The fact that ETFs trade intraday like stocks is a major draw for active investors looking to generate alpha by moving in and out of the market to play macroeconomic trends (as opposed to relying on a buy-and-hold or company-specific strategy).
Not surprisingly, day traders have embraced these financial instruments as viable tools for achieving cheap and incredibly liquid exposure to virtually any corner of the global market. One way to gauge trading activity levels in the ETF universe is to consider a fund’s turnover, the percentage of an ETF’s outstanding shares changing hands on a daily basis.
Be sure to see the 17 ETFs for Day Traders.
The higher the turnover, the more popular the ETF is said to be among active traders. A higher turnover means a greater proportion of shares changing hands, which in turn implies a shorter average holding period, compared to an ETF with a lower turnover.
Below, we profile a few ETFs that have surprisingly high turnovers (as of 4/21/2015)*.
- iShares 20+ Year Treasury Bond ETF (TLT ): Over 10% of the fund’s outstanding shares change hands everyday, which is quite shocking considering that buy-and-hold is generally the most common strategy for fixed income investors. Because of TLT’s vast liquidity, it’s no wonder that active traders have embraced this ETF as the go-to instrument when it comes to establishing exposure to U.S. Treasuries.
- iShares Russell 2000 ETF (IWM ): Just over 12% of IWM’s shares change hands everyday, making it more of a trading instrument for those looking to move in and out of small caps, rather than an investment vehicle for the long haul.
- State Street Utilities Select Sector SPDR (XLU ): Utilities fall on the low end of the volatility spectrum for equities. As such, it’s surprising to see that XLU is the sector ETF with the highest turnover rate at 6%.
- State Street SPDR S&P 500 (SPY ): SPY is the biggest ETF by assets, so it may be surprising for some to see it on the list of funds with the highest turnover. The reality is that SPY is a favorite among traders. Investors looking to access large-cap U.S. stocks generally flock to its cheaper counterparts, namely the iShares S&P 500 ETF (IVV ) and Vanguard’s S&P 500 ETF (VOO ).
Top 50 ETFs with the Highest Turnover
The table below features the top 50 ETFs with the highest turnover:
|(OIH )||Market Vectors Oil Services ETF||33.37%|
|(USO )||United States Oil Fund||15.86%|
|(FXI )||iShares China Large-Cap ETF||15.30%|
|(SPY )||SPDR S&P 500||13.63%|
|(EWZ )||iShares MSCI Brazil Capped ETF||13.63%|
|(IWM )||iShares Russell 2000 ETF||12.06%|
|(IYR )||iShares U.S. Real Estate ETF||11.77%|
|(FAZ )||Daily Financial Bear 3X Shares||11.67%|
|(XME )||SPDR S&P Metals & Mining ETF||11.13%|
|(TLT )||20+ Year Treasury Bond ETF||11.00%|
|(FAS )||Daily Financial Bull 3X Shares||10.58%|
|(EZA )||iShares MSCI South Africa ETF||7.33%|
|(DIA )||Dow Jones Industrial Average ETF||7.02%|
|(XBI )||SPDR S&P Biotech ETF||6.95%|
|(FTGC )||Global Tactical Commodity Strategy Fund||6.46%|
|(XLU )||Utilities Select Sector SPDR||6.27%|
|(ECH )||iShares MSCI Chile Capped ETF||6.10%|
|(EEM )||iShares MSCI Emerging Markets ETF||6.07%|
|(IBB )||Nasdaq Biotechnology||5.87%|
|(AMZA )||InfraCap MLP ETF||5.72%|
|(XLB )||Materials Select Sector SPDR||4.87%|
|(TUR )||MSCI Turkey ETF||4.14%|
|(EWY )||iShares MSCI South Korea Capped ETF||4.07%|
|(EWA )||MSCI Australia ETF||3.94%|
|(THD )||MSCI Thailand Capped ETF||3.91%|
|(XLY )||Consumer Discretionary Select Sector SPDR||3.86%|
|(PIN )||India Portfolio||3.81%|
|(EWM )||iShares MSCI Malaysia ETF||3.74%|
|(XLF )||Financial Select Sector SPDR||3.50%|
|(EWQ )||iShares MSCI France ETF||3.30%|
|(EWD )||iShares MSCI Sweden ETF||3.07%|
|(EWI )||iShares MSCI Italy Capped ETF||3.06%|
|(SHY )||1-3 Year Treasury Bond ETF||3.04%|
|(EWH )||iShares MSCI Hong Kong ETF||2.91%|
|(IYE )||iShares U.S. Energy ETF||2.73%|
|(ILF )||iShares Latin America 40 ETF||2.58%|
|(EWL )||iShares MSCI Switzerland Capped ETF||2.52%|
|(LTPZ )||15+ Year U.S. TIPS Index Fund||2.35%|
|(HYG )||iShares iBoxx $ High Yield Corporate Bond ETF||2.20%|
|(EWG )||iShares MSCI Germany ETF||2.07%|
|(EWP )||iShares MSCI Spain Capped ETF||2.04%|
|(EWJ )||iShares MSCI Japan ETF||1.81%|
|(TIP )||TIPS Bond ETF||1.78%|
|(IWO )||iShares Russell 2000 Growth ETF||1.71%|
|(IEF )||iShares 7-10 Year Treasury Bond ETF||1.67%|
|(JNK )||SPDR Barclays Capital High Yield Bond ETF||1.67%|
|(BBH )||Market Vectors Biotech ETF||1.65%|
|(RTH )||Market Vectors Retail ETF||1.58%|
|(EMB )||iShares J.P. Morgan USD Emerging Markets Bond ETF||1.58%|
The Bottom Line
ETFs have found their way into countless portfolios as investors have embraced the benefits of the exchange-traded product structure. Active traders have also embraced these instruments for their vast liquidity, utilizing them as tactical tools capable of delivering granular exposure to various corners of the global market. The high turnover of some ETFs showcases that active traders have embraced some ETFs more than others, and as such, this should prompt prospective buyers to look under the hood and determine whether or not the fund they’re considering is better suited as a trading or investment vehicle.
*ETFdb.com calculates turnover as a percentage figure comprising the fund’s five-day average trading volume divided by the number of shares outstanding.
Follow me on Twitter @SBojinov.
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Disclosure: No positions at time of writing.