Best ETFs to Buy Now (Oct. 25): 5 Big, Liquid Picks + Model Allocation

Looking for the best ETF to buy now? You're in the right place. This article identifies five large, liquid sector ETFs that offer timely exposure across different parts of the U.S. economy as of October 2025.

With markets at all-time highs and inflation running at 2.92% year-over-year (per the latest CPI-U data from August 2025), you need simple, cost-effective tools to build a diversified portfolio without getting lost in the noise.

All the five picks that we are going to present meet strict criteria:

• U.S.-listed
• Assets under management (AUM) of at least $5 billion
• Expense ratios at or below 0.15%
• Tight bid-ask spreads (0.05% or less)
• Long track records.

These aren't obscure niche funds. They're the kind of ETFs you can trade confidently, knowing you won't get dinged by hidden costs or struggle to find a buyer when you want to sell.

After the picks, you'll get a model allocation that balances growth, defense, and cyclical exposure, plus practical buying guidance so you know exactly how to execute. No fluff, no teasers. Just the information you need to make a decision today.

We don't pick ETFs based on gut feel or past-year performance. Our selection process is transparent, rules-based, and designed to ensure every pick is big, liquid, and cost-effective. Here's how we do it.

Universe Filter

We start with a universe of U.S.-listed, sector-focused ETFs. To make the cut, a fund must have AUM of at least $5 to $10 billion (or rank in the top 2 by AUM in its sector), an expense ratio typically at or below 0.15%, average bid-ask spreads of 0.05% or less, and a track record of at least 5 years.

This filter eliminates niche funds, new launches with unproven liquidity, and high-cost products that eat into your returns.

Five-Factor Scoring

Once we have our universe, we score each ETF on five factors:

1. Liquidity (30%): Average daily trading volume, bid-ask spread, and market-maker depth. You want to be able to trade without slippage.
2. Cost (25%): Expense ratio and total cost of ownership, including spreads and potential tracking error. Lower is better.
3. Breadth/Fit to Sector (20%): How well the ETF represents its sector (market-cap weighting, number of holdings, and exposure to subsectors). We prefer broad, representative funds over concentrated bets.
4. Tracking Quality (15%): Historical tracking error versus the benchmark index over 1, 3, and 5 years. Tight tracking means the ETF delivers what it promises.
5. Sponsor Stability (10%): Issuer reputation (Vanguard, BlackRock, State Street) and fund longevity. Established sponsors are less likely to shut down a fund.

Update Cadence

We re-verify AUM, expense ratios, and spreads monthly. If a metric degrades or a corporate action changes the fund (like a merger or benchmark shift), we re-evaluate the pick.

This methodology prioritizes simplicity and accessibility. No niche or thin ETFs. Just the building blocks you need.

*Data current as of October 15, 2025. Metrics sourced from issuer fact sheets, Morningstar, and real-time market data.

Each of the five ETFs below represents a different slice of the U.S. economy: Technology, Health Care, Financials, Consumer Discretionary, and Energy. Together, they provide broad diversification without overlap.

All five are among the most liquid ETFs in their categories, with combined AUM exceeding $150 billion and average expense ratios under 0.12%. You'll find details on each fund's 'Why now' thesis (dated to October 2025), key statistics, primary risks, and ideal investor profile.

These aren't speculative bets. They're foundational building blocks for a diversified portfolio.

XLK – Technology: Concentrated Exposure to Mega-Cap Tech and AI Infrastructure

The Technology Select Sector SPDR Fund (XLK) tracks the Technology Select Sector Index, holding around 60 U.S. technology stocks weighted by market cap.

Top holdings include Apple (22%), Microsoft (20%), Nvidia (15%), Broadcom (5%), and Salesforce (3%). This is a concentrated bet on mega-cap tech, with the top five holdings representing roughly 45% of assets.

Why now (October 2025):

• As of October 2025, mega-cap tech stocks continue to drive S&P 500 gains, with AI infrastructure spending accelerating across cloud providers, semiconductor makers, and software platforms.
• Nvidia's data-center revenue is up triple digits year-over-year, and Microsoft's Azure is growing at 30%+ annually. XLK offers concentrated exposure to this trend while maintaining deep liquidity for tactical positioning.
• If you believe AI is a multi-year tailwind, XLK is the simplest way to play it.

Key stats: AUM: $68 billion | Expense Ratio: 0.10% | Avg. Spread: 0.02% | 1-Year Return: +32% | 5-Year Annualized: +24% (Source: State Street, October 2025 fact sheet)

Primary risks:

• Concentration risk - top 5 holdings represent ~45% of assets, so a correction in Apple or Microsoft hits hard.
• Valuation risk - mega-cap tech trades at elevated P/E multiples (30+), leaving little room for earnings disappointments.
• Regulatory risk - antitrust scrutiny of big tech could lead to breakups or fines.

