Whatever your strategy, one of these buy-and-hold ETFs will deliver.
It’s fair to say that, for most investors, not a lot worked in 2022. However, it’s important to understand that investing — particularly for those of us who are playing the stock market with our retirement funds — is an exercise best measured in years or decades instead of just 12-month stretches. In fact, the vast majority of research shows that it’s incredibly difficult to outperform the stock market on a day-to-day basis. Instead, it’s better for your pocketbook and for your mental health to simply take a long-term approach. It isn’t easy to just “set it and forget it,” but if you’re looking for a more hands-off approach with a long-term horizon, the following seven exchange-traded funds, or ETFs, offer interesting strategies that could deliver. Presuming you can be patient, of course.
iShares Core S&P 500 ETF (ticker: IVV)
This fund is the second-largest ETF on Wall Street, with more than $300 billion of assets under management, and it’s popular for good reason. IVV is benchmarked to the S&P index of the 500 largest U.S. stocks, including tech titans like Microsoft Corp. (MSFT), megabank JPMorgan Chase & Co. (JPM) and health care giant Johnson & Johnson (JNJ) among others. And it charges a rock-bottom expense ratio of just 0.03% annually, or $3 per year on every $10,000 you invest. It’s not particularly complicated and, in fact, a host of other mammoth S&P 500 funds exist, including the slightly larger and slightly more expensive SPDR S&P 500 ETF Trust (SPY). But for buy-and-hold investors, banking on the biggest U.S. stocks has always been a winning proposition when you measure performance on a long timeline.
iShares ESG Aware MSCI USA ETF (ESGU)
Our next fund is also from iShares, but is significantly smaller with only about $22 billion in assets. If you’re a long-term investor concerned about the future of sustainable finance and corporate responsibility, then ESGU is the way to go. Much like the prior index fund, it is invested in large and liquid U.S. stocks. However, its more selective list of 300 or so components excludes coal companies, weapons manufacturers and firms that get the lowest ESG ratings. That’s an acronym for “environmental, social and governance” factors, and is the shorthand for profit-driven companies that put an eye to much more than just the bottom line. Historically, highly ranked ESG firms have done as well or better than the broader market — so if you’re concerned about the future of the planet, as well as the future of your portfolio, consider this as your way to engage in sustainable investing portfolio management.
Vanguard Growth ETF (VUG)
This Vanguard fund is a biggie, ranking as one of the 15 largest ETFs in the U.S. by assets. It’s also the leader among dedicated growth ETFs on Wall Street. As the name should imply, this means the portfolio biases toward companies that are expanding their profits and sales at a steady clip. You might think nearly all companies try to do that — and most do. But obviously, some companies are more successful than others in achieving that growth. The ETF comprises about 280 popular stocks like tech titan Apple Inc. (AAPL), payment processor Visa Inc. (V) and home improvement retailer Home Depot Inc. (HD). If you want to get a bit more selective than just owning the biggest names, VUG makes sure to put you in the stocks with the best track record of growth.
Invesco QQQ Trust Series 1 (QQQ)
Another interesting approach for growth-oriented long-term investors is to focus on this $160 billion Invesco fund that is laser-focused on the largest Nasdaq-listed stocks. Over the last two decades, the exchange has made a name for itself as the proving ground for many Big Tech and biotechnology standouts. QQQ goes after these names, benchmarked to the Nasdaq-100 index of the largest stocks on that exchange — and excluding those on the NYSE or anywhere else. So who’s on the Nasdaq? Top names in the portfolio at present include enterprise tech powerhouse Microsoft, chipmaker Nvidia Corp. (NVDA), e-tailer Amazon.com Inc. (AMZN) and electric vehicle king Tesla Inc. (TSLA) to name a few. In fact, more than 48% of all assets for this index fund are in the tech sector alone. Admittedly, the Nasdaq stumbled harder than the S&P 500 did in 2022 thanks to these kinds of stocks. But, in the long run, its reliance on dynamic companies could pay off.
Vanguard Information Technology ETF (VGT)
Of course, while half of the prior fund is in tech, that leaves about half of your assets elsewhere. And if you really believe in the promise of technology, then why not dive in with a sector-specific fund like VGT? That’s what you get with this low-cost Vanguard fund that boasts about $43 billion in assets under management. While the fund is weighted by size, with trillion-dollar giants like Apple and Microsoft representing a big chunk of the portfolio by themselves, the total list of components is 370 names deep. And besides, seeing as Big Tech ultimately acquires most of their smaller but attractive competitors, it makes sense that these two giants are running the show — particularly given their history of long-term outperformance.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
Taking a different course of action is this dividend-oriented fund that starts with the S&P 500 index and then hand-picks the 80 companies with the highest yield. As you may know, those aforementioned trillion-dollar tech companies do pay dividends — but they are pretty stingy. Instead, SPYD relies on lower-profile but still-established names like entertainment giant Paramount Global (PARA) and shipping container company Packaging Corp. of America (PKG). The result is a dividend yield that hits about 4.1% to more than double the yield you’ll get in the typical S&P 500 index fund. For long-term investors, buying and holding for share appreciation is wise. However, layering a fund with a track record of dividend growth on top of that can provide extra stability, as well as better total returns.
Global X SuperDividend ETF (SDIV)
The smallest ETF on this list, SDIV has just about $800 million in assets under management. But if you’re after dividends, the huge yield offered by this fund simply cannot be matched. This Global X fund prioritizes dividends by chasing high-yield stocks across all sectors, company sizes and geographies, offering up a current yield that is north of 11.6% — that’s more than six times the typical stock in the S&P 500 right now. Of course, you’ll be trading the stability of blue chips for smaller or lesser-known international names like British tobacco company Imperial Brands PLC (IMBBY) or Singapore shipping company BW LPG (BWLLF). There’s also about 33% of the fund invested in real estate-related stocks. Thankfully, however, this aggressive Global X fund is diversified across more than 100 different companies to help smooth out some of the bumps in the road for individual stocks. This is clearly a niche fund and there’s definitely the risk of more volatility than some of the other options. But for buy-and-hold investors, SDIV could be a fund worth holding on to.
7 best long-term ETFs to buy and hold:
— iShares Core S&P 500 ETF (IVV)
— iShares ESG Aware MSCI USA ETF (ESGU)
— Vanguard Growth ETF (VUG)
— Invesco QQQ Trust Series 1 (QQQ)
— Vanguard Information Technology ETF (VGT)
— SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
— Global X SuperDividend ETF (SDIV)
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7 Best Long-Term ETFs to Buy and Hold originally appeared on usnews.com
Update 02/22/23: This story was previously published at an earlier date and has been updated with new information.