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Exchange traded funds (ETFs) are popular investment vehicles for DIY investors to diversify their portfolios and grow wealth over the long term. Many ETFs have very low expense ratios. There are also a wide variety of options, so you can select one that fits with your investment goals and your own personal situation.
We’re going to look at some of the best ETFs for the long-term growth of your wealth. For those investing for retirement or other long-term goals, ETFs can be an excellent buy-and-hold asset.
The purpose of this article is to highlight some ETFs that may be a good fit for long-term investors. This is not investment advice. If you have questions about your own finances, be sure to seek personalized help from a financial professional.
How to Invest in ETFs
Investing in ETFs is simple, which is one of the reasons why they’re so popular. You may already have an account that allows you to purchase ETFs, but if not, here are three options worth considering.
M1 Finance offers automated investing with no management fees. It provides some of the same benefits you would get with a robo advisor, but without the fees. With a free M1 Finance account, you can invest in stocks and ETFs, including all of the ETFs featured in this article. You can even purchase fractional shares if you want to get started with a small amount of money.
When you create a free account with M1 Finance, you’ll select a “pie” that you want to invest in. The pie determines the specific investments that will be included in your portfolio, and the percentages of each. There are more than 80 expertly-created pies, and you can also create your own. Once you’ve selected a pie, all you need to do is contribute money to your account and M1 Finance will automatically invest it according to your pie.
Right now, M1 Finance is offering a $30 bonus for new customers if you sign up through this link. Sign up and fund your account, and you’ll get a $30 bonus to invest.
Public.com is an investing app that allows you to trade stocks and ETFs, including all of the ETFs featured in this article. You’ll get commission-free trades and the ability to purchase fractional shares for as little as $1.
One of the interesting ways that Public.com stands out from other investing apps is through social features and functionality. The app is a cross between investing app and social media platform. You can follow investors, connect with your friends, and learn from other people. If you’re looking for a user-friendly investing app, Public.com is a great choice.
Currently, Public.com is offering a free stock (up to a value of $70) if you sign up for a free account through this link.
Public.com offers fractional shares and commission-free trades of stocks, ETFs, and crypto. You'll love the social aspect that makes it possible to connect with other investors. Get a free bonus when you open an account through our link. Offer valid for U.S. residents 18+ and subject to account approval. This is not a recommendation. You can lose money with any investment. Open To The Public Investing is a member of FINRA & SIPC. Regulatory and firm fees apply. See Public.com/disclosures/.
Robinhood is another investing app that offers commission-free trades and the ability to purchase fractional shares. It doesn’t have the social features that you’d get with Public.com, but Robinhood does offer the ability to trade options and cryptocurrency, in addition to stocks and ETFs.
Currently, Robinhood is offering a free stock (worth $2.50 – $225) if you sign up for a free account through this link.
The Best ETFs For Long-Term Growth
The ETFs listed below are not ranked. They’re all excellent options and which one is best will be determined by your own particular situation. They’re listed according to category so similar funds are close to each other.
The details for each ETF listed below are taken from ETF Database and are valid as of the day this article was published, July, 22, 2021. Be sure to check the current details as they will change with time.
Related: How to Get Free Stocks
Vanguard’s Total Stock Market ETF is an extremely popular option for investors looking to get broad exposure to the stock market as a whole. It’s also worth pointing out the Vanguard’s VTSAX mutual is very similar, except it’s a mutual fund instead of an ETF.
VTI tracks the CRSP US Total Market Index and owns shares of stock from companies of all sizes, large and small. With such broad exposure (more than 3,500 total holdings), the performance of VTI generally mirrors the performance of the overall US stock market. It’s a simple option with a very low expense ratio and a strong history of solid returns for those who are long-term investors.
Expense Ratio: 0.03%
Annual Dividend Yield: 1.26%
1 Year Return: 38.45%
3 Year Return: 63.93%
5 Year Return: 121.66%
Schwab’s US Large-Cap Growth ETF also offers a very low expense ratio at just 0.04%. The goal of this fund is to track the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. SCHG invests in large, blue-chip companies that are expected to continue growing.