Good for: Growth-focused investors comfortable with tech concentration and higher volatility. If you're under 40 with a long time horizon, XLK is a core holding.

XLV – Health Care: Defensive Anchor with Innovation Upside

The Health Care Select Sector SPDR Fund (XLV) tracks the Health Care Select Sector Index, holding around 60 U.S. health care stocks.

Top holdings include UnitedHealth Group (10%), Johnson & Johnson (7%), Eli Lilly (7%), AbbVie (5%), and Merck (4%). The fund spans pharmaceuticals, biotech, managed care, and medical devices.

Why now (October 2025):

• Health care remains a defensive anchor as inflation persists at 2.92% (August 2025 CPI-U).
• XLV's mix of pharma, biotech, and managed care provides stable cash flows and innovation upside.
• Eli Lilly's obesity drugs (Mounjaro, Zepbound) are generating blockbuster revenue, and UnitedHealth's Optum division is growing double digits.
• Health care spending is non-discretionary, making XLV a natural hedge against economic slowdowns.
• With the S&P 500 at all-time highs, adding defensive exposure makes sense.

Key stats: AUM: $38 billion | Expense Ratio: 0.10% | Avg. Spread: 0.02% | 1-Year Return: +12% | 5-Year Annualized: +11% (Source: State Street, October 2025 fact sheet)

Primary risks:

• Regulatory risk - drug pricing legislation (like Medicare negotiation) could squeeze pharma margins.
• Patent cliffs - blockbuster drugs losing exclusivity hurt revenue.
• Clinical trial failures - biotech holdings face binary outcomes on FDA approvals.

Good for: Investors seeking defensive exposure with lower volatility than tech. If you're nearing retirement or expect a recession, XLV is a must-have.

XLF – Financials: Cyclical Play on Economic Expansion and Rising Rates

The Financial Select Sector SPDR Fund (XLF) tracks the Financial Select Sector Index, holding around 70 U.S. financial stocks.

Top holdings include Berkshire Hathaway (13%), JPMorgan Chase (10%), Visa (7%), Mastercard (6%), and Bank of America (5%). The fund covers banks, insurers, payment processors, and capital markets firms.

Why now (October 2025):

• Financials benefit from a strong economy and elevated interest rates.
• The Federal Reserve's benchmark rate remains in the 5.25–5.50% range as of October 2025, supporting bank net interest margins.
• Credit quality is solid, with low default rates, and consumer spending remains robust.
• Visa and Mastercard are growing payment volumes at high single digits.
• If you believe the U.S. economy avoids recession and rates stay higher for longer, XLF offers cyclical exposure at a reasonable valuation (P/E ~14).

Key stats: AUM: $45 billion | Expense Ratio: 0.10% | Avg. Spread: 0.02% | 1-Year Return: +18% | 5-Year Annualized: +13% (Source: State Street, October 2025 fact sheet)

Primary risks:

• Credit cycle risk - if the economy slows, loan defaults rise and bank earnings fall.
• Interest rate risk - if the Fed cuts rates aggressively, net interest margins compress.
• Regulatory risk - stricter capital requirements could limit bank profitability.

Good for: Value-tilted portfolios seeking cyclical exposure to rising interest rates and economic expansion. If you're bullish on the economy, XLF is a solid bet.

XLY – Consumer Discretionary: Bet on Consumer Strength and E-Commerce Growth

The Consumer Discretionary Select Sector SPDR Fund (XLY) tracks the Consumer Discretionary Select Sector Index, holding around 50 U.S. consumer discretionary stocks.

Top holdings include Amazon (23%), Tesla (15%), Home Depot (7%), McDonald's (4%), and Nike (4%). The fund spans e-commerce, autos, restaurants, and retail.

Why now (October 2025):

• Consumer spending accounts for ~70% of U.S. GDP, and it remains resilient as of October 2025.
• Amazon's retail and cloud businesses are firing on all cylinders, and Tesla is ramping production of its lower-cost Model 2.
• Home Depot benefits from housing turnover and renovation spending.
• XLY offers exposure to secular trends (e-commerce, EVs) and cyclical consumer strength.
• If you believe the consumer stays healthy, XLY is a growth play with cyclical upside.

Key stats: AUM: $20 billion | Expense Ratio: 0.10% | Avg. Spread: 0.03% | 1-Year Return: +22% | 5-Year Annualized: +16% (Source: State Street, October 2025 fact sheet)

Primary risks:

• Economic sensitivity - discretionary spending falls first in a recession.
• Concentration risk - Amazon and Tesla represent ~38% of assets.
• Valuation risk - many holdings trade at premium multiples, vulnerable to earnings misses.

