8 ETFs That May Outperform Savings Accounts

Investing can be complicated, and often, many have a way of making it seem more difficult than it is. The main goal for anyone who socks their money away is to make as much money as possible. Some of the safest avenues to save and earn interest are traditional accounts, such as a savings account or a certificate of deposit (CD).

The challenge? These traditionally “safe” savings vehicles often can’t keep pace with inflation, which means your money could be losing purchasing power over time. For example, you often face the problem of inflation when putting away money in savings accounts. Inflation means prices are rising, so your money buys less over time. So, with inflation at 2.4% for the trailing 12 months as of May 2025, a savings account paying 1% interest would be losing about 1.4% of its purchasing power.

In addition, most people want to do more than just hold steady with the rate of inflation. That’s why many investors turn to exchange-traded funds (ETFs) as an alternative to traditional savings accounts. These funds work by pooling money from many investors to buy a big collection of investments—stocks, bonds, or other assets.

ETFs can have just bonds or just stocks or just some other asset, or a mix of different types of assets. The trick is to find ETFs that have more of the kind of stability you’re used to but with a higher rate of return than you would get from a savings account. Below, we take you through eight likely to meet this standard.

Saving with Exchange-Traded Funds (ETFs)

ETFs have changed how many everyday people invest their money. These funds sell shares on the major exchanges that give you ownership of a part of baskets of stocks, bonds, and other investments. Americans have embraced these investment tools in a big way—as of March 2025, over 4,000 U.S.-based ETFs managed over $10 trillion in assets.

While ETFs generally carry more risk than a savings account (meaning your investment could go down in value), many ETFs are designed to be less risky than buying individual stocks. They do this by spreading your money across many different investments. That’s so that if any of them do poorly, they can potentially make that up from the others.

For people who don’t need their money right away, these investment tools might work better than traditional savings accounts or CDs for building long-term wealth. Below, we’ll look at four main types:

1. Index ETFs that track the broad market moves. In other words, when you hear the market is up today, that would mean your ETF should be up, though you’ll want to listen or read for which index is up since your ETF might be linked to one of them.
2. Bond ETFs that focus on more stable investments
3. Sector ETFs that target specific parts of the economy.
4. Money market ETFs that hold short-term government bonds, akin to bank money market funds.

Many easier-to-understand ETFs within this group have often outperformed inflation. To get higher returns, you’ll need to take on more risk, but many ETFs offer much lower risk than individual stocks.

Comparing ETFs and Savings Accounts

Before you dump your entire savings account into an ETF, let’s make sure you understand the differences between the two:

What Your Money Buys

• Savings account: Your money stays as cash, just like keeping it in your checking account but earning some interest. The interest might be at a fixed rate or one that changes over time.
• ETFs: Your money buys pieces of investments like stocks or bonds that can grow (or shrink) in value.

Assessing the Safety of Your Money

• Savings account: Up to $250,000 is protected by the government (Federal Deposit Insurance Corp.)—you can’t lose your original deposit if it’s under that.
• ETFs: Come with no government insurance, so their value goes up or down based on market performance.

Accessing Your Money When Needed

• Savings account: Usually available anytime, though some banks limit monthly withdrawals on certain types of savings accounts.
• ETFs: Can be sold when the major stock exchanges are open, but you might have to sell for less than you paid if the markets are down.

Potential Earnings from ETFs

• Savings account: Generally a fixed interest rate that’s predictable, but typically lower than ETF returns.
• ETFs: Potential for higher returns through investment gains and dividends, but no guarantees.

Tax Considerations

• Savings account: The interest earned is taxable each year.
• ETFs: Tax implications vary. You may owe taxes on any dividends received and gains when you sell (if you sell the ETF shares for more than you originally paid). In addition, some retirement accounts can delay when you have to pay taxes until you withdraw from them later in life.

Introduction to Index ETFs

Index ETFs follow a large market index. Despite there being bond indexes, in general, these refer to ETFs that track a stock index. But what is that? A stock index—the S&P 500 and Dow Jones Industrial Average are two famous examples—is like a scorecard that tracks how a group of stocks or bonds is doing overall.

That is, it follows the performance of a bunch of companies’ stock prices—for example, the S&P 500, tracks 500 very large U.S. companies. Instead of looking at just one company, an index gives you a snapshot of how the whole group is doing. Indexes thus serve as benchmarks for investment performance and are the backbone of index ETFs.

