With more than 4,400 exchange-traded funds (ETFs) in the U.S. for investors to choose from (12,400 globally), the marketplace has become increasingly muddled. The heavyweights are still the heavyweights, but there’s a lot of noise from leveraged single-stock ETFs, ultra-high-yield products, and a slew of increasingly niche options.
It’s a good idea to review why fundamentally driven, diversified core holdings remain the best for anchoring your portfolio. Two things generally matter for an ETF to be considered a solid long-term holding.
First, the expense ratio matters because lower fees mean the investor keeps more money. Thankfully, this is easy in today’s ETF marketplace. Super-low expense ratios are fairly common among the biggest and most liquid broad-market funds.
Second, it needs a smart portfolio construction strategy. It can be simple, such as investing in the S&P 500 at a low price, or a little more multipronged, such as investing in dividend-growth stocks with healthy balance sheets. The more difficult it is to explain, the less appropriate it probably is as a core holding.
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Four ETFs worth holding for the long haul
Vanguard Growth ETF
The Vanguard Growth ETF (VUG 0.24%) holds around 150 large-cap growth stocks screened for factors such as earnings growth, revenue growth, and return on assets. Its 0.03% expense ratio is elite, but traditionalists may not like its holdings concentration. Tech sector stocks account for 70% of the portfolio. The top 10 holdings make up 65% of the fund. Nvidia, Apple, and Microsoft alone account for 34%.
Today’s Change
(-0.24%) $-0.20
Current Price
$82.76
Key Data Points
Day’s Range
$81.92 – $83.55
52wk Range
$69.63 – $90.60
Volume
9.9M
This ETF is clearly a concentrated trade on the artificial intelligence (AI) infrastructure build. These companies are spending tens of billions, if not hundreds of billions, of dollars on AI development. And it’s likely to be a multidecade capital spending cycle focused on data centers, semiconductors, and enterprise software. Its concentration is concerning, but these are the stocks driving growth and innovation. It’s best to own them, especially at this price.
Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (SCHD +0.41%) screens for companies with at least 10 consecutive years of dividend payments and then evaluates their cash flow-to-debt ratio, return on equity, dividend yield, and dividend growth rate. It narrows it down to the 100 names with the best combinations of these characteristics. Its expense ratio is just 0.06%.
Schwab U.S. Dividend Equity ETF
Today’s Change
(0.41%) $0.13
Current Price
$32.09
Key Data Points
Day’s Range
$31.97 – $32.31
52wk Range
$26.21 – $32.91
Volume
22.4M
This ETF is an ideal long-term quality-and-income play. It’s full of durable, mature cash flow generators built to withstand multiple economic cycles. That’s the type of ETF you want in your portfolio’s core and pairs nicely with funds like the Vanguard Growth ETF.
Vanguard Total International Stock ETF
The Vanguard Total International Stock ETF (VXUS 0.70%) addresses the U.S.-centric focus of many popular broad-market ETFs. It spreads its exposure across more than 8,700 companies worldwide, in both developed and emerging markets. With an expense ratio of 0.05%, it’s the ideal complement to the S&P 500 for overseas equity.
Vanguard Total International Stock ETF
Today’s Change
(-0.70%) $-0.60
Current Price
$84.48
Key Data Points
Day’s Range
$83.96 – $84.90
52wk Range
$67.85 – $88.62
Volume
13.4M
International stocks have enjoyed a comeback over the past 18 months as more attractive valuations, stronger economic growth prospects, and a favorable currency market environment have driven big returns. More than just short-term performance, it’s important to have exposure to asset classes outside of the United States. The global economy moves in cycles, and investing internationally can help smooth out volatility.
Vanguard Energy ETF
The Vanguard Energy ETF (VDE 0.31%) might be a bit polarizing because it’s much more cyclically sensitive than the other broader-market ETFs on this list. It tracks the biggest U.S. energy companies, including ExxonMobil, Chevron, and ConocoPhillips. It has an expense ratio of 0.09%.
This fund can serve as an inflation hedge in a broader portfolio. Energy inflation is dominating the market narrative right now, helping make energy one of the top-performing sectors so far this year. That makes it more susceptible to economic slowdowns, but energy products are essential to everybody. Plus, the above-average yield can help augment total returns.