When it comes to building long-term wealth, often times simplicity works best. You don't need to chase the hottest stock or time the market. What you do need are a few core positions you can buy, hold, and consistently dollar-cost average into. Exchange-traded funds (ETFs) are one of the best investments to do just that.
Here are five ETFs that I think are perfect for long-term investors. You don't need to own all of them, but if you've got $1,000 to put to work, any of these would be a smart place to start. Just remember that $1,000 is just a starting point, and it's best to consistently invest into ETFs each month over time.
Vanguard S&P 500 ETF
NYSEMKT: VOO
Key Data Points
If I could only pick one ETF to hold for the next 30 years, the Vanguard S&P 500 ETF (VOO +0.82%) would be it. It tracks the 500 largest companies in the U.S., essentially giving you a slice of the entire U.S. economy. You get instant exposure to the market's biggest companies, which also just so happen to be some of the market's biggest winners.
The ETF's expense ratio also incredibly low. It's just 0.03%, which means nearly every dollar you put into the fund is working for you. Over the past 10 years, it's produced an average annual return of around 13.6%, as of the end of June. That kind of consistency makes it one of the most reliable long-term investments out there.
Vanguard Growth ETF
NYSEMKT: VUG
Key Data Points
If you want to lean more into tech and high-growth names, the Vanguard Growth ETF (VUG +0.95%) is the investment for you. It still gives you broad exposure to large-cap stocks, but it focuses on companies with strong earnings and sales growth. That means you're getting more exposure to companies like Nvidia and Amazon. The ETF, which follows the CRSP US Large Cap Growth Index, currently holds around 165 stocks.
The ETF's focus on growth has paid off with market-beating returns. Over the past 10 years, the Vanguard Growth ETF has returned an average of 16.2% annually, as of the end of June, easily outpacing the broader market. With an expense ratio of just 0.04%, it's also cost-effective.
You're not getting the same diversification as the S&P 500, which means you could see more volatility at times. However, if you believe tech and innovation will continue to lead the market -- and I do -- this is a solid way to get more exposure without having to pick winners yourself.
Invesco QQQ Trust
NASDAQ: QQQ
Key Data Points
Another simple, growth-oriented ETF to own is the Invesco QQQ Trust (QQQ +2.34%). The ETF tracks the Nasdaq-100, which includes the 100 largest non-financial stocks listed on the Nasdaq exchange. Not surprisingly, that means it is heavily concentrated in tech and consumer names.
This ETF has consistently been one of the best performers out there. Over the past 10 years, it's returned 18.7% annually, as of the end of June. Even more impressive is that it's outperformed the S&P 500 more than 87% of the time on a rolling-12-month basis over the past decade. That type of performance is hard to ignore.
Its top holdings read like a who's who of Silicon Valley: Apple, Microsoft, Nvidia, Amazon, and Alphabet, to name a few. That said, the weightings of its top holdings are a bit more spread out than some other tech-heavy ETFs, including the Vanguard Growth ETF.
It does carry a slightly higher expense ratio at 0.2%, but for the performance you're getting, it's more than fair. If you're comfortable with a little more volatility in exchange for long-term upside, the Invesco QQQ Trust should be on your short list of ETFs to buy right now.
Image source: Getty Images.
Schwab U.S. Dividend Equity ETF
While technology is a hot sector, not every investor is looking to go all-in on tech stocks. For investors with more interest in income and value stocks, the Schwab U.S. Dividend Equity ETF (SCHD +0.25%) is a great option. It tracks the Dow Jones U.S. Dividend 100 Index, which is focused on companies with strong dividend histories and solid fundamentals. It also has a low expense ratio of just 0.06%.
The ETF currently has a yield of nearly 4%, giving investors a solid source of income. This fund isn't just investing in high-yield stocks, though; it is looking for ones that have strong track records of consistently increasing their dividends over time.
While the ETF has not been putting up the same type of performance as growth-stock oriented ETFs, it has still been a solid performer. It has generated an average annual return, including dividends, of 11.2%, as of the end of June. That's better than most value-focused ETFs over the same stretch.
If you're building a portfolio for retirement or just want a ballast in a growth-heavy portfolio, the Schwab U.S. Dividend Equity ETF fits the bill.
Vanguard International High Dividend Yield ETF
The simple fact is that most investors are underexposed to international stocks. The Vanguard International High Dividend Yield ETF (VYMI +0.68%) can help fix that predicament. This ETF focuses on non-U.S. companies with above-average dividend yields. Over 40% of its portfolio is in European names, with the rest split between Asia-Pacific and emerging markets.
It's been the second-best-performing ETF in Vanguard's lineup so far this year, up 20.7% as of July 16, trailing only one that solely focuses on Europe. It's also been Vanguard's top-performing international-focused ETF over the past five years, with an average annual return of around 14.5%, as of the end of June. That's impressive given how long international markets have lagged the U.S.
If you're looking to round out your portfolio with some international exposure, the Vanguard International High Dividend Yield ETF is worth owning. Its expense ratio of 0.17% is higher than most Vanguard ETFs, but that is typical of international-focused ETFs.
