Best Long-Term ETF

Stock investors aim for portfolio diversification to minimize their risk and get exposure to new opportunities. While portfolio diversification is a common goal, it can be difficult at times to stay on top of all of your positions. Exchange-traded funds (ETFs) simplify this approach by giving investors a basket of stocks under one umbrella. Some ETFs mirror popular indices, while others focus on a particular theme or sector. Investors looking for long-term ETF ideas can benefit from this list.

8 Best ETFs for the Long Term

Investors looking for promising long-term ETFs may want to start with the choices on this list.

1. SPDR S&P 500 ETF Trust (NYSEARCA: SPY)

SPY mirrors the S&P 500 and is the largest ETF in the world by market cap. The fund has a 0.09% expense ratio and has generated a 12.05% annualized return over the past five years. SPY’s top three holdings are Apple (7.00%), Microsoft (6.50%) and Amazon (3.36%). 

2. Invesco QQQ Trust Series 1 (NASDAQ: QQQ)

QQQ mirrors the Nasdaq 100 Composite and has delivered exceptional returns for investors. The fund has generated a 17.63% annualized return over the past five years. Half of the fund’s total assets are in tech companies, and the top three holdings are Apple (10.83%), Microsoft (9.45%) and Amazon (5.62%). The total expense ratio is 0.20%. 

3. Vanguard Information Technology Index Fund ETF (NYSEARCA: VGT)

The Vanguard Information Technology Index Fund ETF focuses on information technology companies and has a 0.10% expense ratio. VGT has generated a 37.08% year-to-date return and has a 20.65% annualized return over the past 10 years. The fund’s top three holdings are Apple (23.09%), Microsoft (20.53%) and NVIDIA (4.25%).  

4. iShares Russell 1000 Growth ETF (NYSE: IWF)

The iShares Russell 1000 Growth ETF has generated a 15.53% annualized return over the past 10 years. The fund’s 12-month trailing yield was 0.75% on June 30, 2023. Investors must pay a reasonable 0.19% expense ratio for their IWF shares. The fund’s top three holdings are Apple (12.17%), Microsoft (11.20%) and Amazon (5.84%). 

5. Vanguard Small Cap ETF (NYSEARCA: VB)

The Vanguard Small Cap ETF has a 0.05% expense ratio and mirrors the CRSP U.S. Small Cap Index. The fund is riskier than others but comes with a higher potential reward. VB’s top three holdings are Fair Isaac Corp. (0.39%), Builders FirstSource Inc. (0.36%) and Targa Resources Corp. (0.35%). The fund is up by 14.71% year-to-date.

6. VanEck Semiconductor ETF (NASDAQ: SMH) 

The VanEck Semiconductor ETF gives investors exposure to semiconductor stocks like NVIDIA (19.94%), Taiwan Semiconductor Manufacturing (10.57%) and Broadcom (5.33%). The fund has 26 total holdings and a 0.35% expense ratio. SMH has delivered high returns for investors. Shares are up by 58.29% year-to-date and have generated a 25.19% annualized return over the past 10 years.

7. ARK Innovation ETF (NYSE: ARKK) 

The ARK Innovation ETF is a high-risk, high-reward ETF that tends to reward investors during bullish markets. While most ETFs do well in bullish markets, ARK Innovation ETF has historically delivered stronger returns than most of the other choices. However, the fund doesn’t perform as well during bear markets and has lost over 70% of its value from the all-time high. However, shares more than tripled from December 2019 to the February 2021 peak. ARKK is an actively-managed fund with a 0.75% expense ratio and a 41.34% year-to-date return. The fund’s top three holdings are Tesla (10.63%), Roku (9.36%) and Coinbase (7.84%). 

8. Technology Select Sector SPDR Fund (NYSEARCA: XLK)

XLK has a 0.10% expense ratio and focuses on tech stocks. The fund has a 20.53% annualized return over the past 10 years. The fund distribution yield is currently 0.79%. The fund invests in many reliable large-cap stocks, and its top three holdings are Microsoft (22.41%), Apple (21.92%) and NVIDIA (5.08%).

What is a Long-Term ETF?

A long-term ETF is a fund that gives investors exposure to several stocks. Some ETFs hold onto over 100 stocks, which makes portfolio diversification more straightforward. ETFs have objectives that you can find on the issuing company’s website.

Should You Invest in ETFs for the Long-Term?

Long-term ETFs can generate meaningful returns for investors. Professionals manage these funds and adjust portfolio holdings based on asset performance. Some ETFs follow an index and adjust their holdings based on how an index’s positions and concentrations change over time. These assets allow you to save time compared to analyzing individual stocks. 

Invest in ETFs with Benzinga’s Top Brokers

Investors can choose from many ETFs, but if you have been using the same broker for a few years, a better option may be available. These are some of the top brokers to consider when investing in long-term ETFs.

Factors to Consider in Choosing a Long-Term ETF

Wondering if the long-term ETF you have your eye on is a good investment? These are some factors to consider before investing your money.

Expense Ratio and Management Fees

A higher expense ratio and management fees will reduce your profits. These costs continue to impact your ETF even if it has not generated a profitable return on investment.

Tracking Error and Index Replication

ETFs may have slight fluctuations from index returns, but these fluctuations are supposed to be minimal. ETFs with high tracking errors don’t do as good of a job at tracking an index. Investors who want to track an index should check if the portfolio concentrations match between the ETF and the index.

Liquidity and Trading Volume

High trading volume makes it easier to exit ETFs if you want to get out of them and diversify your holdings in a different way. ETFs with low liquidity do not offer as many exit opportunities. You may have to sell at a much lower price than the market price if liquidity is low.

Historical Performance and Growth Potential

Historical performance doesn’t offer guarantees, but ETFs with stable, consistent performance may be less risky than ETFs that have had sharp rallies and crashes within a few years.

Portfolio Composition and Diversification

Investors should look at the top 10 holdings of an ETF to assess their exposure to various companies. While it’s good to look at the top 10 holdings, it’s important to see how the portfolio is constructed. You can also look at asset allocation based on a sector to see if the ETF gives you the diversified asset concentrations that you seek.

Generate Higher Returns with Long-Term ETFs

Long-term ETFs can help investors generate higher returns. These assets give investors exposure to more opportunities while minimizing risk through portfolio diversification. Investors should assess their financial goals and risk tolerance before committing to a long-term ETF.

Frequently Asked Questions