The best long-term ETFs allow investors to easily build a diversified portfolio because they provide broad exposure across many asset classes, industries, and geographies. This diversification can help an investor reduce risk without sacrificing long-term returns.
There are many exchange-traded funds (ETFs) built for long-term investors. Here’s a closer look at several top ETFs that make ideal buy-and-hold investments.
The best ETFs for the long term hold a diversified portfolio of stocks while charging a very low ETF expense ratio. While many funds share those two key characteristics, here are the top ETFs for long-term investors:
1. Vanguard S&P 500 ETF
Like the S&P 500, this ETF uses a market weight strategy, giving a higher weighting to the largest companies. As a result, its top 10 holdings made up more than 30% of its total net assets in early 2022. That gives investors relatively concentrated exposure to the largest companies in the index.
This ETF offers investors exposure to the largest U.S. stocks for a very low cost. Its ETF expense ratio of 0.03% is significantly below 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 (RSP -0.59%) is also an index fund designed to track the stocks in the S&P 500. However, it uses an equal weight approach instead of one based on market cap. As a result, this ETF’s top 10 holdings represent just 2.5% of its total assets.
This approach reduces concentration risk by providing broad exposure across the 500 stocks in the S&P 500. This ETF rebalances its holdings quarterly to ensure each holding remains a relatively equal portion of the fund’s assets.
This ETF has a relatively low expense ratio of 0.2%. That’s a reasonable fee to gain broad equal-weight exposure to 500 of the largest public companies in the U.S.
3. iShares Russell 1000 Growth ETF
The iShares Russell 1000 Growth ETF (IWF 0.14%) provides exposure to U.S. companies expected to increase their earnings at an above-average rate compared to the broader stock market. The fund held shares of about 500 companies as of early 2022.
This ETF takes a market-weighted approach. Because of that, its top 10 holdings made up almost 50% of its total assets. Given its growth focus, technology stocks make up a significant portion of the fund’s holdings. Overall, the information technology sector accounted for 46% of the ETF’s holdings.
This ETF charges investors a reasonable expense ratio of 0.19%. That’s a fair price to pay to gain long-term exposure to growth stocks.
4. Vanguard Real Estate ETF
The Vanguard Real Estate ETF (VNQ -0.43%) invests in real estate stocks, with a focus on real estate investment trusts (REITs). These entities typically own income-producing commercial real estate such as apartments, office buildings, retail properties, and industrial complexes.
As of early 2022, this REIT ETF had 164 total holdings. The top 10 made up 44.7% of its assets. However, it’s worth noting that its largest holding was a real estate index fund also managed by Vanguard, which helps reduce its overall concentration.
This fund charges a relatively low fee of 0.12%. That makes it an inexpensive way to gain exposure to the real estate market, which has historically been an excellent long-term investment.
5. Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (SCHD -1.75%) tracks an index focused on holding dividend stocks known for the quality and sustainability of their dividend payments. This ETF enables investors to benefit from the power of dividends in producing attractive total returns for…
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