There may be comfort in stocking your portfolio with large and well-known exchange-traded funds such as the nation's biggest ETF, the SPDR S&P 500 ETF Trust (SPY), or the soaring Invesco QQQ Trust (QQQ), which tracks the 100 largest non-financial stocks traded on Nasdaq. But you may not realize that you could be paying a little extra for such comfort – or that you have another choice.
Several name-brand ETFs offer lower-cost, higher-returning clones, nicknamed "mini-mes." Although informally named after the small sidekick of Dr. Evil in the Austin Powers movies, mini-me funds are heroes for investors, says Dan Sotiroff, a senior analyst for investment research firm Morningstar.
They have some drawbacks. For example, because they are newer and less liquid than their bigger siblings, there are fewer options contracts linked to them. And they trade less efficiently, carrying slightly wider spreads between the prices a buyer is willing to pay and a seller is willing to accept. But for long-term investors, "the mini is a better deal," says Sotiroff. Or, as Austin Powers would say: "Yeah, baby!"
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Cheaper versions of famous funds
Of course, many ETFs are index funds that attempt to replicate benchmarks such as the S&P 500. However, a true mini-me fund is an exact clone of a larger, well-established fund. A mini-me is managed by the same firm and holds the same portfolio but charges lower expenses and typically trades at lower prices.
Why are firms such as State Street, Invesco and BlackRock creating cheaper versions of their famous funds? They are trying to prevent their customers from switching to lower-cost competitors, explains Aniket Ullal, head of ETF data and analytics at CFRA Research. "The logic is that cannibalizing one's own product is preferable to losing share to a competitor," he says.
In addition, most of the mini-mes launched so far offer some additional profit opportunities for their fund sponsors. The mini-mes tend to be updated versions of older funds that were created before the Securities and Exchange Commission modernized rules for ETFs. Those original funds are technically trusts and have higher costs because they are legally barred from immediately reinvesting dividends received from stock investments, for example, or making money by lending securities.
See the table below (correct as of August 31, 2024) to compare five mini-me ETFs with their larger, original versions. Clones are highlighted in bold and located directly above the originals. N/A denotes the fund was not in existence over the entire period.
| Fund name | Symbol | Price | Expense ratio | One-year total return |
|---|---|---|---|---|
| SPDR Portfolio S&P 500 | SPLG | $64 | 0.02% | 27.1% |
| SPDR S&P 500 | SPY | $540 | 0.09% | 27.0% |
| Invesco NASDAQ 100 | QQQM | $187 | 0.15% | 27.1% |
| Invesco QQQ Trust | QQQ | $455 | 0.20% | 27.0% |
| SPDR Gold MiniShares | GLDM | $50 | 0.10% | 29.3% |
| SPDR Gold Shares | GLD | $231 | 0.40% | 28.9% |
| Grayscale Bitcoin Mini Trust | BTC | $5 | 0.15% | N/A |
| Grayscale Bitcoin Trust | GBTC | $46 | 1.50% | 98.7% |
| iShares Gold Trust Micro | IAUM | $25 | 0.09% | 29.3% |
| iShares Gold Trust | IAU | $47 | 0.25% | 29.1% |
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related content
-
September Fed Meeting: Live Updates and CommentaryThe September Fed meeting is a key economic event, with Wall Street keyed into what Fed Chair Powell & Co. will do about interest rates.
-
Ask the Editor: Questions on 529 Plan Rollovers to a Roth IRAAsk the Editor In this week's Ask the Editor Q&A, we answer four questions from readers on transferring 529 plan money to a Roth IRA.
-
September Fed Meeting: Live Updates and Commentary
The September Fed meeting is a key economic event, with Wall Street keyed into what Fed Chair Powell & Co. will do about interest rates.
-
I'm an Investment Strategist: This Is How the Fed's Next Rate Move Could Impact Your WalletInterest rate cuts might be coming, which could affect everything from your credit card debt to your mortgage. It's smart to prepare now — here's how.
-
I'm a Retirement Planner: These Are Three Common Tax Mistakes You Could Be Making With Your InvestmentsDon't pay more tax on your investments than you need to. You can keep more money in your pocket (or for retirement) by avoiding these three common mistakes.
-
Want to Shave 10 Hours Off Your Workweek? A Startup Expert Shows How AI Can HelpArtificial intelligence is overhauling how companies operate, freeing up entrepreneurs and their workers to skip the menial stuff and get down to business.
-
Dow Gains 617 Points as Rate Cuts Near: Stock Market TodayWednesday's economic data didn't shift Wall Street's expectations that the Fed is preparing for a rate cut at next week's meeting.
-
Hot August CPI Report Doesn't Shift the Rate-Cut Needle: What the Experts SayThe August CPI came in higher than forecast on a monthly basis, but Wall Street still expects a rate cut at next week's Fed meeting.
-
Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings, From a Financial PlannerHolding too much of one company's stock can put your financial future at risk. Here are four ways you can strategically unwind such positions without triggering a massive tax bill.
-
Beyond Banking: How Credit Unions Serve Their CommunitiesCredit unions differentiate themselves from traditional banks by operating as member-owned financial cooperatives focused on community support and service rather than shareholder profit.