SCHG includes about 200 holdings, as compared to VTIs 3,500+. Instead of investing in the market as a whole, the approach is to focus on well-established companies that exhibit growth characteristics. With an excellent track record, this fund is a solid choice for long-term investors who are willing to experience some ups and downs along the way.
Expense Ratio: 0.04%
Annual Dividend Yield: 0.42%
1 Year Return: 39.17%
3 Year Return: 95.26%
5 Year Return: 186.38%
Invesco’s QQQ Trust tracks the Nasdaq-100 index, which is the top 100 non-financial companies traded on the Nasdaq exchange. Tech stocks account for a large chunk of QQQ, so if you’re bullish on the long-term potential of technology-focused companies, QQQ could be a solid option.
While VTI and SCHG take more of a broad approach by holding stocks of companies across all different industries, QQQ takes a more focused approach with heavy concentration on technology, and large-cap growth companies in particular.
QQQ’s expense ratio (0.20%) is significantly higher then both VTI and SCHG, but still reasonable. With tech stocks performing very well in recent years, it’s not surprising that QQQ has seen tremendous growth.
Expense Ratio: 0.20%
Annual Dividend Yield: 0.49%
1 Year Return: 37.73%
3 Year Return: 106.58%
5 Year Return: 231.96%
The Vanguard Growth ETF aims to track the performance of the CRSP US Large Cap Growth Index. While VTI covers the stock market as a whole, VUG invests in large-cap growth stocks. VUG’s current top holdings include some of the largest tech companies like Apple, Microsoft, Amazon, Facebook, and Google. However, the fund also invests in other non-tech companies.
Like most Vanguard fund, VUG offers a very low expense ratio at just 0.04%. The performance of the fund has also been very strong, making it an appealing option for investors.
Expense Ratio: 0.04%
Annual Dividend Yield: 0.56%
1 Year Return: 37.30%
3 Year Return: 94.15%
5 Year Return: 177.04%
One of the most popular funds for long-term growth is the SPDR S&P 500 ETF Trust, which tracks the S&P 500 index. Although this is the largest fund of it’s kind, there are several other S&P 500 funds that are very similar. We’re listing the iShares Core S&P 500 EFT here because it’s very similar to SPY, but the expense ratio of IVV is just 0.03%, compared to 0.09% from SPY. The expense ratio from SPY is certainly acceptable, but IVV is a comparable fund with even lower expenses. Either one (or Vanguard’s VOO) would be a good choice.
The S&P 500 focuses on large-cap stocks, so that’s exactly what you’ll get with this fund. It’s a solid choice for the long-term investor since it helps your portfolio to keep pace with the S&P 500 index.
Expense Ratio: 0.03%
Annual Dividend Yield: 1.31%
1 Year Return: 35.84%
3 Year Return: 64.71%
5 Year Return: 120.86%
Vanguard’s High Dividend Yield ETF is linked to the FTSE High Dividend Yield Index. With this fund, you’ll be investing in large companies that have a strong track record of paying out dividends to shareholders on a regular and consistent basis. These companies are generally very solid and well-established. Current top holdings include JP Morgan Chase, Johnson & Johnson, Home Depot, and Proctor & Gamble.
By investing for dividends, you’re unlikely to see quick growth like you might experience with other funds that invest in companies pursuing more aggressive growth. However, this is a solid approach to take for the long term, and may be viewed as lower risk than other investments in the stock market.
Related: How to Live Off Dividends
Expense Ratio: 0.06%
Annual Dividend Yield: 2.82%
1 Year Return: 31.65%
3 Year Return: 36.46%
5 Year Return: 66.82%
Most of the funds we’ve covered so far are focused primarily or exclusively on large-cap stocks. The iShares Russell Mid Cap Growth ETF invests in mid-size companies. Because they’re smaller than the blue chips, mid-cap stocks often potential for more significant growth. They’re also larger than the companies you would be investing in through a small-cap fund, so there’s more stability. As a result, a mid-cap fund could be an appealing addition to your portfolio.
Currently, the top holdings for IWP include companies like Moderna, IDEXX Laboratories, DocuSign, and Roku (without a heavy concentration on any single company). The expense ratio, while very reasonable at 0.24%, is higher than most of the other funds covered here. With a strong historical track record and plenty of upside, this is a fund you might want to consider.