These funds are also called “passive“—that’s because the managers don’t have to pick any stocks; they are already chosen to be in the index the fund is promising to follow.

Advantages of Index Funds

Today, index ETFs cover almost every type of index imaginable, from broad market indexes like the Dow to specialized ones that focus on sectors and regions. By following an index, these ETFs offer instant diversification—this means spreading your money across different investments to cut your risk.

These ETFs are also generally lower in cost. They’re also great for knowing exactly what you’re getting—there’s no guessing what’s in them and how they’re doing since they are based on widely covered indexes that you can look up at any time. Indeed for those like the S&P 500 or Dow Jones Industrial Average, you’ll hear or read about them at the top of the news.

That said, some ETFs are not really for beginners or those needing to ensure as best as they can that they don’t lose anything in what they sock away. These include crypto ETFs, commodity ETFs, and inverse ETFs that bet against the market or specific economic sectors.

With all this in mind, below are three ETFs to consider:

SPDR S&P 500 ETF Trust (SPY)

SPDRs were the first index ETFs launched in 1993 to track the S&P 500. They opened the door for investors to access an entire index in a single, tradable fund. The first was the SPDR S&P 500 ETF Trust (SPY), which mirrors the performance of the S&P 500.

Not only is it the largest ETF in the world, but it’s also the oldest. Launched in 1993, the fund has over 600 billion in assets under management (AUM). The fund’s fees are only 0.0945%, which is higher than some of the funds that track the S&P 500 but, given its size, it might save you in terms of the spreads between the bid and ask prices for shares.

This is worth explaining since many investors just immediately choose funds with the lowest expense ratio. Let’s make this concrete with an example. Suppose you invest $10,000 in SPY. SPY’s 0.0945% expense ratio would cost $9.45 annually, while a smaller fund that tracks the same index might charge 0.04%, which would cost $4 a year—a $5.45 difference.

However, SPY’s higher trading volume typically results in spreads as tight as $0.01 to $0.02 per share, while less liquid ETFs might have spreads of $0.05 to $0.10 or wider. For more active traders, that can make a big difference over time. For passive investors and savers, it may depend on the specific ETF being compared to SPY.

The fund’s major holdings are listed below.

The iShares Russell 2000 Value Index ETF (IWM)

If you want to profit from the performance of smaller companies, you can try the iShares Russell 2000 Value Index ETF. Established in 2000, the fund costs less than the industry average while allowing you to have a stake in the potential giants of tomorrow.

Because its holdings are very spread out and many of them are smaller, lesser-known companies (see the chart below), it’s important to note that the top three sector weightings in June 2025 were financial firms (19.36%), industrials (18.17%), and real estate (16.08%).

The Vanguard Total Stock Market ETF (VTI)

If you want the broadest representation of the U.S. stock market, the Vanguard Total Stock Market ETF is popular for doing so. VTI takes the “buy everything” approach. With over 3,500 companies in its portfolio, it’s like buying a tiny piece of almost every public company in America.

VTI charges just three cents per $100 invested, making it one of the cheapest ways to own the entire U.S. stock market. Its returns, in line with the U.S. stock market as a whole in recent years, have been quite strong. The top sectors represented are technology (34.50%), consumer discretionary (14.90%), and industrials (13.10%) as of June 2025. The company holdings are below:

Exploring Bond ETFs

Bond ETFs allow you to invest with less stress given the safety of bonds and without the risks of holding individual bonds—or indeed higher-risk stocks and other securities. Bonds are like loans to companies or governments, and they pay you interest in return, just as you pay interest on what you borrow to credit card or mortgage companies. These funds invest in hundreds or thousands of bonds simultaneously, making your money relatively safe.

The older you are, the more your investment dollars should be in bonds. Here are two bond ETFs to consider.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG)

The iShares iBoxx $ High Yield Corporate Bond ETF tracks the Markit iBoxx USD Liquid High Yield Index, which focuses on corporate bonds with higher interest rates but lower credit ratings. With investments in more than 1,200 of these bonds, it’s like owning a slice of corporate America’s debt market. Its returns have historically shown it can offer a higher yield than a typical savings account, though with more risk.

