7 of the Best ETFs to Buy for Long-Term Investors
Long-term investing can deliver large-sized gains.
When it comes to investing, perhaps the most obvious resource you need at your disposal is ready cash. But a very close second, unless you want to make risky gambles in hopes of an instant payday, is time. Strategies ranging from reinvesting dividends to accruing compound interest all require patience and a long-term approach to realize their full potential. If you’re interested in growing your nest egg over years or decades instead of just weeks or months, then consider the following seven exchange-traded funds for long-term investors.
SPDR S&P 500 ETF Trust (ticker: SPY)
One of the very first ETFs on Wall Street should be one of the very first options under consideration by long-term investors. Launched in 1993, the SPY tracks the Standard & Poor’s 500 index of the largest U.S. companies and has gathered a massive $375 billion in assets under management to become one of the largest and most liquid exchange-traded products in the world. If you’re looking to play the long-term upside in big names from Apple Inc. (AAPL) to Microsoft Corp. ((MSFT)) to Johnson & Johnson (JNJ), this is the simplest way to do so.
Vanguard Russell 2000 ETF (VTWO)
Large U.S. stocks are important to hold, but many of the biggest corporations that are currently dominant are growing slowly. That makes this Vanguard fund, which offers exposure to smaller companies with the potential to grow significantly, an important option for long-term investors. Benchmarked to the Russell 2000 index, this $7 billion fund excludes the top 1,000 American companies and then builds its portfolio with the next 2,000 stocks in line including footwear company Crocs Inc. (CROX) and small pharmaceutical company Biohaven Pharmaceutical Holding Company Ltd. (BHVN) among others. There’s no guarantee that an individual stock will succeed, but collectively this fund has more small-sized stocks with significant upside potential than a fund with more stagnant holdings.
iShares Core S&P Mid-Cap ETF (IJH)
If you don’t want to decide between mature companies and younger, riskier small caps, this iShares fund represents the middle ground. Its holdings are “Goldilocks” stocks that are neither too big nor too small, including regional financial firm Signature Bank (SBNY) and solar energy stock Solaredge Technologies Inc. (SEDG) to name a few. Perhaps you don’t recognize those names, but with $67 billion in assets, IJH’s midsize strategy clearly has a lot of appeal among investors.
Vanguard FTSE All-World ex-U.S. ETF (VEU)
This ETF offers exposure to global stocks with an “ex-U.S.” approach, meaning it excludes American companies and fills its portfolio with everything else. To be clear, these aren’t no-name stocks from the middle of nowhere. Top holdings include Swiss consumer giant Nestle ADR (NSRGY) and Japanese automaker Toyota Motor Corp. (TM). The top three countries represented by percentage are Japan at 17%, China at 10% and the UK. at 9%.
Vanguard FTSE Emerging Markets ETF (VWO)
Another international fund with a big following, this Vanguard emerging markets offering has nearly $110 billion in assets under management to rank as one of the largest ETFs on Wall Street despite its admittedly aggressive and overseas focus. Top nations in this fund include China, Taiwan, India and Brazil. This ETF holds more than 5,200 companies ranging from smaller stocks you can’t easily access via the typical U.S. brokerage account to names such as Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), the largest chipmaker on the planet. If you want to look beyond the typical large stocks in developed markets, VWO is for you.
Vanguard Total World Stock ETF (VT)
There are plenty of other ways to sort the universe of stocks out there by size or country, but this is a truly diversified fund with some 9,300 holdings of all sizes, sectors and geographies. About 60% of the fund is in the U.S., as it is the largest market in the world, but there are also developed markets including Japan, the UK. and France represented along with more than 10% of assets in emerging markets such as China. If you really are a long-term investor just looking to play the global economy over many years, then you could do worse than parking your cash in this single investment to capture the totality of the global stock market.
iShares Core U.S. Aggregate Bond ETF (AGG)
The previous picks have all comprised stocks, but AGG is a diversified bond fund from iShares that offers broad exposure to fixed income markets via investment-grade bonds, U.S. Treasury securities and even a smattering of junk bonds that offer higher yield but more risk. A total of $89 billion in assets under management and a massive portfolio of about 9,800 different bonds mean that this is a comprehensive and diversified bond fund for the long haul. Right now, this fund offers a 1.4% yield — slightly above the average of the S&P 500. That makes AGG a fund you truly can hold forever, particularly if you’re focused on long-term income investing.
ETFs to buy for long-term investors:
— SPDR S&P 500 ETF Trust (SPY)
— Vanguard Russell 2000 ETF (VTWO)
— iShares Core S&P Mid-Cap ETF (IJH)
— Vanguard FTSE All-World ex-U.S. ETF (VEU)
— Vanguard FTSE Emerging Markets ETF (VWO)
— Vanguard Total World Stock ETF (VT)
— iShares Core U.S. Aggregate Bond ETF (AGG)