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Best Performing ETFs of Last 10 Years

The last 10 years have been favorable for stocks. The S&P 500 has risen at a 14% annualized rate. The best performing ETFs in specific categories have done much better. What are the best performing ETFs of the last 10 years? What are likely to be the best performing ETFs in the next 10 years?

Ten years ago, the U. S. economy was coming out of the Great Recession.

Stocks had been rallying for over a year after bottoming in March 2009.

The S&P 500 closed at 1030.71 on June 30, 2010.

As the economy continued to improve, stock prices embarked on a multi-year rally.

Stocks were however rattled by a few events during the 10 years. They include:

  • S&P’s downgrade of U. S. debt rating in 2010.
  • European sovereign debt crisis in 2010 and 2011.
  • Slowing global economic growth in 2015.
  • The trade war between the U. S. and China in 2018.
  • Rising interest rates in 2018.
  • The COVID-19 pandemic in 2020.

These setbacks have, however, been mild in the big picture.

Excluding dividends, the S&P 500 has risen 3.0-fold implying a 12% compound annual return.

Best Performing ETFs Last 10 Years

While S&P 500 company earnings have grown 1.9-fold since 2009, the S&P 500 index has risen 3.0-fold as stock valuation metrics have expanded. Register to learn more on the year-over-year performance of AlphaProfit model portfolios since inception.

According to FactSet, S&P 500 company earnings have risen from $74.53 a share to $144.91 a share or 1.9-fold during this 10 year period ending on June 30, 2020.

The decline in interest rates has allowed the price/earnings ratio to increase, helping stock prices rise more than earnings.

According to Macrotrends, the yield on the 10-year Treasury bond has dropped from 3.0% in June 2010 to 0.66% in June 2020.

In this milieu, the best performing ETFs in several categories have been able to outpace the S&P 500.

So, what are the best performing ETFs in the last 10 years?

Best Performing ETFs of Last 10 Years: Alternative Category

Leveraged equity ETFs in the alternative category made the most of rising stock prices over the past 10 years.

The ProShares UltraPro QQQ (TQQQ) which seeks daily investment results that correspond to three times the daily performance of the Nasdaq-100 Index is the best performing ETF of the last 10 years with a 51.5% compound annual return.

Best Performing ETFs of Last 10 Years: Sector Equity

Among non-leveraged ETFs, several in the sector equity category have beaten the broad market. The ETFs that focus on specific industries in the technology, health care, and consumer discretionary sectors have fared best.

The First Trust Dow Jones Internet Index Fund (FDN) claims top honors among non-leveraged ETFs with a compound annual return of 21.7%.

The SPDR S&P Biotech ETF (XBI) and the Consumer Discretionary Select Sector SPDR Fund (XLY) have gained at annualized rates of 20.9% and 17.6%, respectively to rank best among health care and consumer discretionary sector ETFs.

For comparison purposes, the iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) that track the S&P 500, have gained at 13.9% annualized rate.

Learn more: How to consistently choose the best sector ETF

Best Performing ETFs of Last 10 Years: U. S. Equity

Over the past 10-years, the U. S. stock market has been most favorable for large-cap growth style investors.

The large-cap growth styled Invesco QQQ Trust ETF (QQQ) with an annualized return of 20.5% claims the top spot for the best performing ETF in the U. S. equity category.

Selected broad market ETFs have fared quite well despite operating in relatively out-of-favor investing styles.

The mid-cap growth styled iShares Morningstar Mid-Cap Growth ETF(JKH) and the large-blend styled Invesco S&P 500 Top 50 ETF (XLG) have gained 15.2% and 14.5% annualized to trounce ETFs tracking the S&P 500.

Notably, not a single value-styled ETF has been able to beat ETFs tracking the S&P 500. The best performing value ETF is the SPDR Dow Jones Industrial Average ETF (DIA) with a 12.8% annualized return.

Learn more: How you can increase returns from your investments in ETFs

Best Performing ETFs of Last 10 Years: International Equity

International stocks have generally lagged U. S. stocks during the past 10 years.

The iShares MSCI EAFE ETF (EFA) that tracks the popular MSCI EAFE foreign stock benchmark has gained just 5.8% annualized during this period.

The rising U. S. dollar, for one, has been a headwind for international stocks.

According to Yahoo Finance, the U. S. Dollar Index (DXY) has risen from 86.02 to 97.39 over the past 10 years. The U. S. Dollar Index measures the value of the dollar relative to a basket of major foreign currencies.

Gaining 11.9% annualized, the Invesco China Technology ETF (CQQQ) is the best performing ETF in the international equity category.

Learn more: How to construct high performing portfolios using ETFs

Best Performing ETFs for the Next 10 Years

In financial markets, what worked for the past 10 years seldom works for the next 10 years.

With that said, the First Trust Dow Jones Internet Index Fund (FDN) and the SPDR S&P Biotech ETF (XBI) have decent odds of topping the return charts in 10 years.

It also helps to look at the weaker performers of the past 10 years to get a handle on possible turnarounds.

Excluding inverse ETFs, energy, and agricultural ETFs and ETNs feature prominently in the losers list.

ETFs investing in value, as well as small-cap stocks in the U. S. and foreign stocks in general, have been among the weaker performers.

While energy ETFs can appeal to contrarians, investors owning ETFs that invest in U. S. value stocks, U. S. small-cap stocks or foreign stocks are likely to earn superior returns in the next 10 years.

The best performing ETF in the next 10 years is likely to emerge from one of these categories.

Learn more:

Sector ETF model portfolios from AlphaProfit
Performance of AlphaProfit's ETF model portfolios
How AlphaProfit helps you invest in the best sector ETF consistently
How AlphaProfit's investment strategy minimizes your risk
How AlphaProfit keeps your fees and expenses low
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