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3 ETFs Perfect for Robinhood Investors

By Matthew Frankel, CFP® – Oct 11, 2020 at 6:48AM

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Here are three great ETFs that could supercharge your long-term returns.

Robinhood investors have a reputation for buying high-growth stocks. Indeed, some of the most popular stocks on the platform fit that description, including Virgin Galactic Holdings, Penn National Gaming, and Tesla.

However, no fewer than seven exchange-traded funds, or ETFs, appear in Robinhood's current Top 100 list. While millions of Robinhood investors are certainly trying to get in on the ground floor of the next big thing, many are also creating smart, low-maintenance, long-term investment portfolios with the magic of index funds.

If you're looking for some investments that could produce excellent long-term returns while still allowing you to sleep soundly at night, here are three excellent ETFs. 

A person using a laptop and smiling.

Image source: Getty Images.

One of the most exciting tech trends

The way we pay for goods and services has radically transformed over the past decade or so, and will likely continue to do so. Financial technology includes payment processing companies like Square and PayPal, financial software companies like Intuit and Bill.com, and companies that make it easier and more cost-effective to borrow money like LendingTree, just to name a few.

Instead of trying to pick winners in the space, it might be a better idea to simply realize that "a rising tide lifts all ships" and invest in all the fintech leaders. The Global X FinTech ETF (FINX 0.54%) does just that. Its portfolio contains 33 of the most compelling fintech stocks, including the five companies mentioned in the last paragraph, as well as some of the most exciting internationally listed fintech leaders that may not be available through Robinhood.

With a 0.68% expense ratio, the Global X FinTech ETF isn't cheap, but it isn't too steep of a price to pay for an all-in-one portfolio that could benefit from one of the most exciting growth markets of this generation.

Get rich slowly with dividends

With interest rates near record lows, finding investments that pay a decent yield without a ton of risk can be tricky. Vanguard High Dividend Yield ETF (VYM -0.19%) is one of a rare few.

This fund invests in a diverse portfolio of more than 400 stocks that pay above-average dividends. Top holdings include Johnson & Johnson, Procter & Gamble, and JPMorgan Chase. These stocks are solid investment choices on their own, but it could be an even better idea to own all of these high yielders as part of an ETF.

The Vanguard High Dividend Yield ETF has a dividend yield of about 4.3% as of this writing and has a rock-bottom 0.06% expense ratio. This isn't just an income play; over the past decade, the fund has generated total returns averaging over 11% per year.

Market-beating total returns with relatively low volatility

One sector notably absent from Robinhood's Top 100 list -- both in stock and ETF form -- is real estate. There are a few good reasons Robinhood investors might want to change that. First, real estate stocks tend to be less volatile than the rest of the market and can diversify a stock portfolio.

Second, real estate stocks tend to be excellent dividend payers. The Vanguard Real Estate ETF (VNQ -0.70%) pays 3.5% as of this writing and invests in a portfolio of 181 real estate investment trusts, or REITs.

Finally, while many investors think of real estate as a boring and low-return investment, that's a complete misconception. In fact, over the past 20 years, real estate investment trusts have produced better total returns than the S&P 500.

^SPXTR Chart

^SPXTR data by YCharts

It's also worth mentioning that many dividend-focused ETFs, like the Vanguard High Dividend ETF mentioned earlier, specifically exclude real estate stocks, so both could be excellent additions to your long-term investment strategy.

Matthew Frankel, CFP owns shares of Square and has the following options: short September 2022 $155 calls on Square. The Motley Fool owns shares of and recommends Intuit, PayPal Holdings, Square, Tesla, Vanguard REIT ETF, and Virgin Galactic Holdings Inc. The Motley Fool owns shares of Vanguard High Dividend Yield ETF. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Vanguard High Dividend Yield ETF Stock Quote
Vanguard High Dividend Yield ETF
VYM
$112.93 (-0.19%) $0.22
Vanguard Specialized Funds - Vanguard Real Estate ETF Stock Quote
Vanguard Specialized Funds - Vanguard Real Estate ETF
VNQ
$87.47 (-0.70%) $0.61
Global X FinTech ETF Stock Quote
Global X FinTech ETF
FINX
$20.67 (0.54%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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