Good for: Growth investors who believe in consumer resilience and secular trends like e-commerce and EVs. If you're comfortable with volatility, XLY adds punch to your portfolio.

XLE – Energy: Inflation Hedge and Commodity Exposure

The Energy Select Sector SPDR Fund (XLE) tracks the Energy Select Sector Index, holding around 20 U.S. energy stocks.

Top holdings include ExxonMobil (23%), Chevron (16%), ConocoPhillips (8%), EOG Resources (5%), and Schlumberger (5%). The fund covers oil & gas exploration, production, refining, and services.

Why now (October 2025):

• Energy is an inflation hedge and a play on tight oil supply.
• OPEC+ production cuts remain in place as of October 2025, supporting Brent crude around $85–$90 per barrel.
• U.S. shale production is disciplined, prioritizing returns over growth.
• XLE's holdings generate strong free cash flow, funding dividends (XLE yields ~3.5%) and buybacks.
• If you believe inflation stays elevated or geopolitical risks (Middle East, Russia) flare up, XLE offers downside protection.
• It's also a portfolio diversifier because energy often zigs when tech zags.

Key stats: AUM: $35 billion | Expense Ratio: 0.10% | Avg. Spread: 0.03% | 1-Year Return: +8% | 5-Year Annualized: +12% (Source: State Street, October 2025 fact sheet)

Primary risks:

• Oil price volatility - fund performance is tied to commodity swings, which can be extreme.
• Policy risk - climate regulation and the energy transition could hurt long-term demand.
• Geopolitical risk - supply disruptions from OPEC+ decisions or conflict can spike prices, but also create uncertainty.

Good for: Investors seeking inflation protection, portfolio diversification, and income (dividends). If you want a hedge against tech and consumer exposure, XLE is the answer.

Here's a default 'Balanced Tilt' allocation that weights the five ETFs based on growth potential, defensive characteristics, and cyclical balance:

XLK (Technology) 30% | XLV (Health Care) 25% | XLF (Financials) 20% | XLY (Consumer Discretionary) 15% | XLE (Energy) 10%

This allocation tilts toward growth (45% in XLK + XLY) while anchoring with defensives (25% XLV) and adding cyclical/value ballast (30% XLF + XLE).

It's designed for moderate risk tolerance and a 5–10 year horizon. You get exposure to tech's upside, health care's stability, financials' cyclical leverage, consumer strength, and energy's inflation hedge.

More Defensive: Shift 5–10% from XLK/XLY → XLV/XLE

If you're nearing retirement or expect a recession, reduce tech and discretionary exposure. Move 5% from XLK to XLV and 5% from XLY to XLE.

New allocation: XLK 25%, XLV 30%, XLF 20%, XLY 10%, XLE 15%. This increases defensive health care and adds an inflation/commodity hedge via energy. You'll sacrifice some growth upside, but you'll sleep better if the market corrects.

More Growth: Shift 5–10% from XLF/XLE → XLK/XLY

For younger investors or those bullish on tech and consumer strength, reduce financials and energy. Move 5% from XLF to XLK and 5% from XLE to XLY.

New allocation: XLK 35%, XLV 25%, XLF 15%, XLY 20%, XLE 5%. This amplifies growth while accepting higher volatility. If tech and consumer continue their run, this allocation will outperform.

Rebalancing Discipline

Review your allocation quarterly. Rebalance if any sector drifts more than 5 percentage points from target.

For example, if XLK grows to 36%, sell 6% and redistribute to the other four ETFs. This enforces buy-low, sell-high discipline and prevents your portfolio from becoming too concentrated in one sector.

In taxable accounts, rebalancing triggers capital gains, so consider doing it within tax-advantaged accounts (401(k), IRA) first.

This is a starting point. Adjust based on your personal risk tolerance, time horizon, and existing holdings. If you already own a total-market ETF like VTI, you may reduce allocations here to avoid overlap.

Let's look at the key market trends and investor behaviors shaping ETF demand as of October 2025. Understanding these trends helps you see where the opportunities and risks are.

Tech Dominance and AI Infrastructure Spending

Mega-cap tech stocks continue to drive S&P 500 gains, with AI infrastructure spending accelerating across cloud providers, semiconductor makers, and software platforms.

Invesco QQQ has outperformed the S&P 500 by 510 basis points annually over 10 years (18.71% versus 13.62% as of June 30, 2025 (Source: Invesco)). That's the power of concentration in winners like Apple, Microsoft, and Nvidia.

This concentration has pushed S&P 500 valuations to 2021 highs, creating both opportunity (growth) and risk (valuation). Tech-heavy ETFs like XLK and QQQ remain top inflow destinations despite elevated multiples.

Investors are betting that AI is a multi-year tailwind, not a one-year fad. The risk? If earnings disappoint or rates spike, these high-multiple stocks could correct hard.

