An index fund is an investment fund – either a mutual fund or an exchange-traded fund (ETF) – that is based on a preset basket of stocks, bonds, or other assets. ETFs are particularly popular with long-term investors because they offer low fees, tax efficiency, and easy diversification.
In a challenging market, it helps to ignore day-to-day volatility. Instead, focus on building a diversified portfolio of long-term investments across a variety of asset classes. Here are some of the best ETFs for long-term investing:
Vanguard Total Stock Market ETF (VTI): This ETF tracks the performance of the entire U.S. stock market and includes more than 3,500 stocks across all sectors. It has a low expense ratio of just 0.03% and is an excellent option for investors seeking broad exposure to the U.S. equity market.
iShares Core S&P 500 ETF (IVV): This ETF tracks the performance of the S&P 500 index, which is widely regarded as the most important benchmark for the U.S. stock market. With an expense ratio of just 0.03%, this ETF is an affordable way to invest in the largest U.S. companies.
Schwab U.S. Large-Cap ETF (SCHX): This ETF tracks the performance of the largest U.S. companies and has an expense ratio of just 0.03%. It's a great option for investors looking for exposure to the U.S. large-cap market without the high fees that some other funds charge.
Vanguard Growth ETF (VUG): Growth ETFs give investors easy exposure to the wide world of growth investing. This ETF tracks the performance of the CRSP US Large Cap Growth Index and has an expense ratio of just 0.04%.
Vanguard Value ETF (VTV): This ETF tracks the performance of the CRSP US Large Cap Value Index and gives investors exposure to value stocks, which tend to be undervalued by the market. With an expense ratio of just 0.04%, it's a great option for those seeking value investments.
iShares Core MSCI EAFE ETF (IEFA): This ETF tracks the performance of developed markets outside the U.S. and Canada, including Europe, Asia, and Australia. With an expense ratio of just 0.08%, it's a great way to diversify outside the U.S. market.
Vanguard Total International Stock ETF (VXUS): This ETF tracks the performance of the FTSE Global All Cap ex US Index, which includes more than 7,000 stocks from developed and emerging markets outside the U.S. With an expense ratio of just 0.08%, it's an excellent option for international diversification.
iShares Core U.S. Aggregate Bond ETF (AGG): This ETF tracks the performance of the U.S. investment-grade bond market and includes more than 8,000 bonds from various sectors. With an expense ratio of just 0.04%, it's an affordable way to invest in fixed income.
SPDR Gold Shares ETF (GLD): This ETF tracks the price of gold bullion and is an excellent option for investors seeking exposure to the precious metal. With an expense ratio of 0.40%, it's more expensive than some other ETFs, but it's still a low-cost way to invest in gold.
Real Estate ETFs: REITs offer a lower-cost option for investing in real estate and diversifying your portfolio. Learn about how REIT ETFs work and which ones might be right for you.
Exchange-traded funds make it easy to diversify a portfolio and are often easier for investors to buy than their mutual fund counterparts. With so many ETFs to choose from, it can be overwhelming to know where to start. The best long-term ETFs allow investors to easily build a diversified portfolio because they provide broad exposure across many asset classes. In a challenging market, a bias toward certain sectors could pay off. The S&P 500 is the top stock market benchmark. These are the best ETFs designed to duplicate its performance.