Key Points
- Passive exposure to the markets is something more and more active investors are seeking right now.
- For those looking to put some capital to work in steady and consistent ETFs to hold long-term, here are three top picks to consider right now.
- Are you ahead, or behind on retirement? SmartAsset’s free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don’t waste another minute; learn more here.(Sponsor)
Finding the right exchange-traded funds (ETFs) to invest in is easier said than done. Of course, there are plenty of top index funds out there that track the whole market. Is it worth putting all of one’s eggs in such highly-diversified baskets? Or does it make sense to try to pick ETFs tracking various sectors that may beat the market over a given time frame? Or even ETFs tracking the movement of individual stocks one thinks has a shot at outperforming over time?
That’s a good question, and I’d really say most financial advisors would suggest the answer will vary depending on the individual investor. The good news is that I’m going to cover three of the top ETFs I think long-term investors can own and sleep well at night, while growing their nest egg for retirement.
Without further ado, here are three ETFs investors can turn to for lasting wealth throughout retirement.
Vanguard S&P 500 ETF (VOO)
Loading stock data...Let’s start with a relative no-brainer pick, at least in my view. The Vanguard S&P 500 ETF (NYSEARCA: VOO)is one of the largest and oldest ETFs out there, tracking (as its name suggests) the broader S&P 500.
In other words, investors who put their capital to work in this ETF essentially are able to buy a slice of the 500 largest (and highest quality) U.S. stocks, without having to consistently rebalance their portfolio and make adjustments for market cap weighting changes over time. This ETF takes care of all of that for investors in an automated fashion, providing this high level of diversification for almost free. Indeed, an expense ratio of just 0.03% is the smallest I’ve come across for broad index ETFs, which says something.
The reason that’s so important for investors thinking long-term (say, with a decade or two until retirement) is that the fees charged by such ETFs can eat into one’s long-term returns, considerably. That goes even for funds with a seemingly small expense ratio. On this basis, VOO is an excellent long-term pick.
It goes without saying that investors gain exposure to the highest-quality tech and growth stocks in such an ETF, but also have excellent exposure to a range of other sectors that are starting to outperform. For those who think broad economic growth will continue to be strong for the coming decades, this is a top ETF I think cost-conscious investors can rest well owning over the longer term.
Schwab U.S. Small-Cap ETF (SCHA)
Loading stock data...For investors looking to tilt their portfolios more toward the smaller-cap segment of the market, the Schwab U.S. Small-Cap ETF (NYSEARCA: SCHA)would be my preferred way to go.
This fund’s broad exposure to thousands of U.S. small caps is meaningful, given how overweight funds like VOO are to mega cap tech stocks. Indeed, the rally we’ve seen at the top levels of the market cap spectrum among certain tech names has been breathtaking. But for investors who think this rally could be coming to an end at some point (given that multiples are now near all-time highs in most areas of the market), small caps could be a segment of the market that may outperform over the medium to long-term.
For those with a significant investing time horizon, it’s also worth pointing out that small cap stocks tend to outperform their large-cap counterparts in terms of capital appreciation over any significant period of time. Thus, given the valuation dislocations we’re seeing the market today, coupled with the historical upside small caps can provide, SCHA is one ETF I think investors putting capital to work for retirement can’t sleep on right now.
SPDR Portfolio S&P 500 Growth ETF (SPYG)
Loading stock data...Last, but certainly not least on this list of “forever” ETFs investors can consider buying now when saving for a few decades down the road is the SPDR S&P 500 Growth ETF (NYSEARCA: SPYG).
Like VOO, SPYG tracks the S&P 500, providing investors with exposure to some of the highest-growth areas of the economy such as technology and tech-adjacent names. Investors looking to capitalize on the surges we’re seeing in the AI, cloud, software, chips and other areas of the tech market will certainly benefit from holding an ETF like SPYG for a very long period of time.
I will note that while SPYG has traded in high correlation to index funds like VOO, over the longer-term, investors who have held onto shares of SPYG or other growth-centric funds have tended to outperform. For those who think that the current bull market can continue (and another one is likely around the corner), this is a long-term holding I think is worth adding, particularly on significant selloffs (such as the one we saw in April).
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