The best long-term ETFs make it easy for investors to build a diversified portfolio because they offer broad exposure to many asset classes, sectors, and geographies. This diversification can help an investor reduce risk without sacrificing long-term returns.
There are many exchange-traded funds (ETFs) designed for long-term investors. Here’s a rundown of several of the best ETFs that make ideal investments to buy and hold.
Best long-term ETFs
The best AND F long term hold a diversified portfolio inventory while charging a very low ETF expense ratio. While many funds share these two key characteristics, here are the best ETFs for long-term investors:
1. Vanguard S&P 500 ETF
the Vanguard S&P 500 ETF (NYSEMKT: VOO) is a index fund designed to follow the S&P 500 Index. This index represents 500 of the largest publicly traded US companies. The objectives of this ETF are to closely track the returns of this index, which is the primary benchmark for overall US stock market returns. It offers investors a high potential for investment growth, making it an ideal long-term investment.
Like the S&P 500, this ETF uses a market weighting strategy, giving larger companies a higher weighting. As a result, its top 10 holdings accounted for more than 30% of its total net assets at the start of 2022. This gives investors relatively concentrated exposure to the largest companies in the index.
This ETF offers investors exposure to the largest US stocks for a very low cost. Its ETF expense ratio of 0.03% is significantly lower than the industry average expense ratio of 0.24%. In other words, investors would only pay $3 in annual management fees per $1,000 invested in this ETF, compared to $24 per year for every $1,000 invested in the average ETF.
2. Invesco S&P 500 Equal Weight ETF
the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP) is also an index fund designed to track S&P 500 stocks. However, it uses an equal weight approach instead of a market capitalization approach. Therefore, the top 10 holdings of this ETF represent only 2.5% of its total assets.
This approach reduces concentration risk by providing broad exposure to all 500 stocks of the S&P 500. This ETF rebalances its holdings quarterly to ensure that each holding remains a relatively equal portion of the fund’s assets.
This ETF has a relatively low expense ratio of 0.2%. This is a reasonable fee to gain broad, equal-weight exposure to 500 of the largest public companies in the United States.
3. iShares Russell 1000 Growth ETF
the iShares Russell 1000 Growth ETF (NYSEMKT: IWF) provides exposure to US companies that are expected to grow earnings at an above-average rate relative to the broader stock market. The fund held shares of around 500 companies at the start of 2022.
This ETF adopts a market-weighted approach. For this reason, his top 10 holdings accounted for nearly 50% of his total assets. Given its growth objective, technology stocks make up a significant portion of the fund’s holdings. Overall, the information technology sector accounted for 46% of ETF holdings.
This ETF charges investors a reasonable expense ratio of 0.19%. It’s a fair price to pay for gaining long-term exposure to growth stocks.
4. Vanguard Real Estate ETF
the Vanguard Real Estate ETF (NYSEMKT:VNQ) invests in real estate stocks, with an emphasis on real estate investment trusts (REITs). These entities generally have commercial real estate such as apartments, office buildings, retail and industrial complexes.
In early 2022, this REIT ETFs held 164 assets in total. The top 10 accounted for 44.7% of its assets. However, it should be noted that his largest holding was a real estate index fund also managed by Vanguard, which helps reduce his overall concentration.
This fund charges a relatively low fee of 0.12%. This makes it an inexpensive way to gain exposure to the real estate market, which has always been a great long-term investment.
5. Schwab US Dividend Equity ETF
the Schwab US Dividend Equity ETF (NYSEMKT: SCHD) tracks a holding-based index dividend stocks recognized for the quality and durability of their dividend payments. This ETF allows investors to benefit from the power of dividends by producing attractive total returns for long-term investors.
This ETF held stocks of more than 100 dividend-paying stocks at the start of 2022. The fund offered a dividend yield around 3%, about double that of the S&P 500.
Its top 10 holdings accounted for around 40% of the total. Meanwhile, his global holdings weigh heavily in the financial sector (21.1% of fund holdings) and technology stocks (20.5%).
This ETF charges an ultra-low expense ratio of 0.06%. For this reason, investors retain a significant portion of the dividend income generated by the holdings of this fund. These features make this ETF a very inexpensive way to collect passive income via dividend shares, which have historically been exceptional long-term investments.
6. iShares Core MSCI EAFE ETF
the iShares Core MSCI EAFE ETF (NYSEMKT: IEFA) is an ETF focused on international equities. It offers investors broad exposure to companies in Europe, Australia and Asia. This allows investors to add some international diversification to their portfolio, which has exceptional long-term growth potential.
This ETF held over 3,000 stocks at the start of 2022. It offers fairly broad exposure to global equities, with its top 10 holdings accounting for around 12% of its net assets. This ETF is also reasonably diversified by sector and geography:
Top 5 sectors
Top 5 geographies
Financials (16.8% of fund holdings)
United Kingdom (15.5%)
Consumer Discretionary (11.5%)
Basic consumption (9.5%)
The iShares Core MSCI EAFE ETF charges a very low expense ratio of 0.07%. This makes it an inexpensive way for investors to add international exposure to their portfolios to benefit from the long-term growth of the global economy.
7. iShares Core Growth Allocation ETF
the iShares Core Growth Allocation ETF (NYSEMKT: AOR) offers investors a simple way to build a diversified portfolio focused on long-term growth across multiple asset classes. This fund offers investors exposure to a wide range of global bonds and equities by holding seven ETFs:
- iShares Core Total USD Bond Market (NASDAQ: IUSB): This US-focused company obligation ETFs totaled 33.9% of the fund’s holdings.
- iShares Core S&P 500 ETF (NYSEMKT:IVV): This S&P 500 index fund represented 32.6% of the ETF’s assets.
- iShares Core MSCI International Developed Markets ETF (NYSEMKT:IDEV) This international ETF focused on developed markets represented 18.3% of its assets.
- iShares Core International Aggregate Bond ETF (NYSEMKT:IAGG): This international bond ETF represented 6.2% of the fund’s assets.
- iShares Core MSCI Emerging Markets (NYSEMKT: IEMG) This ETF focused on emerging markets represented 6% of the fund’s assets.
- iShares Core S&P Mid-Cap ETF (NYSEMKT:IJH): This mid cap stocks-the targeted ETFs represented 2% of the fund’s assets.
- iShares Core Small-Cap ETF (NYSEMKT: IJR): This small cap stocks-focused ETFs totaled 0.9% of fund assets.
This ETF makes it easy for investors to build a balanced long-term portfolio, helping to reduce their risk profile while offering attractive returns. It charges investors a reasonable fee of 0.15% after adjusting for fees and associated waivers on the fund’s ETFs.
Why ETFs are good for long-term investors
ETFs can be great building blocks for long-term investors. They can provide broad exposure to market sectors, geographies and industries and help investors quickly diversify their portfolios and lower their overall risk profile.
The best long-term ETFs offer this exposure for a relatively low expense ratio. The low cost allows investors to earn returns roughly matching the underlying index that these funds aim to track over the long term.