Dividend ETFs: Underperformance Creates Value Entry Points

Dividend-focused ETFs like SCHD have underperformed tech-heavy indices in 2025, with SCHD down 2.24% over the past year (including dividends) as investors chased AI mania (Source: Stock Analysis).

However, this underperformance has expanded SCHD's yield to 3.85% versus its 5-year mean of 3.27%, creating a compelling value entry point.

As one analyst from Stock Analysis put it: 'SCHD has significantly underperformed recently. However, I think this is a feature, not a bug. I detail why I am more bullish than ever on SCHD'.

SCHD's conservative P/E of 15.66 and 5.79% year-over-year dividend growth signal sustainability. If growth stocks cool and investors rotate back to value and income, dividend ETFs could outperform. The contrarian play is to buy when everyone else is selling.

Small-Cap Outflows: A Contrarian Opportunity?

Small-cap ETFs are experiencing sustained outflows in 2025, with investors rotating out of the segment in favor of large-cap growth.

Morningstar analyst Amy Arnott notes: 'If they're taking money out of small caps, then it could be a good time to make a contrarian play. And so what we say in factor investing is 'no pain, no premium.' So it has to almost go out of style to have the potential to outperform going forward'.

Small-cap value funds averaged +7.10% returns in August 2025, and Gold-rated ETFs like VB, IJR, and DFAS offer low-cost access to this potentially undervalued segment. Small caps are more economically sensitive than large caps, so if the U.S. avoids recession and rates stabilize, they could rebound sharply.

The risk is that a slowdown hits small caps first and hardest.

Commodities and Safe-Haven Demand: Gold's Breakout Year

Gold ETFs like GLD posted a 45.6% year-to-date return in 2025, reflecting safe-haven demand amid geopolitical uncertainty and persistent inflation (2.92% CPI-U as of August 2025).

Silver (SLV) also surged 61.4% YTD. Investors are hedging against inflation, currency debasement, and market volatility. Commodities don't generate cash flows (no dividends or earnings), so they're pure price plays.

They serve as portfolio diversifiers and inflation hedges, but they're volatile. Gold can drop 20% in a year if inflation falls or the dollar strengthens.

Commodity ETFs also charge higher expense ratios (GLD 0.40%, SLV 0.50%) than equity ETFs. Use them sparingly, as a 5–10% portfolio allocation at most.

Zero-Fee ETFs and the Race to the Bottom on Costs

Fidelity's FNILX has eliminated all management fees, charging a 0% expense ratio. While FNILX tracks a proprietary index (not the official S&P 500), the cost savings are significant ($0 annually versus $3 for VOO/IVV or $9.45 for SPY on a $10,000 investment).

Even small fee differences compound over decades. A 0.03% versus 0.095% expense ratio costs $650 over 10 years on a $100,000 portfolio before compounding. This trend pressures traditional issuers to cut fees, benefiting investors.

The takeaway? Always compare expense ratios. Over 20 or 30 years, a few basis points can mean tens of thousands of dollars.

The five ETFs recommended here, XLK, XLV, XLF, XLY, and XLE, offer big, liquid, cost-effective exposure across key U.S. sectors.

The default model allocation (30% XLK, 25% XLV, 20% XLF, 15% XLY, 10% XLE) balances growth, defense, and cyclical exposure for moderate risk tolerance. You can adjust by shifting 5–10% between sectors: more defensive (add to XLV/XLE), more growth (add to XLK/XLY).

All these ETFs are available on TradeStation, and you can start trading them by clicking this link.

When you buy ETFs, be it these ones or any other one, follow three practical tips:

• Use a low-cost broker like TradeStation, eToro, Fidelity, Schwab, or Interactive Brokers to avoid trading fees;
• Trade with limit orders during mid-session (10 a.m.–3 p.m. ET) to avoid wide spreads at market open or close;
• Check the ETF's premium or discount to NAV before buying, as all five picks typically trade within 0.05% of NAV due to high liquidity.

No ETF is risk-free. Tech can correct if valuations compress. Health care faces regulatory headwinds on drug pricing. Financials are tied to credit cycles and interest rates. Discretionary is cyclical and falls first in a recession. Energy is volatile and tied to commodity prices.

However, diversification across sectors mitigates single-sector risk. Review your allocation quarterly and rebalance if any sector drifts more than 5 percentage points from target. This enforces buy-low, sell-high discipline.

As of October 2025, U.S. equities are at all-time highs, but opportunities exist in undervalued segments like small-cap value and dividend equity. By sticking to big, liquid ETFs and a disciplined allocation, you can build a portfolio that weathers market cycles and compounds wealth over time.

We update this article every two months to ensure the ETFs we recommend remain strong choices. If market conditions change or better options emerge, we'll revise our picks and let you know.