Picking individual stocks is extremely difficult. That’s a rough truth about investing that many of us don’t learn until we’ve made some costly errors.
That goes for both pros and novices. Investment research firm Morningstar estimates that for the 10-year period that ended in December 2023, less than one in four “active” funds topped the average of their “passive” rivals that simply follow a fixed benchmark like the S&P 500.
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Sure, you may catch lightning in a bottle if your luck and timing are superb, but, particularly in the long run, overtrading and trying to outguess the market can be a losing strategy. The better approach for most investors is to build a diversified portfolio of the best long-term exchange-traded funds to buy and hold for years to come.
The following seven ETFs are all great foundational holdings for long-term, buy-and-hold portfolios:
| ETF | Assets Under Management | Expense Ratio | 10-Year Annualized Return |
| Vanguard S&P 500 ETF (ticker: VOO) | $435 billion | 0.03% | 12.9% |
| Schwab U.S. Small-Cap ETF (SCHA) | $17 billion | 0.04% | 7.8% |
| iShares Core S&P Mid-Cap ETF (IJH) | $85 billion | 0.05% | 9.9% |
| Invesco QQQ Trust (QQQ) | $259 billion | 0.20% | 18.6% |
| Vanguard High Dividend Yield ETF (VYM) | $55 billion | 0.06% | 10.1% |
| Vanguard Total International Stock ETF (VXUS) | $69 billion | 0.08% | 4.5% |
| Vanguard Total World Stock ETF (VT) | $35 billion | 0.07% | 8.8% |
Vanguard S&P 500 ETF (VOO)
Assets: $435 billion Expense Ratio: 0.03%, or $3 annually on every $10,000 invested
The S&P 500 index of the largest U.S. companies is perhaps the world’s most widely followed benchmark of stocks. The Vanguard S&P 500 ETF provides simple, cost-effective exposure to these 500 leading companies. There are other look-alike funds tied to this same passive list of stocks, such as the SPDR S&P 500 ETF (SPY) that is the oldest such fund. But VOO offers great liquidity as well as a rock-bottom expense ratio. As a result, this elegant long-term ETF gives you a piece of leaders including Apple Inc. (AAPL), Microsoft Corp. (MSFT) and others in one single holding. As tech stocks tend to be the largest and most prominent companies on U.S. exchanges, this sector leads the fund at about 30% of assets followed by health care and financial services at about 13% each.
Schwab U.S. Small-Cap ETF (SCHA)
Assets: $17 billion Expense Ratio: 0.04%
Another great long-term ETF holding for investors, this Schwab fund goes smaller by seeking “growthier” opportunities in stocks that average less than $4 billion in market value. It holds around 1,700 stocks for an incredibly diversified lineup of companies, and the top sectors include industrials at 16% followed by technology and financial services at around 15% each. The top individual stocks at present include crypto-related tech-player MicroStrategy Inc. (MSTR) and electrical and HVAC-player Comfort Systems USA Inc. (FIX). With an average market cap of about $3.7 billion, investors get ownership in up-and-coming businesses that may offer greater upside as they grow and mature over time.
[READ: 7 Best Actively Managed ETFs]
iShares Core S&P Mid-Cap ETF (IJH)
Assets: $85 billion Expense Ratio: 0.05%
IJH is a middle ground between the last two long-term ETFs that were listed here, with a focus on midsize companies that are not so small that they have limited resources but also aren’t so large that they’re entrenched behemoths with a difficult path to new customers and growth. This iShares fund is the largest mid-cap ETF out there that focuses on this class of company, tied to the S&P 400 index, which tracks the next 400 stocks in line after the top 500 U.S. companies are tallied for its sister index. Top holdings at present including utility stock Vastra Corp. (VSTA), steelmaker Reliance Inc. (RS) and home goods retailer Williams-Sonoma Inc. (WSM).
Invesco QQQ Trust (QQQ)
Assets: $259 billion Expense Ratio: 0.20%
For investors who care less about broad swaths of the stock market and prefer to veer towards the high-flying technology sector in pursuit of long-term growth, the Invesco QQQ Trust is a solid option to consider. This massive ETF tracks the Nasdaq-100 index, giving it a heavy allocation towards major tech giants like Apple, Microsoft, Nvidia Corp. (NVDA) and other innovators listed on this exchange. While QQQ holds some non-tech names to provide some diversification, its focus leans heavily towards this high-growth sector that has been a leader in recent years. With these titans among its top holdings, QQQ has more than half of its assets in tech at present and allows investors to position their portfolios to profit from the most important trends shaping business and consumer technology over the coming decades.
Vanguard High Dividend Yield ETF (VYM)
Assets: $55 billion Expense Ratio: 0.06%
Investors prioritizing income may want to consider the Vanguard High Dividend Yield ETF as a long-term holding. This fund tracks an index of companies that have above-average dividend payouts compared to the broader market. While sacrificing some growth potential, VYM delivers an attractive 2.8% dividend yield — more than 1 percentage point higher than the S&P 500 average. Major holdings include well-known dividend payers like JPMorgan Chase & Co. (JPM), Exxon Mobil Corp. (XOM) and Broadcom Inc. (AVGO). By focusing on profitable firms that share the wealth with stockholders, VYM can be an excellent complement to growth-oriented funds in your long-term ETF portfolio.
Vanguard Total International Stock ETF (VXUS)
Assets: $69 billion Expense Ratio: 0.08%
For geographic diversification beyond the U.S., the Vanguard Total International Stock ETF gives investors access to more than 8,500 stocks headquartered in foreign markets around the world. While not constituents in the most popular domestic indexes, many names that make up this fund will be familiar, like Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), Novo Nordisk (NVO) and Toyota Corp. (TM). With broad exposure across developed and emerging markets, top countries of focus include Japan at 17%, the United Kingdom at 9% and Canada at 7%.
Vanguard Total World Stock ETF (VT)
Assets: $35 billion Expense Ratio: 0.07%
Can’t decide between any of the prior options? Well thankfully, there’s a fund that covers all your bases with exposure to the totality of the global stock market. VT has a wide-reaching portfolio of nearly 9,800 stocks spanning the globe. While U.S. equities represent more than 60% of assets, this fund also provides ample investment across international markets. As mentioned in the introduction of this list of the best long-term ETFs, trying to outsmart the market can often result in headaches for investors. This “total world” fund casts the widest of nets to allow your portfolio to ride the long-term uptrend in the global economy without trying to get cute about what’s hot and what’s not.
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7 Best Long-Term ETFs to Buy and Hold originally appeared on usnews.com
Update 04/24/24: This story was previously published at an earlier date and has been updated with new information
