Once again, the last year reinforced that buy-and-hold investing is boring but incredibly effective. Consider a recent Bank of America study that showed just 38% of large-cap managers outperformed their benchmark in 2023. The average fund underperformed by 1.6 percentage points.
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This is a common occurrence on Wall Street year after year, with mountains of research showing that the best performance often comes from a simple, long-term approach to index fund investing.
Whether you’re a new investor just getting started or a seasoned pro looking for the best strategy to follow in 2024, the answer is probably the same: Seek out the best long-term ETFs to buy and hold and then sit back and enjoy the ride.
If you have the patience and discipline to follow this approach, the following seven exchange-traded funds are good options to hang on to for the long haul, and represent the best long-term ETFs to buy and hold:
| ETF | Assets | Expense ratio |
| Vanguard S&P 500 ETF (ticker: VOO) | $389 billion | 0.03% |
| Schwab U.S. Small-Cap ETF (SCHA) | $16 billion | 0.04% |
| Invesco QQQ Trust (QQQ) | $249 billion | 0.20% |
| Vanguard High Dividend Yield Index ETF (VYM) | $51 billion | 0.06% |
| Vanguard Total International Stock ETF (VXUS) | $63 billion | 0.07% |
| Vanguard Total World Stock ETF (VT) | $33 billion | 0.07% |
| iShares Core U.S. Aggregate Bond ETF (AGG) | $101 billion | 0.03% |
Vanguard S&P 500 ETF (VOO)
Assets: $389 billion Expense: 0.03%, or $3 annually on every $10,000 invested
The S&P 500 index of the largest U.S. stocks is one of the most closely followed benchmarks in the world. And this Vanguard fund linked to that key index is one of the simplest and most effective long-term ETFs out there. Though the SPDR S&P 500 ETF Trust (SPY) is the oldest and most popular S&P 500 index fund, the VOO is a more attractive option for most long-term investors thanks to a lower cost structure. And with a massive asset base, it can hardly be called an also-ran even if it trails the flagship SPY’s assets under management. This long-term ETF is elegant and simple, merely tracking S&P 500’s composition of the largest U.S. companies in the market such as Apple Inc. (AAPL) and Microsoft Corp. (MSFT) all in one straightforward, cost-effective holding.
Schwab U.S. Small-Cap ETF (SCHA)
Assets: $16 billion Expense: 0.04%
Long-term investors often are interested in the growth potential of smaller companies over time. If this is your philosophy, then SCHA is worth a look as a diversified small-cap fund without a bias towards growth or value. This ETF offers investors a simple way to gain exposure to smaller and mid-sized companies that might have greater growth potential over mature large-cap holdings like those in the S&P 500. Right now, SCHA holds just less than 1,700 stocks with an average market cap of only about $3.3 billion per position. If you want to play the long-term upside for the stock market, a foothold in these up-and-coming stocks is very important.
Invesco QQQ Trust (QQQ)
Assets: $249 billion Expense: 0.20%
Another long-term investing strategy is to bias your portfolio toward the high-growth tech sector. That’s what this Invesco fund does, by aligning itself with the Nasdaq-100 index of the 100 largest companies listed on the Nasdaq stock exchange. You’ll get a sampling of other sectors, but since trillion-dollar Silicon Valley giants like Microsoft, Apple and Nvidia Inc. (NVDA) are all listed on the Nasdaq, it should be no surprise that the tech sector winds up representing more than half of all assets in this ETF. That gives you a bit of diversification, but also a focus on tech that could pay off in the long run.
[READ: 7 Best International Stock Funds to Buy]
Vanguard High Dividend Yield Index ETF (VYM)
Assets: $51 billion Expense: 0.06%
If you’re less concerned with aggressive growth and more concerned about reliable stocks that offer a consistent return, VYM offers access to a portfolio of nearly 500 dividend stocks. If you’re unfamiliar, dividends are profit-sharing arrangements where companies pass on a bit of their cash to stockholders every quarter. That provides a nice sweetener to the performance of the stock itself, as well as a clear sign that the company is doing well. After all, you can’t share profits unless you have consistently high-performing operations — and plenty of cash to spare. This long-term ETF focuses on companies with a history of delivering higher-than-average payouts. At the moment, top holdings include Big Oil firm Exxon Mobil Corp. (XOM), chipmaker Broadcom Inc. (AVGO) and mega-bank JPMorgan Chase & Co. (JPM). Not as dynamic as tech startups perhaps, but certainly very reliable firms to hang on to for the long haul.
Vanguard Total International Stock ETF (VXUS)
Assets: $63 billion Expense: 0.07%
Looking beyond size and sector approaches, another important factor in picking the best long-term ETFs to buy and hold is geographic diversification. That’s where this “ex-U.S.” fund from Vanguard comes in, with a worldwide approach that includes about 8,500 total stocks — but none that are headquartered in the United States. Admittedly, some of these names will be awfully familiar like Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) or Swiss consumer staples giant Nestle SA (NSRGY). However, these multinationals don’t appear in domestic-only ETFs like an S&P 500 or Nasdaq fund. If you want extra exposure to established global brands that happen to be located outside our borders, VXUS is a great long-term supplemental holding.
Vanguard Total World Stock ETF (VT)
Assets: $33 billion Expense: 0.07%
Can’t decide what flavor you like best? Then you can literally buy a piece of nearly every stock in the world via this massive ETF from Vanguard. There are nearly 10,000 stocks in the portfolio of this fund, ranging from top domestic blue chips to smaller startups. The U.S. drives much of the portfolio with a 60% asset allocation, but you’ll also get stocks in developed markets like Japan and the U.K. and emerging markets like India and China. Technology and finance play big roles, at about 23% and 15% of the fund, respectively, but all sectors are represented. In short: If you want a long-term ETF to buy and hold, VT is an option that will cover all your bases — no matter what approach comes into favor in the years ahead.
iShares Core U.S. Aggregate Bond ETF (AGG)
Assets: $101 billion Expense: 0.03%
The previous picks have all been focused on stocks, but long-term investing also includes diversification into other assets like bonds. If you’re looking to add exposure to fixed-income markets, then AGG is a noteworthy fund to consider. It’s among the largest exchange-traded bond funds, and one of the top 15 ETFs of any kind on Wall Street. It’s also comprehensive and diversified as an “aggregate” bond fund, with more than 10,000 holdings that offer exposure to the full array of the investment-grade bond market including both government and corporate bonds. This bond fund currently yields 4.3%, nearly three times the roughly 1.5% offered by the S&P 500 at present, and offers much less volatility than stocks. If you want a foundational long-term ETF, AGG is worth a look.
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7 Best Long-Term ETFs to Buy and Hold originally appeared on usnews.com
Update 02/16/24: This story was previously published at an earlier date and has been updated with new information.