The bonds HYG holds are widely spread out among companies, though it has more sizable holdings in the consumer cyclical (17.69%), communications (16.70%), and consumer noncyclical (12.62%) sectors as of June 2025.

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)

For those seeking a more conservative approach, the iShares iBoxx $ Investment Grade Corporate Bond ETF follows the Markit iBoxx USD Liquid Investment Grade Index.

This fund focuses on bonds from companies with stronger credit ratings, like Bank of America (BAC) and JPMorgan Chase (JPM). With over 2,900 different bonds and over $28 billion under management, it charges 14 cents per $100 invested.

The banking sector is the most represented in the ETF with 23.61%, with another 17.64% in consumer noncyclical, and 11.56% in technology as of June 2025.

Sector-Specific ETFs

While broad market ETFs buy the whole market and bond ETFs focus on loans, sector ETFs zero in on specific parts of the economy. They’re riskier than broader market funds since your money isn’t spread across different industries, but they can be useful for investors who have good reason to think that particular sectors are going to do well.

Since you expose your portfolio to higher risk with sector ETFs, you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don’t use them at all.

Consider the two funds below.

The Financial Select Sector SPDR Fund (XLF)

The Financial Select Sector SPDR tracks the Financial Select Sector Index, which tracks the stocks of the American financial industry. For eight cents per $100 invested, you get exposure to banking giants, insurance companies, and payment processors.

As one would expect, the fund’s holdings are in various sectors of the financial world. Financial services represent 30.93% of the fund, banks make up 25.72% of the fund, 24.21% of the fund is in capital markets, insurance represents 14.58% of fund assets, and consumer finance comes in at 4.56% of the ETF as of June 2025. Major holdings include familiar names like Berkshire Hathaway (BRK.A, 12.21% of holdings), JPMorgan Chase (11.01%), and Visa (V, 8.13%).

If you were invested in the ETF in recent years, you would have your shares soar on the back of a booming financial industry. For example, as of June 2025, the fund had gained 126.95% over the past five years.

The Invesco QQQ Trust Series 1 (QQQ)

The Invesco QQQ Trust, while not technically a sector fund, has become the go-to ETF for technology investors. It tracks the Nasdaq-100 Index, which includes the largest nonfinancial companies listed on the Nasdaq stock exchange.

With tech giants like NVIDIA (NVDA, 9.08%), Microsoft (MSFT, 8.87%), and Apple (AAPL, 7.20%) among its top holdings, as of June 2025, this ETF has delivered impressive returns—129.54% over the past five years and 410.12% over the past 10 years.

Its top holdings as of June 2025 are 57.23% in technology, 19.66% in the consumer discretionary sector, and 5.80% in healthcare.

Money Market ETFs

In 2024, a new kind of ETF was launched, the first true money market ETF, potentially offering the best of both worlds between savings accounts and fund investments.

Texas Capital Government Money Market ETF (MMKT)

The Texas Capital Government Money Market ETF marks the first time investors can access a money-market fund in the form of an ETF. For investors worried about moving beyond savings accounts, MMKT might offer an appealing middle ground. Like a savings account, it focuses on maintaining stability but also seeks higher yields than typical bank accounts.

Of particular importance is that MMKT goes beyond other ETFs following what’s known as Rule 2a-7, which is the same strict government regulation that traditional money market funds must follow. This means 99.5% of its assets must be in cash or various types of government securities.

While the fund isn’t FDIC-insured like your savings account, these requirements make it a more conservative approach within the range of options in your brokerage account.

The fund charges 20 cents per $100 invested (0.20% expense ratio), which is higher than some savings accounts but lower than many investment options. For investors looking to dip their toes beyond savings accounts, MMKT represents a way to acclimate yourself to how the markets and brokerage accounts work after perhaps only having bank accounts previously. Later on, if you wish, you can broaden your horizons to other ETFs like those discussed above.

The Bottom Line

A savings account is a safe place to park your cash. Many times, especially when inflation is rising or high, it can also mean losing money. To generate something extra and beat inflation, you generally need to invest in securities. The ETFs discussed offer an inexpensive, diversified way to do this, and there are plenty of choices that focus on stocks, bonds, or indexes. That said, there is more risk involved with ETFs than with savings accounts, especially with ETFs that hold stocks.

ETFs aren’t for everyone. Bear in mind that ETFs don’t offer guaranteed returns, and the value of your investment can decrease.