Best Large Cap ETFs for November 2022

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Large-cap stocks are one of the most popular ways to invest in the market. These companies have the deepest pockets, and their businesses are more resilient than typical small-cap stocks. As such, large-cap stocks have been a great way to invest, with the bellwether S&P 500 returning an average annual return of about 10% over time. If you don’t want to bother investing in individual stocks, you can gain exposure to large-cap stocks through ETFs.

What are large-cap ETFs?

A large-cap ETF is an exchange-traded fund that invests in the largest companies in the market, that is, companies whose shares are collectively valued at more than $1.5 or $20 billion. Large-cap ETFs are a great way to own some of the world’s most successful companies without the work of analyzing individual companies and picking winners.

Large-cap stocks range from a few lesser-known options to well-known household names such as Amazon, Apple, and Microsoft. Therefore, the largest large-cap company may be worth 100 times the value of the smallest. Large-cap ETFs typically have the greatest concentration in the largest companies, with smaller companies allocating far fewer shares.

Large-cap companies tend to be popular with investors for the following reasons:

  • Best Companies in the World: Large-cap stocks are among the best companies in the world, and they have some of the most powerful competitive advantages in the world.
  • Deep financial resources: Large-cap stocks often get their own cash due to strong business and can often raise capital on favorable terms.
  • Cash cow: Large-cap stocks tend to grow more slowly than small-cap stocks, but they tend to be cash cows, often returning most of their earnings to shareholders through dividends.
  • Less volatility: Sure, stocks tend to be highly volatile, but large-cap stocks tend to be less volatile than small-cap stocks, making them more suitable for risk-averse investors.

One of the best-known large-cap stocks is the S&P 500, which includes about 500 of the largest US companies. The S&P 500 is a key index because it includes the most prosperous U.S. companies traded on exchanges.

These are great advantages for investors, but if you don’t know much about investing, or just don’t want to manage your own investments, buying large-cap ETFs is a great place to start.

Best performing large-cap ETFs

Bankrate selected these top funds based on the following criteria:

  • U.S. funds (growth, value, hybrid) that appear in the Large Cap Screener
  • Top performing funds over the past five years
  • Performance as measured on October 31, 2022 using the latest data

Invesco S&P 500 GARP ETF (SPGP)

Based on the S&P 500 Fair Price Growth Index, the fund includes about 75 stocks with the highest scores on both growth criteria and value pricing. The index is reconstituted semi-annually.

  • 2022 YTD performance: -16.2%
  • Historical performance (every year over 5 years): 14.0%
  • Cost ratio: 0.33%

Pacer US Cash Bull 100 ETF (COWZ)

The fund includes the top 100 companies in the Russell 1000 Index, a group of large-cap stocks, weighted by their free cash flow yield. The weighting is capped at 2% and the index is reconstituted quarterly.

  • 2022 YTD performance: -0.6%
  • Historical performance (every year over 5 years): 13.6%
  • Cost ratio: 0.49%

Invesco QQQ Trust (QQQ)

This ETF tracks the Nasdaq 100 Index, a collection of the 100 largest non-financial companies traded on Nasdaq.

  • 2022 YTD performance: -31.1%
  • Historical performance (every year over 5 years): 13.3%
  • Cost ratio: 0.20%

iShares Russell Top 200 Growth ETF (IWY)

The fund tracks the Russell 200 Growth Index, which includes the largest U.S. companies expected to grow at an above-trend pace.

  • 2022 YTD performance: -28.0%
  • Historical performance (every year over 5 years): 13.0%
  • Cost ratio: 0.20%

Invesco S&P 500 Momentum ETF (SPMO)

The fund tracks the S&P 500 Momentum Index, which includes stocks in the S&P 500 with high momentum scores. The fund is restructured every six months.

  • 2022 YTD performance: -11.7%
  • Historical performance (every year over 5 years): 12.9%
  • Cost ratio: 0.13%

Are large-cap ETFs a good investment?

Large-cap ETFs are a great place for beginners, but they’re also a great option for advanced investors. With large-cap ETFs, you can earn attractive long-term returns.

While a large-cap portfolio like the S&P 500 produces returns of about 10% per year over the long term, the returns are much larger than that. A great year for the market will be a 30% return, but sometimes the market can drop that much in a year. So buying and holding is crucial if you want to get the level of returns that large-cap stocks offer.

As mentioned above, large-cap stocks are made up of the largest and most financially stable companies in the market. This status tends to make them a little less volatile than even the best small-cap stocks. But it seems like a grim consolation in tough years, as they still drop significantly. Another bonus: Large-cap stocks tend to pay more dividends than their smaller rivals.

bottom line

Regardless of your skill level, large-cap ETFs are a great way to invest in the stock market, and they can help investors buy into that market segment without having to do extensive research on their investments. But like any type of investment, they’re not without risk, even though those tend to be less risky than other types of stocks, such as small and mid-cap stocks.

Editorial Disclaimer: All investors are advised to conduct independent research on investment strategies before making an investment decision. In addition, investors are reminded that past performance of investment products does not guarantee future price increases.

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