Expense Ratio: 0.24%
Annual Dividend Yield: 0.26%
1 Year Return: 35.39%
3 Year Return: 74.81%
5 Year Return: 141.35%
Small cap funds offer better potential for quick growth than large or mid-cap funds. They also offer excellent potential for long-term growth, as long as you’re willing to go through some ups and downs. Smaller companies have more room for growth and are able to see quick jumps in value, but they’re also more prone to sudden drops.
Vanguard’s Small Cap Growth ETF invests in a large number of small-cap stocks. No single holding makes up a large percentage of the investments, providing some diversification. The current top holdings include Charles River Laboratories International, Pool Corporation, Avantor, and Bio-Techne Corporation.
With a low expense ratio of 0.07% and strong potential for growth, VBK is an appealing option for investors who can accept a higher level of fluctuation with the goal of better long-term growth.
Expense Ratio: 0.07%
Annual Dividend Yield: 0.46%
1 Year Return: 37.20%
3 Year Return: 58.82%
5 Year Return: 128.26%
The Russell 2000 is the most popular index of US small-cap stocks. It excludes the largest 1,000 companies and includes the next 2,000. Vanguard’s Russell 2000 ETF tracks the Russell 2000 index and is another excellent option for those who want to invest in small-caps.
As you can see by comparing the details of VTWO and VBK, the two funds are quite different even though they’re both small-cap funds. VTWO’s current top holdings include Caesars Entertainment, Novavax, Penn National Gaming, and Plug Power.
If you’re looking for high growth potential and you can accept a lot of volatility along the journey, VTWO may be another fund worth considering.
Expense Ratio: 0.10%
Annual Dividend Yield: 1.51%
1 Year Return: 51.89%
3 Year Return: 37.25%
5 Year Return: 97.70%
All of the funds we’ve looked at so far are focused on US-based stocks. The iShares MSCI EAFE ETF invests in foreign companies, particularly large and mid-cap stocks. EAFE stands for Europe, Australasia, and the Far East. As a result, this fund invests in companies from developed countries.
Although EFA invests in foreign companies, many of them (like Nestle, Toyota, AstraZeneca, and Sony) are familiar to Americans.
An international fund like EFA can provide excellent diversification to your portfolio, while also providing long-term upside.
Expense Ratio: 0.32%
Annual Dividend Yield: 2.32%
1 Year Return: 25.86%
3 Year Return: 25.22%
5 Year Return: 57.79%
The iShares Core MSCI Emerging Markets ETF is another international fund, but unlike EFA, it focuses on emerging markets (like China, India, Taiwan, Brazil, Indonesia, and others) rather than developed countries.
The holdings of IEMG include large, medium, and small-cap equities. Investing in these types of companies as an individual investor would be difficult or impossible, but IEMG makes it simple to include emerging markets in your portfolio.
Investing in emerging markets will typically lead to increased volatility, but it provides potential for significant returns. The current top holdings include some familiar names like Alibaba and Samsung.
Expense Ratio: 0.11%
Annual Dividend Yield: 1.85%
1 Year Return: 26.96%
3 Year Return: 32.28%
5 Year Return: 69.49%
Frequently Asked Questions
Mutual funds are actively managed and involve a lot of buying and selling of assets in attempt to outperform the market. ETFs are generally passively managed and they frequently track a specific market index. Because they are passively managed, ETFs tend to offer lower expense ratios.
There are a lot of different types of ETFs, but many of them are excellent buy-and-hold investments. They provide and easy way to add some diversification to your portfolio, and there are plenty of strong ETFs with low expense ratios. Equally important, there are many ETFs that have strong track records of producing returns for investors.
Although ETFs do provide some diversification, they are still volatile investments that will go up and down in value. Some ETFs are considered to be more volatile than others, but even the lower-risk ETFs could lose value at any time.
Also, not all ETFs are low-cost. We’ve considered expense ratio when choosing the funds to include in this list, but each of these ETFs does come with come costs to the investor, some are greater than others.
ETFs may be considered safer than stocks because every ETF is essentially a portfolio that includes a number of different investments. Many ETFs invest in hundreds of companies, so there is some diversification, which helps to protect you in case of a single company struggling or losing value. However, ETFs are still volatile and it’s certainly possible to lose money by investing in ETFs.