When the market is at all-time highs, as it is today, investors often freeze up. During these periods, there tends to be chatter about high stock prices, so people worry that they'll end up buying right before a big pullback. The reality is that markets hit new highs more often than you might think, and over the long term, stocks trade higher. That means waiting for a perfect entry point can often mean missing out.
A J.P. Morgan study found that missing the 10 best days over a 20-year stretch cuts your total return roughly in half. While those best days often come after big market drops, investors rarely pounce on those dips, worrying that the market will fall further. This is why using a dollar-cost averaging strategy is so important. Putting money to work regularly at set times, whether stocks are up or down, takes the guesswork out of timing and lets compounding work in your favor.
Let's look at five exchange-traded funds (ETFs) you can begin investing $1,000 in today, and keep adding to for many years to come.
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1. Vanguard S&P 500 ETF
If I could only own one investment for the next 30 years, it would be the Vanguard S&P 500 ETF (VOO 0.55%). It tracks the performance of the S&P 500, which gives you instant diversity and a portfolio made up of about 500 of the largest and most influential companies in the U.S. Because the S&P 500 is a market-cap-weighted index, it lets its winners run. This is one of the biggest reasons why the ETF has been such a great performer over the long run: It lets the cream rise to the top.
Over the past decade (running through the end of August), the ETF averaged annualized returns of 14.6%, which is a great return. And its 0.03% expense ratio is as cheap as it gets.
If you want one investment you can buy and dollar-cost-average into on autopilot, the Vanguard S&P 500 ETF is it.
2. Vanguard Growth ETF
If you want a little more emphasis on growth stocks, the Vanguard Growth ETF (VUG 0.98%) is a great choice. It holds large-cap companies that are growing faster than the broader market, which tilts it toward technology leaders. Together, Nvidia, Microsoft, and Apple make up more than a third of its holdings.
Its top 10 holdings account for more than 60% of its portfolio, so you're getting a lot more concentration in top growth names. Growth stocks have been helping lead the market higher over the past decade, and this can be seen in the ETF's results. Over the past ten years, it's delivered an average annual return of 17.1%.
With artificial intelligence (AI) looking like it could be a game-changing technology, the Vanguard Growth ETF is a great way to gain additional exposure to many of the top companies leading the AI charge.
3. Invesco QQQ Trust
Another growth ETF to consider is the Invesco QQQ Trust (QQQ 0.79%). It tracks the Nasdaq-100 index, which is heavily weighted toward tech and consumer names. More than 60% of its portfolio is in the tech sector, while nearly 19% is in consumer discretionary, although some stocks in this sector are basically tech companies, like Amazon.
The Invesco QQQ Trust has been a top performer over the long term, producing an average annual return of 19.4% over the past 10 years. Even more impressive is that its outperformance has been consistent, with it besting the S&P 500 on a 12-month rolling basis more than 87% of the time over this stretch.
While its 0.2% expense ratio is on the higher side for an index ETF, its performance makes it a top option to consider.
4. Schwab U.S. Dividend Equity ETF
While growth stocks have been leading the charge, value stocks shouldn't be ignored, as they can also have their day in the sun. The Schwab U.S. Dividend Equity ETF (SCHD -0.44%) is perfect if you want to add some dividend-paying value stocks to your portfolio.
The ETF focuses on companies with solid financials and a history of paying and growing dividends. Its current yield is around 3.8%, and because the index it's tied to screens for payout sustainability every year, those dividends are more dependable than what you might find in other high-yield ETFs.
The ETF has delivered double-digit annualized returns over the past decade, while charging a tiny 0.06% expense ratio. This is a solid performance considering that growth stocks have been in favor over this period.
5. Vanguard International High Dividend Yield ETF
Most portfolios are heavily tilted toward U.S. stocks, but adding some international exposure can be a smart way to diversify. The Vanguard International High Dividend Yield ETF (VYMI -0.11%) is a great option if you're looking to add a little international flavor to your portfolio.
The ETF holds positions in non-U.S. companies that pay above-average dividends. The portfolio is split across Europe, Asia-Pacific, and emerging markets, with top holdings including Nestlé, Roche Holding, Toyota Motor, and Shell. That mix gives you global diversification and a nice income stream.
The fund has been a huge performer this year, with the ETF up nearly 28% year to date through Sept. 10. Over the five years through the end of August, it posted 14.2% annualized returns. Its 0.17% expense ratio is higher than domestic-focused index funds, but very reasonable for an international fund.
