These ETFs offer rock-bottom fees to keep costs low.
When it comes to the stock market, many new investors are intimidated by the options out there — and if they aren’t, they often wind up making some costly mistakes by trading at the wrong times. But the strange reality about Wall Street is that sometimes being hands-off can pay off more. Not only does frantic trading sometimes lead to bad decisions, it can also rack up your fees and taxes. Thankfully, there’s a whole universe of exchange-traded funds, or ETFs, out there expressly designed for long-term investors who don’t want to bother with buying and selling at all hours. The following seven long-term ETFs all are very established, with at least $15 billion in assets under management, and offer rock-bottom expense ratios that should add up to just a few dollars per year for most smaller investors.
iShares Core S&P 500 ETF (ticker: IVV)
The S&P 500 index, which comprises about 500 of some of the largest publicly traded domestic companies, is the starting point for many investors. While the SPDR S&P 500 ETF Trust (SPY) is the largest and perhaps most popular option out there, it’s worth noting this fund has a slightly higher fee structure for what is effectively the same strategy as IVV. That makes this iShares option a better long-term ETF. Just keep in mind that top holdings include tech titans Apple Inc. (AAPL) and Microsoft Corp. (MSFT), and about 24% of all assets are in tech stocks, thanks to the dominance of this sector in the American economy.
Annual fee: 0.03% expense ratio, or $3 annually on $10,000 invested.
Assets under management, or AUM: $303 billion.
Vanguard Growth ETF (VUG)
If you’re bullish on the long-term growth of the tech sector, then consider looking beyond a vanilla S&P index fund to this growth-oriented Vanguard ETF. This fund takes the largest U.S. corporations then layers on a screen for profitability and sales growth, moving away from sleepy sectors and toward companies with solid histories of expansion. Right now, about 250 stocks make up this fund, with the tech sector representing about 41% of the portfolio; materials and energy have less than a 2% weighting each. For investors who don’t mind a bit more risk in pursuit of growth and rewards, VUG is a cheap option to hold for the long haul.
Annual fee: 0.04%.
AUM: $71 billion.
Vanguard Value ETF (VTV)
The flip side of growth is, of course, value. Because investors have been more risk averse with their approach to stocks this year, VTV has managed to suck up more assets and grow to an impressive $100 billion under management. In contrast to the prior long-term ETF, health care and financial services are the top two sectors here at 23% and 20% of the portfolio, respectively. As examples of the kinds of stocks in these sectors this fund prioritizes, the biggest single positions among the 340 or so stocks are insurance giant UnitedHealth Group Inc. (UNH) and Class B shares of Warren Buffett’s Berkshire Hathaway Inc. (BRK.B).
Annual fee: 0.04%.
AUM: $100 billion.
Schwab U.S. Small-Cap ETF (SCHA)
All the options so far have been the usual suspects that hold large domestic corporations in their portfolios. If you’re interested in a long-term ETF, however, you may also want to look beyond the mature companies of today to the small and hungry firms that could be tomorrow’s leaders. That’s the approach of SCHA, which holds stocks with market caps of less than $10 billion. The portfolio includes lesser-known tech stocks like Lattice Semiconductor Corp. (LSCC), convenience store operator Casey’s General Stores Inc. (CASY) and biotech firm Halozyme Therapeutics Inc. (HALO). There’s more risk in smaller names like these, but a long list of more than 1,700 positions will help smooth out volatility; no single stock is worth more than about 0.3% of the entire portfolio at present.
Annual fee: 0.04%.
AUM: $14 billion.
Vanguard Total International Stock ETF (VXUS)
All the funds so far have been domestic in their focus, but this “ex-U.S.” Vanguard fund is designed to expressly avoid the home market. Instead, it offers exposure to the largest stocks in developed markets such as Europe and Japan. These are big multinational names you probably recognize, including Swiss consumer products icon Nestle SA (NSRGY), Dutch energy giant Shell PLC (SHEL) and global health care companies such as Roche Holding AG (RHHBY) and AstraZeneca PLC (AZN). If you are looking for long-term ETFs, then building a geographically diverse portfolio could help to avoid reliance on the ups and downs of the U.S. stock market.
Annual fee: 0.07%.
AUM: $50 billion.
Vanguard Total World Stock ETF (VT)
Not sure how to build a mix of growth, value, domestic and international positions? Then let VT take the guesswork out of things by offering a holistic approach to the world’s stock markets. With about 9,500 positions at present and only about 60% of assets in domestic companies, this is a sure way to stay completely diversified without managing multiple holdings. You get popular, large U.S. stocks, international leaders and even a small exposure to emerging markets in Latin America and Asia. This long-term ETF is cheap, comprehensive and easy to stash away for many years without worrying about day-to-day fluctuations in pricing.
Annual fee: 0.07%.
AUM: $24 billion.
iShares Core U.S. Aggregate Bond ETF (AGG)
We’ve covered stocks so far, but it’s important to consider bond exposure in any diversified portfolio, too. That’s particularly true after the big move in interest rates this year, which has finally driven yields up to a respectable level. AGG reflects a wide spectrum of the entire investment-grade bond market that includes government bonds, corporate bonds, mortgage-backed securities and select international bonds. The trailing yield isn’t that grand at about 2.2%, but the more recent and higher-yielding securities have pushed the 30-day yield up to 4%. And if rates continue to rise, that may edge even higher. With more than 9,900 individual bonds from bulletproof borrowers such as the U.S. Treasury and megacap firms such as Johnson & Johnson (JNJ), you can have a lot of confidence that this bond fund will keep paying you over the long haul.
Annual fee: 0.03%.
AUM: $82 billion
7 best long-term ETFs to buy and hold:
— iShares Core S&P 500 ETF (IVV)
— Vanguard Growth ETF (VUG)
— Vanguard Value ETF (VTV)
— Schwab U.S. Small-Cap ETF (SCHA)
— Vanguard Total International Stock ETF (VXUS)
— Vanguard Total World Stock ETF (VT)
— iShares Core U.S. Aggregate Bond ETF (AGG)
More from U.S. News
Uranium Stocks and ETFs, Plus 3 Other Ways to Invest in Uranium
7 of the Best High-Dividend ETFs
7 Best Long-Term ETFs to Buy and Hold originally appeared on usnews.com
Update 12/07/22: This story was published at an earlier date and has been updated with new information.
