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Three Essential ETFs for Long-Term Investing
Anyone can invest successfully with a bit of money, knowledge, and patience. Here are three exchange-traded funds (ETFs) worth considering for the long haul.
Image source: Getty Images.
1. Vanguard Growth ETF
The Vanguard Growth ETF (NYSEMKT: VUG) tops my list.
VUG Total Return Level data by YCharts
This ETF tracks about 400 growth stocks, including major players like Microsoft and Nvidia alongside smaller firms like Equinix and Synopsys.
| Symbol | Company Name | % of Holdings |
|---|---|---|
| AAPL | Apple | 12.06% |
| MSFT | Microsoft | 11.42% |
| NVDA | Nvidia | 10.00% |
| GOOG/GOOGL | Alphabet | 6.00% |
| AMZN | Amazon | 5.99% |
| META | Meta Platforms | 4.73% |
| LLY | Eli Lilly | 2.87% |
| TSLA | Tesla | 2.70% |
| V | Visa | 1.70% |
Source: Vanguard fund filings
Investors benefit from a low expense ratio of 0.04%, which means just $4 per year for every $10,000 invested.
However, this fund isn’t ideal for everyone. Income-focused investors may be disappointed by its low dividend yield of only 0.5%, making it less suitable for those seeking cash generation.
Furthermore, since it emphasizes growth stocks, expect higher volatility. During market downturns, this fund could experience sharper declines compared to value-oriented funds.
Despite these drawbacks, the Vanguard Growth ETF is a strong choice for investors targeting growth over the medium and long term.
2. Vanguard Value ETF
Next is the Vanguard Value ETF (NYSEMKT: VTV).
VTV Total Return Level data by YCharts
This ETF is perfect for those who prefer value investing. Like the previous fund, it tracks an index of 400 stocks, but focuses on value-oriented companies.
Top holdings include strong companies like Berkshire Hathaway and ExxonMobil, differing from the tech-centric growth fund.
| Symbol | Company Name | % of Holdings |
|---|---|---|
| BRK.B | Berkshire Hathaway | 3.17% |
| JPM | JPMorgan Chase | 2.74% |
| UNH | UnitedHealth Group | 2.46% |
| XOM | ExxonMobil | 2.38% |
| PG | Procter & Gamble | 1.86% |
| HD | Home Depot | 1.84% |
| AVGO | Broadcom | 1.83% |
| JNJ | Johnson & Johnson | 1.80% |
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Exploring Top ETFs: Performance, Income, and Investment Strategies
Top Holdings and Dividend Yields
| Symbol | Company Name | % of Holdings |
|---|---|---|
| JNJ | Johnson & Johnson | 1.78% |
| WMT | Walmart | 1.63% |
| ABBV | AbbVie | 1.59% |
Source: Vanguard fund filings
The fund produces significant income for investors, boasting a dividend yield of 2.3%. For example, a $10,000 investment could yield around $230 in annual dividends.
Furthermore, the fund’s expense ratio sits at a low 0.04%. This efficiency allows investors to retain more of their earnings in the stock market, a clear advantage.
However, focusing on value can carry risks. Over the last decade, the Vanguard Growth ETF has outshone the Vanguard Value ETF by over 150%, even with the added dividends reinvested into the value fund.
Investors planning for retirement might consider increasing their risk to avoid underperforming the market. On the other hand, those seeking passive income or wishing to minimize risk may find the Vanguard Value ETF appealing.
Discovering the Vanguard Total Stock Market ETF
Next, we turn to the Vanguard Total Stock Market ETF (NYSEMKT: VTI).
This ETF occupies a unique position, bridging growth and value funds. As an index fund, it aims to provide broad exposure to the U.S. stock market, offering a mix of investments.
| Symbol | Company Name | % of Holdings |
|---|---|---|
| AAPL | Apple | 6.07% |
| MSFT | Microsoft | 5.77% |
| NVDA | Nvidia | 5.12% |
| GOOG/GOOGL | Alphabet | 3.18% |
| AMZN | Amazon | 3.17% |
| META | Meta Platforms | 2.25% |
| BRK.B | Berkshire Hathaway | 1.47% |
| AVGO | Broadcom | 1.45% |
| LLY | Eli Lilly | 1.37% |
| TSLA | Tesla | 1.28% |
Source: Vanguard fund filings
Its performance has also settled firmly between its growth and value peers. The Vanguard Total Stock Market ETF boasts a 10-year compound annual growth rate (CAGR) of 13.5%, tracking behind the Vanguard Growth ETF’s 16.4% and ahead of the Vanguard Value ETF’s 11.5%.
VUG Total Return Level data by YCharts
Examining the fees, this fund is even more cost-effective than its counterparts, with an expense ratio of 0.03%, meaning investors only incur $3 annually for every $10,000 invested.
Though the fund offers a 1.3% dividend yield, which aligns with the S&P 500 average, it’s not particularly high.
A significant advantage of the fund lies in its diversification, minimizing major risks typically associated with investing. However, its broad exposure can also lead to concerns of over-diversification.
Even with its stability, the fund is still subject to market declines, particularly during bear markets. Historical trends suggest that although markets fall, they eventually recover and achieve new highs.
Therefore, for investors in search of a reasonably priced, diversified option, the Vanguard Total Stock Market ETF presents an appealing choice.
Seize the Opportunity for Profitable Investments
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*Stock Advisor returns as of October 21, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Alphabet, Amazon, ExxonMobil, Nvidia, Procter & Gamble, Tesla, and Visa. The Motley Fool has positions in and recommends AbbVie, Alphabet, Amazon, Apple, Berkshire Hathaway, Equinix, Home Depot, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Synopsys, Tesla, Vanguard Index Funds-Vanguard Growth ETF, Vanguard Index Funds-Vanguard Value ETF, Vanguard Total Stock Market ETF, Visa, and Walmart. The Motley Fool recommends Broadcom, Johnson & Johnson, and UnitedHealth Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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