Buying individual stocks can seem complicated or high-risk to novice investors. But stocks aren’t your only option these days thanks to the rise of exchange-traded funds, or ETFs. The unique structure of ETFs makes them among the best low-risk long-term investments, too.
These unique investment vehicles boast built-in diversification and very low-cost structures. The best long-term ETFs also typically charge only a few hundredths of a percentage point in fees, and provide exposure to hundreds or even thousands of individual investments in one simple position.
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The hardest part about investing in long-term ETFs is the psychological hurdle of being truly “hands-off” with your nest egg. Reams of research papers prove that trading too much or trying to outsmart the market is less profitable than simply riding big-picture trends for several years or even several decades.
If you have the patience to buy and hold, these are some of the best long-term ETFs to consider right now:
| Long-term ETF | Expense Ratio | Assets Under Management* |
| iShares Core S&P 500 ETF (ticker: IVV) | 0.03% | $504 billion |
| Vanguard Growth ETF (VUG) | 0.04% | $132 billion |
| Vanguard High Dividend Yield Index ETF (VYM) | 0.06% | $57 billion |
| Vanguard Information Technology ETF (VGT) | 0.09% | $74.2 billion |
| Schwab U.S. Small-Cap ETF (SCHA) | 0.04% | $18 billion |
| Vanguard Total International Stock ETF (VXUS) | 0.08% | $74 billion |
| iShares Core U.S. Aggregate Bond ETF (AGG) | 0.03% | $116 billion |
*As of Aug. 26 market close.
iShares Core S&P 500 ETF (IVV)
Assets: $504 billion Expense ratio: 0.03%, or $3 annually on every $10,000 invested
The largest and most liquid ETF available to U.S. investors is the SPDR S&P 500 ETF Trust (SPY), one of the oldest and most respected index funds available. However, coming in at No. 2 is this look-alike fund from iShares that follows an identical investment thesis by holding the largest 500 domestic stocks that make up the S&P 500 index. The difference is that IVV charges a slightly lower expense ratio — which can actually add up materially if you’re holding for decades instead of just a month or two. When it comes to low-cost index funds, IVV is hard to pass up thanks to its mix of massive scale and affordable fees.
Vanguard Growth ETF (VUG)
Assets: $132 billion Expense ratio: 0.04%, or $4 annually on every $10,000 invested
Another massive ETF, this Vanguard fund is focused on large companies but has a more focused list of about 190 firms that exhibit strong growth characteristics such as expanding sales and profit margins. There are many big-name U.S. stocks out there that offer stability, but VUG is more concerned with companies that still have access to growth despite their already impressive operations. For instance, more than half of its holdings are in the tech sector, with less than 1% in utilities. It’s not quite as diversified as a traditional index fund, but this growth-oriented option may serve you well by focusing on long-term potential rather than just current scale.
[READ: 7 of the Best Fidelity Bond Funds to Buy for Steady Income]
Vanguard High Dividend Yield Index ETF (VYM)
Assets: $57 billion Expense ratio: 0.06%, or $6 annually on every $10,000 invested
The opposite end of the investing spectrum from a focus on growth is a focus on dividends. That’s what VYM offers, with about 550 total holdings that all provide income potential — and all told, the fund offers a collective yield of 2.7% to roughly double the payout of the S&P 500 index at present. The top sector right now is financial services, at more than 21% of all assets, led by megabank JPMorgan Chase & Co. (JPM). This is representative of the kinds of stocks that you’ll tap into with big brands and reliable operations that lead to consistent dividend payouts over time.
Vanguard Information Technology ETF (VGT)
Assets: $74.2 billion Expense ratio: 0.09%, or $9 annually on every $10,000 invested
It can be riskier to focus on a single sector of Wall Street, but technology stocks have a long history of outperformance versus other corners of the market. Top stocks in this fund are familiar favorites, including Nvidia Corp. (NVDA), Microsoft Corp. (MSFT) and Apple Inc. (AAPL) — a trio of stocks that have delivered for investors in a big way over the last decade or two. There are never any guarantees, of course, and there was that little thing known as the dot-com crash about 25 years ago that proved not all tech stocks are created equally. That said, it’s hard to imagine the Silicon Valley leaders that make up VGT going anywhere anytime soon.
Schwab U.S. Small-Cap ETF (SCHA)
Assets: $18 billion Expense Ratio: 0.04%, or $4 annually on $10,000 invested
Another great long-term ETF holding for investors that looks beyond the big dogs, this Schwab fund goes smaller with 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 innovative automotive retailer Carvana Co. (CVNA). While not as stable as some of the biggest names on Wall Street, a deep list of holdings provides diversification to protect investors from volatility if a handful of these up-and-coming businesses hit a snag.
Vanguard Total International Stock ETF (VXUS)
Assets: $74 billion Expense Ratio: 0.08%, or $8 annually on $10,000 invested
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, such as Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), Novo Nordisk (NVO) and Dutch technology firm ASML Holdings NV (ASML). The ETF has broad exposure across developed and emerging markets, and top countries of focus include Japan at 16%, the U.K. at 9% and Canada at 6%. But as the ticker symbol implies, this is an “ex-U.S.” fund that excludes all domestic stocks from the portfolio.
iShares Core U.S. Aggregate Bond ETF (AGG)
Assets: $116 billion Expense Ratio: 0.03%, or $3 annually on $10,000 invested
Lastly, AGG is a long-term ETF that’s a great option for investors looking to add exposure to fixed-income markets and beyond just common stock. It’s the largest exchange-traded bond fund as measured by assets, and one of the 10 biggest ETFs of any kind on Wall Street. It’s also comprehensive and diversified as an “aggregate” bond fund, with over 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 3.2%, but the comparatively higher interest rate environment in recent years means the fund’s yield has ticked steadily higher. That could change course if and when the Federal Reserve cuts rates, but regardless of the interest rate environment, there is always a strong case to be made for the diversification across assets — including holding funds like AGG for the long haul.
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Update 08/27/24: This story was previously published at an earlier date and has been updated with new information.
