Index Fund – This fund helped bring commodities into the mainstream, Hougan writes, and while a lot of people have been burned by the commodity bubble, diversification is still an important benefit.
  • WisdomTree Small Cap Emerging Markets ETF – According to Hougan, this fund proved well-structured ETFs could bring low-cost access to illiquid markets and help investors “add a noncorrelated source of returns to their portfolios.”
  • NETS Dow Jones Wilshire Global Total Market Index Fund – Northern Trust filed for this fund in 2007, and, while it has yet to launch, Hougan writes it is the first truly global equity ETF and has led the way for several similar funds.
  • ProShares UltraShort S&P 500 – When used properly, Hougan says, these funds can be very empowering.
  • iShares Lehman Aggregate Bond Index Fund – This fund provides low-cost exposure to the bond segment, Hougan says.